INSURANCE FARMLAND

INSURANCE TERMS / TERMINOLOGIES

2011-04-29T15:08:00.000-07:00

Insurance terms/terminologies are the language, expressions, vocabularies, jargons, lingo (informal), lexicons, lexis and/or words, or a set of expressions, vocabularies, jargons etc. relating to the day-to-day operation of insurance, used by people involved in the activities or fields of work of insurance.

Term

Definition

Actual cash value

This is the traditional measure of property insurance loss. Usually defined as the cost of replacing the destroyed property with new property, minus an allowance for depreciation.

Actuary

This is a person involved in life assurance, assessing the risks and calculating the premium and handling the matters connected with pension funds.

All-risk insurance

This is a generic term for insurance that covers all risks that are not explicitly excluded.

Annuity

This is an insurance contract for annual (or some other regular interval) payment of a specified amount of money to somebody, either for a stated number of years or for the person's lifetime.

Assurance

Life insurance; or assurance against certainty; or insurance against something that is certain to happen such as death, rather than something that might happen such as loss of or damage to property.

Auto collision coverage

This is the portion of an auto insurance policy that pays for collision damage to the insured auto.

Auto comprehensive coverage

This refers to the portion of an auto insurance policy that pays for loss or damage to the insured auto other than the loss or damage caused by collision.

Auto liability coverage

The portion of an auto insurance policy that protects against claims for legal liability arising out of auto accidents. Provides legal defense and pays sums necessary to settle claims against the insured person.

Automatic premium loan

A life insurance policy provision authorizing the insurer to use the policy's loan value to pay any premium not paid by the end of the grace period.

Beneficiary

This is the person who receives the proceeds of a life insurance policy upon the death of the insured person; or the legal recipient or somebody entitled to money or property by an insurance policy.

Binder

This refers to a temporary insurance contract (written or oral) that remains in effect until replaced by a regular policy.

Cash surrender value

This is the amount of money payable to a policyholder who discontinues a life insurance policy.

Casualty Insurance

Insurance that covers losses caused by injury to others or damage to property of others. Casualty insurance policies may or may not require that policy-owners determine legal liability (fault) in order to collect payments.

It is otherwise referred to as company's liability insurance. It is insurance against claims following negligence by a company's employees who cause injury to people or damage to property. It is also an insurance against physical damage to property, equipment, or machinery.

Coverage

This is the protection provided by insurance. This otherwise referred to as insurance protection i.e. the amount or type of protection provided by an insurance policy.

Cover note

Temporary insurance cover which enables the insured to enjoy the benefits of a policy while it is being processed.

Credit life insurance

Term life insurance issued to cover repayment of a loan if the borrower dies.

Deductible clause

A policy provision defining the specific amount of loss that, if exceeded, will trigger insurance coverage.

Dividend

A partial return of premium, reflecting the difference between the premium charged and the amount needed to cover the company's operations and payments on claims.

Endowment insurance

Life insurance payable to the insured if he or she is living on the maturity date stated in the policy, or to a beneficiary if the insured dies before that date.

Exclusions

Provisions that explicitly limit the coverage provided by an insurance policy.

Expiration date

The date when an insurance policy ends.

Grace period

A period of time following the date the premium is due, during which a policy remains in force even though the premium has not been paid.

Group insurance

This refers to any insurance plan that covers a number of individuals under a single contract. It is typically issued to an employer for the benefit of employees.

Guaranteed insurability

A life insurance policy provision permitting the purchase of additional insurance at stated times regardless of the condition of the insured person's health.

Incontestable clause

A policy provision that prevents the insurer from challenging or contesting claims after a stated period of coverage, regardless of any misstatements made by the applicant.

Insurable interest

This is a demonstrable interest in something covered by an insurance policy, the loss of which would cause deprivation or financial loss.

Insurable interest must be shown whenever somebody takes out an insurance policy or makes a claim.

Insurable value

This is the true value for which a property is insured after deducting the value of the land and other items that are not part of the property.

Insurance broker

This is somebody who is paid to act as an agent for the insurance organization in negotiating insurance contracts/policies between the insurer and the insured. He/she is responsible and acts as an agent in arranging a deal or contract on the selling and buying of insurance policies.

Insurance rate

The price of insurance per unit of coverage, usually expressed as a cost per dollar amount of coverage per year.

Insurance policy

This is the document which sets out the exact terms of the insurance contract.

Insurance protection

This is the amount or type of protection provided by an insurance policy.

Insured

This refers to a person or organization that is protected by insurance is referred to as the insured.

Insurer

This is an insurance company or other organization that provides insurance for the insured.

Liability insurance

An insurance policy that protects against claims for legal liability. Provides legal defense and pays sums necessary to settle claims against the insured.

Limit of liability

The maximum amount an insurer will pay in the event of a covered loss.

