Negotiating the life insurance jungle can be a nightmare. It does not have to be and though there may be a raft of new ideas and terms to come to grips with, you need to remember you have to get this decision right for your loved ones as by the time you claim, you will be gone and cannot come back to correct any mistakes.
Term life and whole of life insurance policies are the two most common insurance policies on the market. Less well known are variable universal life insurance policies.
Whole of life policies actually combine a life insurance with an investment fund that is built up over time and is held for the benefit of the policy holder. The level of cover and premiums are reviewed at regular intervals and if, in later years, the level of cover cannot be maintained by the premiums being charged then the investment fund can be used to supplement the cost of cover and maintain protection until death.
Whole of life policies are very long term policies and frequently are the longest lived insurance contract that there can possibly be. They are very flexible and are commonly used to protect estates from the ravages of inheritance taxes that are levied upon death.
Term life insurance policies last for a set period of time: the term. There is no investment element and the premium tends to be cheaper than whole of life policies as a result. The entire premium is used to purchase life coverage and so once the term expires there is no return of monies to the policy holder.
Typically, term life insurance policies are used to insure mortgages which last a known length of time so the term can easily be calculated. They also are often used for young families who have a desperate need for financial protection but are subjected to very tight budgetary constraints.
Variable universal life insurance policies combine an investment element with life insurance and to this end they are similar in nature to whole of life policies. They are flexible in receiving premiums both in terms of when and how much.
Variable universal life insurance policies are as much a part of an investment portfolio as your insurance coverage. Being insurance policies they benefit from attractive taxation benefits that are peculiar to insurance policies. Being flexible as to how and when they receive premiums, this allows for their use to shelter capital gains that otherwise are taxable within them.
Saturday, February 9, 2008
The Essential Guide To Insurance
Insurance can at times be somewhat of a minefield for many people; with so many different products available, choosing the right one and making sure that we are properly covered can be a challenge. Although this may be the case, it is also an essential part of our everyday living.
Buildings Insurance
Your home is likely to be your most valuable possession so it is important to ensure that adequate buildings insurance cover is set in place.
Buildings insurance covers the structure of the building plus anything you would normally leave behind when you move. This will include things like patios, drives, fences, walls and permanent fixtures like kitchens and bathrooms. Accidental damage caused by fire, storms, or burst pipes, for example will also be covered.
Having buildings insurance cover in place is not if fact a legal requirement although nearly every mortgage lender will insist that cover is taken out as they look to protect what is their asset too, albeit temporarily.
Many lenders will offer a block building insurance policy arrangement. The cover provided and premium rate are agreed between the lender and insurer, but instead of issuing each borrower with an individual policy number a master policy is set up, with both the lender and insurer having copies.
These premiums are not always the most competitive in price so it is advisable to shop around for quotes also.
The amount that each property will need to be insured for will of course vary. The valuer will provide a figure for the re-instatement value of the property, ie the cost of rebuilding in the event of total destruction. There is no specific link between this figure and that for the valuation for mortgage purposes, or the price that the purchaser has agreed to pay.
Contents Insurance
Contents insurance offers cover on the household goods and possessions inside your property and will often include the garden too if applicable. In other words, contents can be defined as everything that you would normally take with you when you move.
The lender will not insist that you take out a contents insurance policy however in many cases it is advisable. Not doing so could see you unable to replace your belongings in the event of disasters such as fire, flooding or burglary.
Many policies offer cover on a new for old basis which means should anything happen to your possessions such as the TV or washing machine; you should be able to replace the damaged goods for a new model.
Mortgage Payment Protection Insurance (MPPI)
Mortgage Payment Protection insurance (MPPI) is also known as accident, sickness and unemployment (ASU) insurance and, as the name suggests, it covers your mortgage repayments if you have an accident, fall ill or lose your job.
Most policies will provide cover for a period of 12 months. Your policy should cover the full amount of your mortgage and linked expenses such as other insurance policies and pension plans.
Many providers of payment protection insurance will offer modular coverage. For example, you can choose unemployment only option if job loss is your main concern or an accident & sickness only module depending on what you feel is more important to you.
You will not be able to claim money against your policy immediately after you make a claim. Typically, you have to wait three or four months - what is known as the deferral period before you begin to receive insurance payouts.
Often however, for an additional charge, some insurers will provide back-to-day-one cover that covers you from the first day you make a claim.
Payment is made 30 days after you made your claim and you need to have been off work for at least a month. In addition most policies have an excess period, usually 30, 60 or more days that is excluded from the payout should you make a claim.
Life Insurance
Life cover pays out a lump sum when you die, or earlier if you are diagnosed with a terminal illness. This lump sum payment may be used to pay off an outstanding mortgage or simply passed on as part of an inheritance.
There are two types of life insurance: Level term and decreasing term.
Level term insurance will often run alongside an interest only mortgage. It lasts for a set period and pays out the set amount you chose at the outset in case of death during the term.
Decreasing term insurance often run alongside a capital repayment mortgage. It offers a smaller payout year on year as the outstanding mortgage debt falls.
With both types of insurance there are many factors that the provider will take into account when calculating the premium. These factors will include; your age, weight, whether you a smoker or non a smoker and your medical history amongst other things.
A Five Point Plan When Taking Out Insurance
1. By speaking to a specialist adviser before you buy insurance could pay off. Ensure that you adviser is able to offer a range of policies from a variety of different providers.
2. Shop around for mortgage payment protection insurance (MPPI). Dont just agree to take out the policy offered by your lender without doing some research of your own. Policies offered by the lenders are not always the most competitive in the marketplace.
