Insurance

Home insurance

2011-05-18T21:46:00.000-07:00

Home insurance provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets. (wikipedia.org)

Reinsurance

2011-05-18T21:26:00.000-07:00

Reinsurance is insurance that is purchased by an insurance company (reinsurer) from another insurance company (insurer) as a means of risk management, to transfer risk from the insurer to the reinsurer. The reinsurer and the insurer enter into a reinsurance agreement which details the conditions upon which the reinsurer would pay the insurer's losses (in terms of excess of loss or proportional to loss). The reinsurer is paid a reinsurance premium by the insurer, and the insurer issues thousands of policies.

For example, assume an insurer sells one thousand policies, each with a $1 million policy limit. Theoretically, the insurer could lose $1 million on each policy – totaling up to $1 billion. It may be better to pass some risk to a reinsurance company (reinsurer) as this will minimize the insurer's risk.

There are two basic methods of reinsurance:

Facultative Reinsurance In facultative reinsurance, the ceding company cedes and the reinsurer assumes all or part of the risk assumed by a particular specified insurance policy. Facultative reinsurance is negotiated separately for each insurance contract that is reinsured. Facultative reinsurance normally is purchased by ceding companies for individual risks not covered by their reinsurance treaties, for amounts in excess of the monetary limits of their reinsurance treaties and for unusual risks. Underwriting expenses and, in particular, personnel costs,are higher relative to premiums written on facultative business because each risk is individually underwritten and administered. The ability to separately evaluate each risk reinsured, however, increases the probability that the underwriter can price the contract to more accurately reflect the risks involved.

Treaty Reinsurance is a method of reinsurance requiring the insurer and the reinsurer to formulate and execute a reinsurance contract. The reinsurer then covers all the insurance policies coming within the scope of that contract. There are two basic methods of treaty reinsurance:

Quota Share Treaty Reinsurance, and

Excess of Loss Treaty Reinsurance.

In the past 30 years there has been a major shift from Quota Share to Excess of Loss in the property and casualty fields. (wikipedia.org)

Insurance law

2011-05-18T21:17:00.000-07:00

Insurance law is the name given to practices of law surrounding insurance, including insurance policies and claims. It can be broadly broken into three categories - regulation of the business of insurance; regulation of the content of insurance policies, especially with regard to consumer policies; and regulation of claim handling.

Development of Insurance LawThe earliest form of insurance is probably marine insurance, although forms of mutuality (group self-insurance) existed before that. Marine insurance originated with the merchants of the Hanseatic league and the financiers of Lombardy in the 12th and 13th centuries, recorded in the name of Lombard Street in the City of London, the oldest trading insurance market. In those early days, insurance was intrinsically coupled with the expansion of mercantilism, and exploration (and exploitation) of new sources of gold, silver, spices, furs and other precious goods - including slaves - from the New World. For these merchant adventurers, insurance was the "means whereof it cometh to pass that upon the loss or perishing of any ship there followeth not the undoing of any man, but the loss lighteth rather easily upon many than upon a few... whereby all merchants, especially those of the younger sort, are allured to venture more willingly and more freely."

The expansion of English maritime trade made London the centre of an insurance market that, by the 18th century, was the largest in the world. Underwriters sat in bars, or newly fashionable coffee-shops such as that run by Edward Lloyd on Lombard Street, considering the details of proposed mercantile "adventures" and indicating the extent to which they would share upon the risks entailed by writing their "scratch" or signature upon the documents shown to them.

At the same time, eighteenth-century judge William Murray, Lord Mansfield, was developing the substantive law of insurance to an extent where it has largely remained unchanged to the present day - at least insofar as concerns commercial, non-consumer business - in the common-law jurisdictions. Mansfield drew from "foreign authorities" and "intelligent merchants"

"Those leading principles which may be considered the common law of the sea, and the common law of merchants, which he found prevailing across the commercial world, and to which every question of insurance was easily referrable. Hence the great celebrity of his judgments, and hence the respect they command in foreign countries".

By the 19th century membership of Lloyd's was regulated and in 1871, the Lloyd's Act was passed, establishing the corporation of Lloyd's to act as a market place for members, or "Names". And in the early part of the twentieth century, the collective body of general insurance law was codified in 1906 into the Marine Insurance Act 1906, with the result that, since that date, marine and non-marine insurance law have diverged, although fundamentally based on the same original principles.

(wikipedia.org)

Health insurance

2011-05-18T21:13:00.000-07:00

Health insurance is insurance against the risk of incurring medical expenses. By estimating the overall risk of health care expenses, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement. The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity. (wikipedia.org)

Liability insurance

2011-05-18T21:11:00.000-07:00

Liability insurance is a part of the general insurance system of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy. Originally, individuals or companies that faced a common peril, formed a group and created a self-help fund out of which to pay compensation should any member incur loss (in other words, a mutual insurance arrangement).