Limited payment whole life

Whole life insurance on which premiums are payable for a specified number of years.

Loss

This is any event or circumstance for which insurance may pay.

Major medical expense insurance

Insurance that pays for a broad range of medical services up to a very high maximum amount. It is usually subject to a deductible amount and percentage participation. Also called major medical.

Medical payments coverage

A form of insurance that pays for medical and funeral expenses without regard to liability. It is available in auto policies and other policies that provide liability coverage.

Mutual insurance company

An insuring organization that is owned by its policyholders.

Named peril insurance

Any insurance that specifies the perils (risks) it covers.

No-fault system

A system in which reimbursement for injuries on the basis of fault (tort liability) is not legally available.

Non-forfeiture options

Alternatives available to a policy-owner who discontinues premium payments on a policy of insurance.

Non-participating insurance

Insurance provided by policies on which no policy dividends are payable. Also called nonpar.

Participating insurance

Insurance provided by policies on which dividends are payable.

Permanent life insurance

Loosely, any form of individual life insurance that develops a cash value.

Policy

This is a contract that exists between an insurance company and a person or organization buying insurance services, or the document that lists the contract terms.

Policy loan

A loan made by a life insurance company to a policy-owner on the security of a policy's cash surrender value.

Simply put, this is a loan granted to a policyholder using the policy as security.

Policy-holder

The person or entity who pays for, and therefore owns, an insurance policy. This is usually the insured, but it may also be a relative of the insured, a partnership, or a corporation. Also called a policy-owner.

Simply put, this is a person, organization, etc., in whose name a policy is held.

Premium

The price of an insurance policy. Payment made to an insurance policy for an insurance policy, it can be paid annually, quarterly or monthly.

Proposal form

This is a form that must be completed by a person wishing to enter into an insurance contract. He must disclose all relevant information truthfully in the form.

Replacement cost

The cost of replacing damaged or destroyed property with new property, without deducting for depreciation.

Risk

The cause of a possible loss. Also referred to as peril.

Settlement options

The alternatives, other than immediate payment in cash, in which a life insurance beneficiary may choose to have policy benefits paid.

Stock insurance company

A corporate insuring organization owned by stockholders.

Straight life insurance

Whole life insurance on which premiums are payable for life.

Subrogation

A legal principle which provides that, to the extent an insurer has paid for a loss, the insurer receives the policyholder's right to recover from any third party who caused the loss.

Surrender value

The amount in cash an insurance company will repay to an endowment policy holder if he wishes to discontinue prior to the date of the maturity. This depends on the premium paid.

Term life insurance

Life insurance payable to a beneficiary when the insured dies within a specified period. If the insured is living at the end of the period, the policy expires without value.

Underwriting

The process by which insurers decide which losses to insure and how to insure them.

Uninsured motorists coverage

A form of auto insurance that pays the damages that insured persons are legally entitled to collect from uninsured motorists.

Waiting period

In disability income insurance, the period of time between the beginning of a disability and the date that the policy's income payments begin. In group insurance, the period an employee must work for a firm in order to qualify for coverage.

Waiver of premium

A life or health insurance policy provision stating that premiums will not be charged if the insured person becomes totally and permanently disabled.

Whole life insurance

Life insurance payable to a beneficiary at the death of the policyholder, whenever that occurs. Premiums may be payable for a specified number of years (limited payment life insurance) or for life (straight life insurance).

Saving...

CLASSIFICATION OF INSURANCE POLICIES

2011-04-24T16:51:00.000-07:00

Insurance policy can be categorized into:

1. Indemnity insurance, and

2. Non-indemnity insurance.

What is indemnity insurance?

Indemnity insurance is an insurance guarantee to provide security or protection against possible hurt, damage, loss or liability. Here, an agreed lump sum (as stated inside the insurance policy) is paid as compensation on the risk insured against any incurred loss or damage.

Indemnity insurance is broadly divided into three forms, as follows:

1. Marine

Power boat

2. Aviation, and

An aeroplane

3. Others (other indemnity insurance)

Marine insurance

Marine insurance includes all vessels designed for aquatic transportation, both on marine and freshwater territories. This includes the huge commercial insurance on hull s and cargo, sailing dinghies, yachts, motor boats, and small crafts generally.

speedboat

Cargo ship

Marine insurance covers these areas of the ship:

· Hull insurance

· Cargo insurance

· Freight insurance

· Others such as insurance of liability

an Australian cargo ship

The marine insurance can be insured in different policy forms such as:

· Voyage policy

· Time policy

Passenger ship

· Valued policy

· Un-valued policy

· Floating policy

Luxury yacht


Cruise ship

Aviation insurance

Aviation insurance guarantees hulls of aircraft, third-party liability, and legal liability to passengers. Compensations, or rather claims, often reach extremely vast amount, although liability passengers is limited by international conventions.