3. Dont forget to budget for your monthly insurance payments. For MPPI & Life insurance, the younger & healthier you are, the lower your costs, however payments can still easily add up to over 50 per month.
4. Never forget to find out what your excess is, or how much you need to pay before your insurance will pay out. Many policies have exclusions so dont forget to find out what these are too.
5. Many people fail to adjust their insurance policies accordingly when their circumstances change. If you insurance policies are not reflecting your current commitments then you could find that you and your dependents are underinsured.
Buildings Insurance
Your home is likely to be your most valuable possession so it is important to ensure that adequate buildings insurance cover is set in place.
Buildings insurance covers the structure of the building plus anything you would normally leave behind when you move. This will include things like patios, drives, fences, walls and permanent fixtures like kitchens and bathrooms. Accidental damage caused by fire, storms, or burst pipes, for example will also be covered.
Having buildings insurance cover in place is not if fact a legal requirement although nearly every mortgage lender will insist that cover is taken out as they look to protect what is their asset too, albeit temporarily.
Many lenders will offer a block building insurance policy arrangement. The cover provided and premium rate are agreed between the lender and insurer, but instead of issuing each borrower with an individual policy number a master policy is set up, with both the lender and insurer having copies.
These premiums are not always the most competitive in price so it is advisable to shop around for quotes also.
The amount that each property will need to be insured for will of course vary. The valuer will provide a figure for the re-instatement value of the property, ie the cost of rebuilding in the event of total destruction. There is no specific link between this figure and that for the valuation for mortgage purposes, or the price that the purchaser has agreed to pay.
Contents Insurance
Contents insurance offers cover on the household goods and possessions inside your property and will often include the garden too if applicable. In other words, contents can be defined as everything that you would normally take with you when you move.
The lender will not insist that you take out a contents insurance policy however in many cases it is advisable. Not doing so could see you unable to replace your belongings in the event of disasters such as fire, flooding or burglary.
Many policies offer cover on a new for old basis which means should anything happen to your possessions such as the TV or washing machine; you should be able to replace the damaged goods for a new model.
Mortgage Payment Protection Insurance (MPPI)
Mortgage Payment Protection insurance (MPPI) is also known as accident, sickness and unemployment (ASU) insurance and, as the name suggests, it covers your mortgage repayments if you have an accident, fall ill or lose your job.
Most policies will provide cover for a period of 12 months. Your policy should cover the full amount of your mortgage and linked expenses such as other insurance policies and pension plans.
Many providers of payment protection insurance will offer modular coverage. For example, you can choose unemployment only option if job loss is your main concern or an accident & sickness only module depending on what you feel is more important to you.
You will not be able to claim money against your policy immediately after you make a claim. Typically, you have to wait three or four months - what is known as the deferral period before you begin to receive insurance payouts.
Often however, for an additional charge, some insurers will provide back-to-day-one cover that covers you from the first day you make a claim.
Payment is made 30 days after you made your claim and you need to have been off work for at least a month. In addition most policies have an excess period, usually 30, 60 or more days that is excluded from the payout should you make a claim.
Life Insurance
Life cover pays out a lump sum when you die, or earlier if you are diagnosed with a terminal illness. This lump sum payment may be used to pay off an outstanding mortgage or simply passed on as part of an inheritance.
There are two types of life insurance: Level term and decreasing term.
Level term insurance will often run alongside an interest only mortgage. It lasts for a set period and pays out the set amount you chose at the outset in case of death during the term.
Decreasing term insurance often run alongside a capital repayment mortgage. It offers a smaller payout year on year as the outstanding mortgage debt falls.
With both types of insurance there are many factors that the provider will take into account when calculating the premium. These factors will include; your age, weight, whether you a smoker or non a smoker and your medical history amongst other things.
A Five Point Plan When Taking Out Insurance
1. By speaking to a specialist adviser before you buy insurance could pay off. Ensure that you adviser is able to offer a range of policies from a variety of different providers.
2. Shop around for mortgage payment protection insurance (MPPI). Dont just agree to take out the policy offered by your lender without doing some research of your own. Policies offered by the lenders are not always the most competitive in the marketplace.
3. Dont forget to budget for your monthly insurance payments. For MPPI & Life insurance, the younger & healthier you are, the lower your costs, however payments can still easily add up to over 50 per month.
4. Never forget to find out what your excess is, or how much you need to pay before your insurance will pay out. Many policies have exclusions so dont forget to find out what these are too.
5. Many people fail to adjust their insurance policies accordingly when their circumstances change. If you insurance policies are not reflecting your current commitments then you could find that you and your dependents are underinsured.
How Insurance Can Make Life Easier
Many a time, an event that we did not predict can drop into our paths and hurt us financially. Similarly, insurance can be an absolute blessing that lets you get on with life smoothly during both the immediate and the long term time frames afterwards. One of the main problems with a large portion of the population is debating whether or not they need to take out insurance for something that they view as being unlikely to happen, is that they'll never really know if it would have been useful except by looking back in retrospect.
We may well say that an insurance could have saved us from all the trouble. But that would only be in hindsight. Reasonably, you shouldn't have to take out an insurance policy to cover absolutely every event that's even vaguely possible, and it wouldn't make financial sense to do so. Covering yourself against key, high-cost causes for an insurance claim only makes itself worthwhile if they end up being used. At the same time, avoid getting into lower payout plans as well. These would not help you too much. After all, this means that the compensation for a particular claim really doesn't have much of an impact on how well you can deal with the cost.