The modern system relies on dedicated carriers, usually for-profit, to offer protection against specified perils in consideration of a premium. Liability insurance is designed to offer specific protection against third party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability are not covered under liability insurance policies. When a claim is made, the insurance carrier has the duty (and right) to defend the insured. The legal costs of a defense normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defense costs tend to soar when cases go to trial.
(wikipedia.org)

Vehicle insurance

2011-05-18T21:08:00.000-07:00

Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other road vehicles. Its primary use is to provide protection against physical damage and/or bodily injury resulting from traffic collisions and against liability that could also arise therefrom.

(wikipedia.org)

Related Life Insurance Products

2011-05-16T08:05:00.000-07:00

Riders are modifications to the insurance policy added at the same time the policy is issued. These riders change the basic policy to provide some feature desired by the policy owner. A common rider is accidental death, which used to be commonly referred to as "double indemnity", which pays twice the amount of the policy face value if death results from accidental causes, as if both a full coverage policy and an accidental death policy were in effect on the insured. Another common rider is premium waiver, which waives future premiums if the insured becomes disabled.

Joint life insurance is either a term or permanent policy insuring two or more lives with the proceeds payable on the first death or second death.

Survivorship life: is a whole life policy insuring two lives with the proceeds payable on the second (later) death.

Single premium whole life: is a policy with only one premium which is payable at the time the policy is issued.

Modified whole life: is a whole life policy that charges smaller premiums for a specified period of time after which the premiums increase for the remainder of the policy.

Group life insurance: is term insurance covering a group of people, usually employees of a company or members of a union or association. Individual proof of insurability is not normally a consideration in the underwriting. Rather, the underwriter considers the size and turnover of the group, and the financial strength of the group. Contract provisions will attempt to exclude the possibility of adverse selection. Group life insurance often has a provision that a member exiting the group has the right to buy individual insurance coverage.

Senior and preneed products: Insurance companies have in recent years developed products to offer to niche markets, most notably targeting the senior market to address needs of an aging population. Many companies offer policies tailored to the needs of senior applicants. These are often low to moderate face value whole life insurance policies, to allow a senior citizen purchasing insurance at an older issue age an opportunity to buy affordable insurance. This may also be marketed as final expense insurance, and an agent or company may suggest (but not require) that the policy proceeds could be used for end-of-life expenses.

Preneed (or prepaid) insurance policies: are whole life policies that, although available at any age, are usually offered to older applicants as well. This type of insurance is designed specifically to cover funeral expenses when the insured person dies. In many cases, the applicant signs a prefunded funeral arrangement with a funeral home at the time the policy is applied for. The death proceeds are then guaranteed to be directed first to the funeral services provider for payment of services rendered. Most contracts dictate that any excess proceeds will go either to the insured's estate or a designated beneficiary. (wikipedia.org)

Types of life insurance

2011-05-16T07:42:00.000-07:00

Life insurance may be divided into two basic classes – temporary and permanent or following subclasses – term, universal, whole life and endowment life insurance.

Term Insurance

Term assurance provides life insurance coverage for a specified term of years in exchange for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else.

There are three key factors to be considered in term insurance:

Face amount (protection or death benefit),

Premium to be paid (cost to the insured), and

Length of coverage (term).

Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. Common types of term insurance include Level, Annual Renewable and Mortgage insurance."

Level Term policy has the premium fixed for a period of time longer than a year. These terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years. Level term is often used for long term planning and asset management because premiums remain consistent year to year and can be budgeted long term. At the end of the term, some policies contain a renewal or conversion option. Guaranteed Renewal, the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time.

Some companies however do not guarantee renewal, and require proof of insurability to mitigate their risk and decline renewing higher risk clients (for instance those that may be terminal). Renewal that requires proof of insurability often includes a conversion options that allows the insured to convert the term program to a permanent one that the insurance company makes available. This can force clients into a more expensive permanent program because of anti selection if they need to continue coverage. Renewal and conversion options can be very important when selecting a program.

Annual renewable term is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time.

Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner’s residence so the mortgage will be paid if the insured dies.

A policy holder insures his life for a specified term. If he dies before that specified term is up (with the exception of suicide see below), his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing. However, in some European countries (notably Serbia), insurance policy is such that the policy holder receives the amount he has insured himself to, or the amount he has paid to the insurance company in the past years.

Suicide used to be excluded from ALL insurance policies[when?], however, after a number of court judgments against the industry, payouts do occur on death by suicide (presumably except for in the unlikely case that it can be shown that the suicide was just to benefit from the policy). Generally, if an insured person commits suicide within the first two policy years, the insurer will return the premiums paid. However, a death benefit will usually be paid if the suicide occurs after the two year period. (wikipedia.org)

Life insurance

2011-05-16T07:38:00.000-07:00

Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (a "premium") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (at regular intervals or in lump sums). In some countries, death expenses such as funerals are included in the premium; however, in the United States the predominant form simply specifies a lump sum to be paid on the insured's demise.

The value for the policy owner is the 'peace of mind' in knowing that the death of the insured person will not result in financial hardship.

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.

Life-based contracts tend to fall into two major categories:

A. Protection policies – designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.

B. Investment policies – where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life and variable life policies.

(en.wikipedia.org)

Insurance

2011-05-15T07:55:00.000-07:00

In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

Principles of insurance

Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur.

The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be an insurable risk. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.

(en.wikipedia.org)