All the above marine insurance coverage areas and policy are also applicable to aviation industry, with little or no exception.

Other indemnity insurance

Other indemnity insurance are listed as follows:

· Fire

Burning house

· Theft and burglary

· Insurance of liability (including third-party)

· Insurance of interest

· Consequential loss of profit

· Agricultural

Any loss sustained as a result of climatic change, fire etc. can be cushioned with an insurance policy.

· Bad debts

· Export credits, etc.

What is non-indemnity insurance?

Non-indemnity insurance is different from indemnity. In case of death, sickness or personal accident, no amount of compensation can equate the emotional disruption being experienced from the death of a loved one through sickness or accident, neither can being compensated counter-balance the pain experienced from a sickness, nor monetary payment from any insurance company compensate for the loss of a leg or an arm in an accident.

A physically challenged man as a result of accident.

In non-indemnity insurance, the logic of compensation, no matter how large it may be, is to present the monetary payment to the insured as a form of “consolation” or “benefit” payment.

Let’s take it this way, if Mr. Adam takes non-indemnity insurance and after some years of paying faithfully the premiums, he has an accident and dies. The insurance company will pay Mr. Adam’s family, or whoever is the beneficiary, the sum-assured. The money being paid to Mr. Adam’s family cannot bring back Mr. Adam, his love for his family, neither can the money redeem the emotional pain being experienced by his loved ones nor compensate for Mr. Adam’s presence and his actions.

In case of loss of any of his limbs, no amount of compensation can erase the pains being experienced by Mr. Adam from the limbless-ness or the emotional imbalance resulting from becoming a physically challenged person. Any compensation paid to Mr. Adam by the insurance company in this case is in form of “benefit” or “consolation” payment.

Non-indemnity insurance consists of both life insurance and non-life insurance.

Non-indemnity life insurance exists in three forms:

Whole life insurance,

Term Insurance , and

Endowment insurance

Non-indemnity non-life insurance policies exist in two forms of:

Sickness

An insurance policy is the insurance policy taken because of any eventuality of any form of sickness. Let’s assume Mr. Adam takes a non-indemnity non-life insurance and he suddenly falls sick. The insurance company will pay his medical bills, and some other compensation as covered in his insurance policy. This may include, but not limited to, payment for the loss of remuneration during the period of sickness, etc.

Personal accident resulting in death or disability

An insurance policy may also be taken as a protection against any personal accident. In a situation where a policy-holder has an accident and, as a result, loses a limb or dies, the insurance company will pay the insured amount (as in the insurance policy) to the benefactor i.e. the person (in case of personal accident resulting in losing of limb(s)) or the relative/person whose name is on the policy (in case of death).

However, apart from personal accident insurance, accident insurance includes and is sub-divided into:

· Burglary and ‘all-risks’

· Employer’s liability and public liability

· Contractors’ all-risks

· Motor

Only the insurance can compensate the burning of this vehicle

· Fidelity guarantee and contingency

· Livestock

These livestock can be insured in case of loss, theft, or otherwise.

· Glass

· Weather

· Engineering

· Travel, and so on.

INSURANCE FRAUD 1: FAKED DEATH

2011-04-21T15:55:00.000-07:00

Insurance fraud is a crime being committed every day. All over the world, some sinister people believed insurance money are free money which can be picked at will through their concoction of a plan. While some of the perpetrators are caught, some escaped with the compensation undetected. But no matter what, crime doesn’t pay. In whatever form, either big or small, a crime is a crime and a criminal is a criminal.

This is a real life story of one of the highest life insurance crime ever perpetrated.

Sunn-ke (not the real name) was an Asian beautician by profession. She was around 28 years old, married with 2 children; she had a biological mother who was 49 years old. One day, an insurance salesman came up to Sunn-ke and advised her about Insurance. Based on this, she took an Endowment Life Assurance worth of one million dollars for her mother and half the amount for herself. Then, she continued paying the premium on a monthly basis.

After two years of paying the premiums regularly, she concocted a trick on how she could dupe the insurer of the sum assured.

First, she took her mother out of the country under a false identity to her uncle in United States of America. Then, she came back and announced to the people that her mum had died. What baffled everybody was that she placed an obituary in the popular newspaper and got a death certificate on behalf of her mother’s death. She then took all this to her insurer.

The people at the insurance company were surprised at this occurrence. They sent some people to visit and console Sunn-ke’s family but on getting there, they met the house door locked and upon enquiring from the neighbours, they were surprised when they tried to condole with the neighbours and were met with scornful eyes. When they asked one of the neighbours when the woman died, he said he had no idea of the woman’s death and that he saw the woman went out with the daughter, dressed in a travelling mood, and she never came back to the house.