The insurance markets are full of huge varieties of options. But you can't avail of all of them. But achieving that balance between a low level of cover against a broad range of risks and the sort of compensation that can really make a difference should it be needed is a hard task indeed. Bearing in mind that, reasonably, you neither plan nor hope for any of the risks that you cover against to actually happen, often people realize far too late that it would have been worthwhile to get insured against a certain liability.
Just ask anybody who has actually had the opportunity to file a claim. (S)he will tell you that an insurance policy offers a wide range of advantages. As an example, let us say that the area that you live in is flooded one year, and you took out flood insurance to cover against damage to both your home and the property inside it while those around you didn't. Initially you would have to pay a lot more to actually keep up the premiums. Yet, at least you would be in a better position if the flood does hit and cause devastation in your area. However, the coverage that you get will be a limited one. I doubt if you will be able to pick up the pieces too quickly after the flood, despite your insurance plan. But there is joy in being able to carry on with life almost as per normal shortly after the claim stops the crippling bill for whatever it was that you could have covered against.
We may well say that an insurance could have saved us from all the trouble. But that would only be in hindsight. Reasonably, you shouldn't have to take out an insurance policy to cover absolutely every event that's even vaguely possible, and it wouldn't make financial sense to do so. Covering yourself against key, high-cost causes for an insurance claim only makes itself worthwhile if they end up being used. At the same time, avoid getting into lower payout plans as well. These would not help you too much. After all, this means that the compensation for a particular claim really doesn't have much of an impact on how well you can deal with the cost.
The insurance markets are full of huge varieties of options. But you can't avail of all of them. But achieving that balance between a low level of cover against a broad range of risks and the sort of compensation that can really make a difference should it be needed is a hard task indeed. Bearing in mind that, reasonably, you neither plan nor hope for any of the risks that you cover against to actually happen, often people realize far too late that it would have been worthwhile to get insured against a certain liability.
Just ask anybody who has actually had the opportunity to file a claim. (S)he will tell you that an insurance policy offers a wide range of advantages. As an example, let us say that the area that you live in is flooded one year, and you took out flood insurance to cover against damage to both your home and the property inside it while those around you didn't. Initially you would have to pay a lot more to actually keep up the premiums. Yet, at least you would be in a better position if the flood does hit and cause devastation in your area. However, the coverage that you get will be a limited one. I doubt if you will be able to pick up the pieces too quickly after the flood, despite your insurance plan. But there is joy in being able to carry on with life almost as per normal shortly after the claim stops the crippling bill for whatever it was that you could have covered against.
Top 10 life insurance shopping tips
1. Who should buy life insurance? If you can answer yes to any of the following questions, then you should consider buying life insurance.
• Does anyone rely on you for financial support? If so, life insurance will help to protect their financial well being.
• Do you have a mortgage, car loan or any other outstanding debts? If so, a life insurance policy can provide a way to take care of these outstanding bills, along with any others like funeral expenses, legal fees, taxes, and medical expenses.
• Do you own a business? If so, you are liable for the debts your business owes. Your personal assets could be liquidated to pay these debts, which could leave little left for your family. Plus, if you have a partner, life insurance could help them buy out your portion of the business.
• Do you want to leave money to a charity? You can use life insurance to leave money to your favourite charity.
2. Who you would like to insure? You can get a policy on your own life, for other members of your family, or a joint one for you and your spouse.
3. What would you like your life insurance policy to achieve?Some of the things a life insurance policy can take care of include: pay funeral expenses, pay outstanding balances on your mortgage and other debts, offset the loss of your income for a period of time, and/or contribute to the future education of your children.
4. How much life insurance do you need? Well that will depend on what you would like your life insurance to accomplish. As a result, there is no one-size fits all answer. However, there are online life insurance calculator tools that can help. Life insurance calculators will help you find out roughly how much life insurance you'll need to have in order to ensure that your family, loved ones and your debts are looked after in the event of your death.
5. How long will you need life insurance for? Again, this is often determined by what you would like your life insurance to achieve. You can estimate the timing of your life insurance needs by asking yourself questions like: When will my mortgage be paid off, when will my children be finished school, and when will I retire? Also, there are online tools that after asking a few short questions will analyze your life insurance needs and offer guidance.
6. What type of life insurance do you need? There are two kinds of life insurance: term and permanent. Term life insurance offers protection for a set period of time, usually 10 to 20 years; while permanent insurance provides a lifetime of protection. Term insurance is more affordable than permanent insurance, offering you an opportunity to get a large amount of coverage at a lower cost. Permanent life insurance on the other hand is more expensive than term, as it offers lifetime coverage along with possible savings and investment options. The good news is if you want a permanent-style policy without the savings or investment options, you can go for a Term to 100 policy which offers coverage until age 100.
7. What medical information will you need to provide to obtain your policy? Typically, the more medical information you provide, the better the price. A life insurance policy that asks few or no medical questions will likely be far more expensive then a policy that asks for your medical information. Plus, depending on the insurer, your age, and the amount of coverage you want, you could be asked to provide blood or urine samples. For these, a nurse will visit, at no cost to you.
8. What are the renewal options and requirements of the policy? Most term policies are renewable until you reach the age of 70 or 75. Questions to ask your broker: will I have to take a medical to renew, is the renewal premium guaranteed, and if not how much can I expect my rate to increase at the time of renewal?
9. What are the conversion options and restrictions of the policy? As your life changes, you may want to convert your life insurance from term to permanent. When you purchase your policy, find out if there are any limitations for conversion, like age or into what type of permanent policy you can convert to – the fewer limitations the better.
