# Buying coverage

## Summary

* Any user can buy coverage on the platform (become Policy Holder) on any pre-existing [Coverage pool](providing-liquidity/coverage-pools) on the platform.
* Policy durations are measured by weeks. All weeks are time-stamped - start and end on specific days in the calendar year, the pool's creation time-stamp being the origin. The minimum duration a user may buy Coverage for is 1 week, and the maximum period is 52 weeks.
  * In practice, the user can purchase a policy with an actual duration of less than 1 full calendar week if the purchase was made in the middle or at the end of the timed week.
* The Premium is determined by the duration of Coverage, the amount, and the current Utilization Ratio of the Project X Coverage Pool.
* There minimum yearly cost of Premium is **1.8%.**
* The Premium cost displayed on the app is estimated. Its true value will be determined by how close the policy amount brings the Project X Coverage Pool's Utilization Ratio to 100%.
* 20% of Premium goes to the Reinsurance Pool, while the 80% is redistributed to the coverage providers as yield.

{% content-ref url="what-is-covered" %}
[what-is-covered](what-is-covered)
{% endcontent-ref %}

## Premium's cost chart

Based on the Utilization Ratio.

![](https://2732138923-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-McJ-rdy5DzkSkdXp6VM%2Fuploads%2FoKH7XIIGya0zvdQXJdl8%2Fimage.png?alt=media\&token=4c5fadee-7542-4c43-baed-8728d14abbd5)



## **Where can I see the coverage pools available?**

Head over to [https://app.bridgemutual.io/user/cover](https://app.bridgemutual.io/user/cover)

## **How much does the cover cost?**

**Three factors determine the price of cover.** As each of the goes up, the price of the coverage (Premium) also goes up:

* The utilization ratio of the pool (the ratio between cover bought and cover provided, pools with a higher utilization ratio are considered riskier and thus more expensive to purchase cover from)
* The duration of the cover which you want to buy
* The amount of cover which you want to buy

## **For what duration can I buy cover?**

The duration may be between a minimum of 1 week and a maximum of 52 weeks. This may be altered in later versions or may differ between different types of coverage products.

The actual duration of the cover is calculated in 1-week intervals, which start and end on specific days. In practice, a user can purchase a policy with a duration of less than one whole calendar week if the purchase was made in the middle or at the end of the time-stamped week.&#x20;

## **Can I purchase multiple covers?**

If they are from different pools - yes! However, you can only have 1 active cover per pool.&#x20;

## **A Coverage Event occurred. How do I make a claim for the cover which I bought?**

{% content-ref url="making-a-claim" %}
[making-a-claim](making-a-claim)
{% endcontent-ref %}

## **How exactly is the Premium calculated?**

**P\_min -** Minimum Premium (expressed in %) \
**TP\_max** **-** Maximum Premium at the UR\_risky threshold _(expressed in %)_ \
**UR\_risky** **-** Utilization Ratio for pricing model when the asset is considered risky (expressed in %) \
**P\_max** **-** Maximum Premium when the utilization ratio equals 100% (expressed in %) \
**UR** **-** Utilization ratio (expressed in %) \
&#xNAN;**%P** **-** % Premium in regards to the size of the Cover \
&#xNAN;**%P\_final** **-** final, % Premium in regards to the size of the Cover&#x20;

$$
UR=\frac {Capacity+Cover\:Size} {Liquidity}
$$

$$
if\:UR<{UR}_{risky} \implies \%P=\frac{UR}{UR_{risky}}*TP_{max}
$$

$$
if\:UR>{UR}_{risky} \implies \%P=TP_{max}+\frac{UR-UR_{risky}}{100\%-UR_{risky}}*(P_{max}-TP_{max})
$$

$$
\%P_{final}=max{\{\%P, P_{min}\}}
$$

$$
Annualized\:Premium\:Cost = Coverage\:Amount  * \%P_{final}
$$

## Current protocol constants

**P\_min** = 1.8% \
**TP\_max** _=_ 10% \
**UR\_risky** = 85% \
**P\_max** = 30%