10. What will the cost be? Well that depends on the individual. The best way to get the cheapest rate is to shop around. Thanks to the Internet, it is fast, free and easy to go to life insurance shopping comparison websites like Canada’s own www.kanetix.ca, to compare rates. By shopping online, you are sure to find the best deal on life insurance from many of Canada’s best-known life insurance carriers.
• Does anyone rely on you for financial support? If so, life insurance will help to protect their financial well being.
• Do you have a mortgage, car loan or any other outstanding debts? If so, a life insurance policy can provide a way to take care of these outstanding bills, along with any others like funeral expenses, legal fees, taxes, and medical expenses.
• Do you own a business? If so, you are liable for the debts your business owes. Your personal assets could be liquidated to pay these debts, which could leave little left for your family. Plus, if you have a partner, life insurance could help them buy out your portion of the business.
• Do you want to leave money to a charity? You can use life insurance to leave money to your favourite charity.
2. Who you would like to insure? You can get a policy on your own life, for other members of your family, or a joint one for you and your spouse.
3. What would you like your life insurance policy to achieve?Some of the things a life insurance policy can take care of include: pay funeral expenses, pay outstanding balances on your mortgage and other debts, offset the loss of your income for a period of time, and/or contribute to the future education of your children.
4. How much life insurance do you need? Well that will depend on what you would like your life insurance to accomplish. As a result, there is no one-size fits all answer. However, there are online life insurance calculator tools that can help. Life insurance calculators will help you find out roughly how much life insurance you'll need to have in order to ensure that your family, loved ones and your debts are looked after in the event of your death.
5. How long will you need life insurance for? Again, this is often determined by what you would like your life insurance to achieve. You can estimate the timing of your life insurance needs by asking yourself questions like: When will my mortgage be paid off, when will my children be finished school, and when will I retire? Also, there are online tools that after asking a few short questions will analyze your life insurance needs and offer guidance.
6. What type of life insurance do you need? There are two kinds of life insurance: term and permanent. Term life insurance offers protection for a set period of time, usually 10 to 20 years; while permanent insurance provides a lifetime of protection. Term insurance is more affordable than permanent insurance, offering you an opportunity to get a large amount of coverage at a lower cost. Permanent life insurance on the other hand is more expensive than term, as it offers lifetime coverage along with possible savings and investment options. The good news is if you want a permanent-style policy without the savings or investment options, you can go for a Term to 100 policy which offers coverage until age 100.
7. What medical information will you need to provide to obtain your policy? Typically, the more medical information you provide, the better the price. A life insurance policy that asks few or no medical questions will likely be far more expensive then a policy that asks for your medical information. Plus, depending on the insurer, your age, and the amount of coverage you want, you could be asked to provide blood or urine samples. For these, a nurse will visit, at no cost to you.
8. What are the renewal options and requirements of the policy? Most term policies are renewable until you reach the age of 70 or 75. Questions to ask your broker: will I have to take a medical to renew, is the renewal premium guaranteed, and if not how much can I expect my rate to increase at the time of renewal?
9. What are the conversion options and restrictions of the policy? As your life changes, you may want to convert your life insurance from term to permanent. When you purchase your policy, find out if there are any limitations for conversion, like age or into what type of permanent policy you can convert to – the fewer limitations the better.
10. What will the cost be? Well that depends on the individual. The best way to get the cheapest rate is to shop around. Thanks to the Internet, it is fast, free and easy to go to life insurance shopping comparison websites like Canada’s own www.kanetix.ca, to compare rates. By shopping online, you are sure to find the best deal on life insurance from many of Canada’s best-known life insurance carriers.
Principle of Insurance
Principles of insuranceCommercially insurable risks typically share seven common characteristics.
Insurance---A large number of homogeneous exposure units
The vast majority of insurance policies are provided for individual members of very large classes.
Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.
The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyds of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent.
Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.
Insurance---Definite Loss
The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause.
The classic example is death of an insured on a life insurance policy.
Fire, automobile accidents, and worker injuries may all easily meet this criterion.
Other types of losses may only be definite in theory.
Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable.
Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
Insurance---Accidental Loss
The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance.
The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost.
Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
Insurance---Large Loss
The size of the loss must be meaningful from the perspective of the insured.
Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims.
For small losses these latter costs may be several times the size of the expected cost of losses.
There is little point in paying such costs unless the protection offered has real value to a buyer.
Insurance---Affordable Premium
If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer.
Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer.
If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.
Insurance---Calculable Loss
There are two elements that must be at least estimatable, if not formally calculable: the probability of loss, and the attendant cost.
Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
Insurance---Limited risk of catastrophically large losses
The essential risk is often aggregation.
If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed.
Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5%.
Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurers appetite for additional policyholders.
The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten.
Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon.
In extreme cases, the aggregation can effect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk.
In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint.
Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.
Insurance---A large number of homogeneous exposure units
The vast majority of insurance policies are provided for individual members of very large classes.
Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.
The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyds of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent.
Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.
Insurance---Definite Loss
The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause.
The classic example is death of an insured on a life insurance policy.
Fire, automobile accidents, and worker injuries may all easily meet this criterion.
Other types of losses may only be definite in theory.
Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable.
Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
Insurance---Accidental Loss
The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance.
The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost.
Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
Insurance---Large Loss
The size of the loss must be meaningful from the perspective of the insured.
Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims.
For small losses these latter costs may be several times the size of the expected cost of losses.
There is little point in paying such costs unless the protection offered has real value to a buyer.
Insurance---Affordable Premium
If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer.
Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer.
If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.
Insurance---Calculable Loss
There are two elements that must be at least estimatable, if not formally calculable: the probability of loss, and the attendant cost.
Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
Insurance---Limited risk of catastrophically large losses
The essential risk is often aggregation.
If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed.
Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5%.
Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurers appetite for additional policyholders.
The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten.
Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon.
In extreme cases, the aggregation can effect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk.
In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint.
Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.
Types of Insurance
Types of insurance
Any risk that can be quantified can potentially be insured. Among the different types of commercially available insurance are:
Types of insurance--Automobile insurance
known in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insured's vehicle itself.
Throughout most of the United States an auto insurance policy is required to legally operate a motor vehicle on public roads.
In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to a no fault system, which reduces or eliminates the ability to sue for compensation but provides automatic eligibility for benefits.
Types of insurance--Aviation insurance
insures against hull, spares, deductible, hull war and liability risks.
Types of insurance--Boiler insurance
(also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery.
Builder's risk insurance insures against the risk of physical loss or damage to property during construction.
Builder's risk insurance is typically written on an "all risk" basis covering damage due to any cause (including the negligence of the insured) not otherwise expressly excluded.
Types of insurance--Casualty insurance
insures against accidents, not necessarily tied to any specific property.
Types of insurance--Credit insurance
repays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death.
Types of insurance--Crime insurance
insures the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
Types of insurance--Crop insurance
Farmers use crop insurance to reduce or manage various risks associated with growing crops.
Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease, for instance."
Types of insurance--Defense Base Act
Workers' compensation or DBA Insurance provides coverage for civilian workers hired by the government to perform contracts outside the US and Canada.
DBA is required for all US citizens, US residents, US Green Card holders, and all employees or subcontractors hired on overseas government contracts.
Depending on the country, Foreign Nationals must also be covered under DBA.
This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
Types of insurance--Directors and officers liability insurance
protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes incurred by directors and officers for which they are liable.
In the industry, it is usually called "D&O" for short.
Types of insurance--Expatriate insurance
provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
Types of insurance--Financial loss insurance
protects individuals and companies against various financial risks.
For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time.
Insurance might also cover the failure of a creditor to pay money it owes to the insured. This type of insurance is frequently referred to as "business interruption insurance."
Fidelity bonds and surety bonds are included in this category, although these products provide a benefit to a third party (the "obligee") in the event the insured party (usually referred to as the "obligor") fails to perform its obligations under a contract with the obligee.
Types of insurance--Health insurance policies
will often cover the cost of private medical treatments if the National Health Service in the UK (NHS) or other publicly-funded health programs do not pay for them.
It will often result in quicker health care where better facilities are available.
Types of insurance--Disability insurance policies
provide financial support in the event the policyholder is unable to work because of disabling illness or injury.
It provides monthly support to help pay such obligations as mortgages and credit cards.
Types of insurance--Liability insurance
covers legal claims against the insured.
For example, a homeowner's insurance policy will normally include liability coverage which will protect the insured in the event of a claim brought by someone who slips and falls on the property, and brings a lawsuit for her injuries.
Similarly, a doctor may purchase liability insurance to cover any legal claims against him if his negligence (carelessness) in treating a patient caused the patient injury and monetary harm.
The protection offered by a liability insurance policy is two fold:
-a legal defense in the event of a lawsuit commenced against the policyholder
-indemnification (payment on behalf of the insured) with respect to a settlement or court verdict.
Liability policies typically cover only the negligence of the insured, and will not apply to results of willful or intentional acts by the insured.
Types of insurance--Marine cargo insurance
covers physical loss or damage to property while in transit via sea or inland waterways.
Marine insurance typically refers to coverage of physical damage to the transporting vessel.
Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.
Types of insurance--Purchase insurance
is aimed at providing protection on the products people purchase.
Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance.
Such insurance is normally very limited in the scope of problems that are covered by the policy.
Types of insurance--Life insurance
provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for burial, funeral and other final expenses.
Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.
Types of insurance--Annuities
provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires.
Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources.
In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
Types of insurance--Total permanent disability insurance
provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.
Types of insurance--Locked funds insurance
is a little-known hybrid insurance policy jointly issued by governments and banks.
It is used to protect public funds from tamper by unauthorized parties.
In special cases, a government may authorise its use in protecting semi-private funds which are liable to tamper.
The terms of this type of insurance are usually very strict.
Therefore it is used only in extreme cases where maximum security of funds is required.
Types of insurance--Marine insurance
covers the loss or damage of goods at sea.
Marine insurance typically compensates the owner of merchandise for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier.
Types of insurance--Nuclear incident insurance
covers damages resulting from an incident involving radio activated materials and is generally arranged at the national level.
(For the United States, see the Price-Anderson Nuclear Industries Indemnity Act.)
Types of insurance--Environmental liability insurance
protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.
Types of insurance--Pet insurance
insures pets against accidents and illnesses - some companies cover routine/wellness care and burial, as well.
Types of insurance--Political risk insurance
can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.
Types of insurance--Professional indemnity insurance
is normally a mandatory requirement for professional practitioners such as architects, lawyers, doctors and accountants to provide insurance cover against potential negligence claims.
Non-licensed professionals may also purchase malpractice insurance, in which case it is commonly called errors and omissions insurance and covers a service provider for claims made against him that arise out of the performance of specified professional services.
For instance, a web site designer can obtain E&O insurance to cover her for certain claims made by third parties that arise out of negligent performance of web site development services.
Types of insurance--Property insurance
provides protection against risks to property, such as fire, theft or weather damage.
This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.
Types of insurance--Terrorism insurance
provides protection against any loss or damage caused by terrorist activities.
Types of insurance--Title insurance
provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
Types of insurance--Travel insurance
is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, lost of personal belongings, travel delay, personal liabilities, etc.
Types of insurance--Workers' compensation insurance
replaces all or part of a worker's wages lost and accompanying medical expense incurred because of a job-related injury.
A single policy may cover risks in one or more of the categories set forth above. For example, auto insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from causing an accident). A homeowner's insurance policy in the U.S. typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner's property.
Potential sources of risk that may give rise to claims are known as "perils". Examples of perils might be fire, theft, earthquake, and hurricane, among many others. An insurance policy will set out in detail which perils are covered by the policy and which are not.
Any risk that can be quantified can potentially be insured. Among the different types of commercially available insurance are:
Types of insurance--Automobile insurance
known in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insured's vehicle itself.
Throughout most of the United States an auto insurance policy is required to legally operate a motor vehicle on public roads.
In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to a no fault system, which reduces or eliminates the ability to sue for compensation but provides automatic eligibility for benefits.
Types of insurance--Aviation insurance
insures against hull, spares, deductible, hull war and liability risks.
Types of insurance--Boiler insurance
(also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery.
Builder's risk insurance insures against the risk of physical loss or damage to property during construction.
Builder's risk insurance is typically written on an "all risk" basis covering damage due to any cause (including the negligence of the insured) not otherwise expressly excluded.
Types of insurance--Casualty insurance
insures against accidents, not necessarily tied to any specific property.
Types of insurance--Credit insurance
repays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death.
Types of insurance--Crime insurance
insures the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
Types of insurance--Crop insurance
Farmers use crop insurance to reduce or manage various risks associated with growing crops.
Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease, for instance."
Types of insurance--Defense Base Act
Workers' compensation or DBA Insurance provides coverage for civilian workers hired by the government to perform contracts outside the US and Canada.
DBA is required for all US citizens, US residents, US Green Card holders, and all employees or subcontractors hired on overseas government contracts.
Depending on the country, Foreign Nationals must also be covered under DBA.
This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
Types of insurance--Directors and officers liability insurance
protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes incurred by directors and officers for which they are liable.
In the industry, it is usually called "D&O" for short.
Types of insurance--Expatriate insurance
provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
Types of insurance--Financial loss insurance
protects individuals and companies against various financial risks.
For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time.
Insurance might also cover the failure of a creditor to pay money it owes to the insured. This type of insurance is frequently referred to as "business interruption insurance."
Fidelity bonds and surety bonds are included in this category, although these products provide a benefit to a third party (the "obligee") in the event the insured party (usually referred to as the "obligor") fails to perform its obligations under a contract with the obligee.
Types of insurance--Health insurance policies
will often cover the cost of private medical treatments if the National Health Service in the UK (NHS) or other publicly-funded health programs do not pay for them.
It will often result in quicker health care where better facilities are available.
Types of insurance--Disability insurance policies
provide financial support in the event the policyholder is unable to work because of disabling illness or injury.
It provides monthly support to help pay such obligations as mortgages and credit cards.
Types of insurance--Liability insurance
covers legal claims against the insured.
For example, a homeowner's insurance policy will normally include liability coverage which will protect the insured in the event of a claim brought by someone who slips and falls on the property, and brings a lawsuit for her injuries.
Similarly, a doctor may purchase liability insurance to cover any legal claims against him if his negligence (carelessness) in treating a patient caused the patient injury and monetary harm.
The protection offered by a liability insurance policy is two fold:
-a legal defense in the event of a lawsuit commenced against the policyholder
-indemnification (payment on behalf of the insured) with respect to a settlement or court verdict.
Liability policies typically cover only the negligence of the insured, and will not apply to results of willful or intentional acts by the insured.
Types of insurance--Marine cargo insurance
covers physical loss or damage to property while in transit via sea or inland waterways.
Marine insurance typically refers to coverage of physical damage to the transporting vessel.
Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.
Types of insurance--Purchase insurance
is aimed at providing protection on the products people purchase.
Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance.
Such insurance is normally very limited in the scope of problems that are covered by the policy.
Types of insurance--Life insurance
provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for burial, funeral and other final expenses.
Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.
Types of insurance--Annuities
provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires.
Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources.
In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
Types of insurance--Total permanent disability insurance
provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.
Types of insurance--Locked funds insurance
is a little-known hybrid insurance policy jointly issued by governments and banks.
It is used to protect public funds from tamper by unauthorized parties.
In special cases, a government may authorise its use in protecting semi-private funds which are liable to tamper.
The terms of this type of insurance are usually very strict.
Therefore it is used only in extreme cases where maximum security of funds is required.
Types of insurance--Marine insurance
covers the loss or damage of goods at sea.
Marine insurance typically compensates the owner of merchandise for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier.
Types of insurance--Nuclear incident insurance
covers damages resulting from an incident involving radio activated materials and is generally arranged at the national level.
(For the United States, see the Price-Anderson Nuclear Industries Indemnity Act.)
Types of insurance--Environmental liability insurance
protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.
Types of insurance--Pet insurance
insures pets against accidents and illnesses - some companies cover routine/wellness care and burial, as well.
Types of insurance--Political risk insurance
can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.
Types of insurance--Professional indemnity insurance
is normally a mandatory requirement for professional practitioners such as architects, lawyers, doctors and accountants to provide insurance cover against potential negligence claims.
Non-licensed professionals may also purchase malpractice insurance, in which case it is commonly called errors and omissions insurance and covers a service provider for claims made against him that arise out of the performance of specified professional services.
For instance, a web site designer can obtain E&O insurance to cover her for certain claims made by third parties that arise out of negligent performance of web site development services.
Types of insurance--Property insurance
provides protection against risks to property, such as fire, theft or weather damage.
This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.
Types of insurance--Terrorism insurance
provides protection against any loss or damage caused by terrorist activities.
Types of insurance--Title insurance
provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
Types of insurance--Travel insurance
is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, lost of personal belongings, travel delay, personal liabilities, etc.
Types of insurance--Workers' compensation insurance
replaces all or part of a worker's wages lost and accompanying medical expense incurred because of a job-related injury.
A single policy may cover risks in one or more of the categories set forth above. For example, auto insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from causing an accident). A homeowner's insurance policy in the U.S. typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner's property.
Potential sources of risk that may give rise to claims are known as "perils". Examples of perils might be fire, theft, earthquake, and hurricane, among many others. An insurance policy will set out in detail which perils are covered by the policy and which are not.
Insurance Business
Insurers make money in two ways:
1-through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks
2-by investing the premiums they collect from insureds.
The most difficult aspect of the insurance business is the underwriting of policies.
Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly.
To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them.
Data is analyzed to fairly accurately project the rate of future claims based on a given risk.
Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure.
Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy.
Of course, from the insurer's perspective, some policies are winners (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are losers (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income).
An insurer's underwriting performance is measured in its combined ratio.
The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the company's combined ratio.
The combined ratio is a reflection of the company's overall underwriting profitability.
A combined ratio of less than 100 percent indicates profitability, while anything over 100 indicates a loss.
Insurance companies also earn investment profits on “float”.
“Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims.
Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out.
In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003.
But overall profit for the same period was $68.4 billion, as the result of float.
Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held.
Naturally, the “float” method is difficult to carry out in an economically depressed period.
Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards.
So a poor economy generally means high insurance premiums.
This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or "insurance" cycle.
Property and casualty insurers currently make the most money from their auto insurance line of business.
Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing.
Additionally, property losses in the US, due to natural catastrophes, have exacerbated this trend.
Finally, claims and loss handling is the materialized utility of insurance.
In managing the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages.
As part of this balancing act, insurance fraud is a major business risk that must be managed and overcome.
1-through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks
2-by investing the premiums they collect from insureds.
The most difficult aspect of the insurance business is the underwriting of policies.
Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly.
To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them.
Data is analyzed to fairly accurately project the rate of future claims based on a given risk.
Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure.
Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy.
Of course, from the insurer's perspective, some policies are winners (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are losers (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income).
An insurer's underwriting performance is measured in its combined ratio.
The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the company's combined ratio.
The combined ratio is a reflection of the company's overall underwriting profitability.
A combined ratio of less than 100 percent indicates profitability, while anything over 100 indicates a loss.
Insurance companies also earn investment profits on “float”.
“Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims.
Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out.
In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003.
But overall profit for the same period was $68.4 billion, as the result of float.
Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held.
Naturally, the “float” method is difficult to carry out in an economically depressed period.
Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards.
So a poor economy generally means high insurance premiums.
This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or "insurance" cycle.
Property and casualty insurers currently make the most money from their auto insurance line of business.
Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing.
Additionally, property losses in the US, due to natural catastrophes, have exacerbated this trend.
Finally, claims and loss handling is the materialized utility of insurance.
In managing the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages.
As part of this balancing act, insurance fraud is a major business risk that must be managed and overcome.
Online Insurance Quotes Are the Best Way to Go
When it was time to get car insurance for my first car there were no insurance quotes to compare; there was nothing to think about. It was my parents’ policy and they went with the company they had used for years.
After getting married, there were still no insurance quotes to look at. When I took my husband’s last name, the insurance company came with it. Because of the relationship established with the local agent, we use the same company for all of out insurance needs.
Was this the best way to go about getting insurance? It worked out for us, but getting insurance quotes is always the best route to go – especially starting out. It could be that the company that works for you didn’t work for your parents. Most likely, the needs that you have today will be completely different from those of your parents (both then and now) and your unique requirements could require a unique insurance company.
Getting insurance quotes is easier than you might think; the trick comes with deciding just what you will put the highest value on – savings or availability. There are numerous online sites that will not only give you insurance quotes but will compare them to other insurance companies. This is easier (and more efficient) than calling numerous companies because it ensures that you will have the same information (discounts, deductibles, etc.) on all of the quotes.
After getting married, there were still no insurance quotes to look at. When I took my husband’s last name, the insurance company came with it. Because of the relationship established with the local agent, we use the same company for all of out insurance needs.
Was this the best way to go about getting insurance? It worked out for us, but getting insurance quotes is always the best route to go – especially starting out. It could be that the company that works for you didn’t work for your parents. Most likely, the needs that you have today will be completely different from those of your parents (both then and now) and your unique requirements could require a unique insurance company.
Getting insurance quotes is easier than you might think; the trick comes with deciding just what you will put the highest value on – savings or availability. There are numerous online sites that will not only give you insurance quotes but will compare them to other insurance companies. This is easier (and more efficient) than calling numerous companies because it ensures that you will have the same information (discounts, deductibles, etc.) on all of the quotes.
How Long Term Care Insurance
Most insurance companies say they will pay out long-term health payments when a person can no longer perform two of several basic activities. There is bathing, eating, dressing, and be able to move about, be confident and be able to use the toilet. As a person ages, usually the first thing to go is being able to bathe themselves. Dressing usually follows closely behind that so obviously those two combined would require long-term health care. However, if someone is not able to eat or use the toilet, then they usually can't last very long and you probably won't get a very long pay out on your insurance policy. Becoming incontinent is not far removed from not being able to use the toilet that most of the notes a severe downgrading your health. So the fact that the majority of these symptoms required to start your long-term health payout means the person is near the end also means you won't see much of a payout in the long run. This may be a harsh way to look at it but it helps you to appreciate the need to look very soberly at long-term health care insurance. Spending a lot of money on large premiums may not be the wisest thing unless you are positive the insurance company won't balk at a payout and hold you up for some time. You then end up paying out-of-pocket expenses to care for a loved one even though you've already put out money supposedly to take care of that. Another area where long-term healthcare kicks in is when a person suffers from dementia or other cognitive impairment.
When you take out long-term health insurance make sure you understand fully all the requirements that must be met before payments start. Whose doctor will have the last say when it comes to determining the medical payout threshold is met. Is it strictly up to the insurance company? Is there a waiting period before you begin to collect payments? People with dementia usually live no more than four years in a nursing home. Life expectancy for those who can't eat or use the toilet is fairly short because of the surrounding health problems. A waiting period of six months to a year severely cuts into your payout from the insurance company. Will it also pay for health care over a number of months after a serious operation or to recover from a serious illness in old age?
When you take out long-term health insurance make sure you understand fully all the requirements that must be met before payments start. Whose doctor will have the last say when it comes to determining the medical payout threshold is met. Is it strictly up to the insurance company? Is there a waiting period before you begin to collect payments? People with dementia usually live no more than four years in a nursing home. Life expectancy for those who can't eat or use the toilet is fairly short because of the surrounding health problems. A waiting period of six months to a year severely cuts into your payout from the insurance company. Will it also pay for health care over a number of months after a serious operation or to recover from a serious illness in old age?
The Importance of Life Insurance
Life insurance makes it a little easier for the surviving
family. It means getting one's self-insured so that, the
family or the nominees of the policyholder become entitled
to compensation in the wake of the death of the policy-
holder. However, the insurer has to pay premiums for a
certain period of time for this. The amount and the interval
of paying premiums differ from policy to policy and company
to company. It also varies from person to person.
There are two main types life insurance: term life and whole
life insurance. Term Life insurance is for a given period of
time. It means that the company will compensate if anything
happens within the given period. The policy may be of two,
five, ten years or whatever the company policy is. When the
period gets over, the company would pay some part of your
total premium as maturity amount. Whole Life Insurance
covers for whole life. The premium is higher for this type.
Just because, you are healthy now, does not ensure anything
for the future, as no one knows when a disease may strike.
So the company bears the risk for that and charges a higher
premium in this case.
Whether we need life insurance or not is becoming a hot
debate. Many say that there is no need of life insurance if
nobody is dependent on your earning. They also opine that
the children and senior citizens don't need insurance at
all. However, other group argues that it is a kind of
saving, thus they don't see anything wrong in increasing
their savings with the life insurance.
However, insuring children and newborn babies involve
certain emotions. To some people, insuring children means
to have intent to get back some part of the amount you have
already spent for your beloved son or daughter. Others are
of the opinion that we are living in a very trying and
expensive days; anybody can imagine how costly childcare
is these days. In case, your insured children grow up strong
and healthy, it can provide some financial back up to their
further studies or business. It can also make it easier for
them to get their life insured in the later part of their
life.
Getting life insurance is not for everyone. If you are
unfit or unhealthy you may experience problems obtaining
life insurance. Chain smokers, heavy drinkers and over-
weight people are the worst affected of the lot. Giving up
smoking and drinking is the only advice to them. It is
advisable for the obese people to lose some weight. They
should also take an account of their blood pressure and take
medicines to control that in time. The buck does not stop
here, they need to do some workout, control blood sugar and
check up their bodies regularly.
family. It means getting one's self-insured so that, the
family or the nominees of the policyholder become entitled
to compensation in the wake of the death of the policy-
holder. However, the insurer has to pay premiums for a
certain period of time for this. The amount and the interval
of paying premiums differ from policy to policy and company
to company. It also varies from person to person.
There are two main types life insurance: term life and whole
life insurance. Term Life insurance is for a given period of
time. It means that the company will compensate if anything
happens within the given period. The policy may be of two,
five, ten years or whatever the company policy is. When the
period gets over, the company would pay some part of your
total premium as maturity amount. Whole Life Insurance
covers for whole life. The premium is higher for this type.
Just because, you are healthy now, does not ensure anything
for the future, as no one knows when a disease may strike.
So the company bears the risk for that and charges a higher
premium in this case.
Whether we need life insurance or not is becoming a hot
debate. Many say that there is no need of life insurance if
nobody is dependent on your earning. They also opine that
the children and senior citizens don't need insurance at
all. However, other group argues that it is a kind of
saving, thus they don't see anything wrong in increasing
their savings with the life insurance.
However, insuring children and newborn babies involve
certain emotions. To some people, insuring children means
to have intent to get back some part of the amount you have
already spent for your beloved son or daughter. Others are
of the opinion that we are living in a very trying and
expensive days; anybody can imagine how costly childcare
is these days. In case, your insured children grow up strong
and healthy, it can provide some financial back up to their
further studies or business. It can also make it easier for
them to get their life insured in the later part of their
life.
Getting life insurance is not for everyone. If you are
unfit or unhealthy you may experience problems obtaining
life insurance. Chain smokers, heavy drinkers and over-
weight people are the worst affected of the lot. Giving up
smoking and drinking is the only advice to them. It is
advisable for the obese people to lose some weight. They
should also take an account of their blood pressure and take
medicines to control that in time. The buck does not stop
here, they need to do some workout, control blood sugar and
check up their bodies regularly.
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