This piece of information got the insurance people suspicious. Then, they sent two of their special investigators to unravel the matter. The insurance investigators went to the Sunn-ke’s mother’s village. On getting there, the interviewed elders were surprised at the news of the woman and they told them that they were just hearing of it. The whole village was immediately thrown into a state of mourning.

The insurance investigators, on getting back, asked Sunn-ke where her mother’s corpse was and when she told them that she had been buried, they asked her why she had to do that without informing the village elders of the woman’s death. She replied them that it was her mother’s last request that she should be buried immediately she died as she would not want any native rite performed on her dead body. However, when they asked her to take them to the burial site, she told them that she wouldn't be able to do that right away and gave them an appointment for the third day.

Some people are so desperate and, evil begets evil, likes begets likes. A dubious action is a chain networking which one crime perpetrated has to be covered up with another criminal action, which in turn needs to be protected from being discovered and has to be covered up with another dubious action, and so on and so forth.

The moment Sunn-ke discovered that her trick was about to be investigated to the core, she went to the burial site and arranged with some people working there. What they did was to get a fresh female corpse of the right age and buried it, after which they arranged for a decent tombstone to be erected on the grave. All this was done in the dead of night to avoid any prying witness.

On the third day, the investigators went with Sunn-ke to verify the burial point of her mother. They noticed a freshly-prepared tomb, when they commented on this Sunn-ke told them that she just did that because she just had sufficient fund to do it.

Whatever is worth doing is worth doing well. The insurance investigators gave their report to their office in which they suggested in exhuming the corpse for final verification. True to the point, they got permission from the appropriate authority and exhumed the corpse and saw the decaying corpse. But what disturbed the investigation was that they could not do any form of identification such as facial, dental etc. Why? The corpse was already decaying beyond the point of recognition and the local woman never visited a dentist for any dental problem; so there was no dental history.

Since it has been verified that the woman was dead by exhuming the body, the insurance had no choice except to pay the complete compensation of sum assured to the woman.

After the compensation had been paid, the top management body of the insurance organization held a meeting and gave the two insurance investigators the mandate to continue their investigation until they were fully satisfied.

Right now, Sunn-ke was at peace of mind that her plot had succeeded without knowing that her phones, shop and house had been electronically bugged by the insurance investigators to eavesdrop on her conversations.

The first breakthrough was when she phoned her uncle in the United States of America. While talking to her uncle, she asked about her mum.

About three days after, she went to a phone booth and discussed with a distant caller. This, after checking through, was discovered to be the same number she used to call her uncle in United States of America. This led to greater suspicion on this case. Why did she had to go and call outside by using public telephone booth and refuse to use her phones? Who is she calling to? What is the content of the conversation?

The next thing the insurance investigators did was to bug all the public telephones within the vicinity of the one Sunn-ke used the other time. Luck was on their side because she made the same long distance call again within a week of this bugging by using the same phone booth and they were able to record the conversation and discovered that the person at the other end was her mother – the supposed dead woman whose assurance sum-assured had been paid.

The insurance investigators gave the full report to the management – all the recorded conversations, the traced address in USA where Sunn-ke was making telephone call to her mother.

The situation turned to an international crime because Sunn-ke’s uncle had a hand in the affairs; he was the one who cooked up the plot right from the beginning before they took the insurance policy. All of them had to be rounded up and dealt with according to the law.

However, the woman never knew the type of game she was being used for by her biological daughter. Neither did she know that she had been proclaimed dead nor had any knowledge that a tombstone had been erected on her behalf while she was still alive and kicking.

This is the extent to which some dark-hearted people could go for money’s sake. Insurance organisations lose billions of dollars annually through insurance fraud. Some people had turned it into some kind of game in duping insurance organizations, they always believed that they can go scot-free but most of them are usually caught in the end no matter how near-perfect the plot may be.

Authored by David Mog on GOARTICLES.COM

INSURABLE AND NON-INSURABLE RISKS

2011-04-17T18:18:00.000-07:00

When we talk of insurance, we are referring to risks in all forms. Hence, having for an insurance policy is just a way of sharing our risks with other people with similar risks.

However, while some risks can be insured (i.e. insurable risks), some cannot be insured according to their nature (i.e. non-insurable risks).

Insurable Risks

Insurable risks are the type of risks in which the insurer makes provision for or insures against because it is possible to collect, calculate and estimate the likely future losses. Insurable risks have previous statistics which are used as a basis for estimating the premium. It holds out the prospect of loss but not gain. The risks can be forecast and measured e.g. motor insurance, marine insurance, life insurance etc.

This type of risk is the one in which the chance of occurrence can be deduced, from the available information on the frequency of similar past occurrence. Examples of what an insurable risk is as explained:

2004 Jeep Grand Cherokee

Example1: The probability (or chance) that a certain vehicle will be involved in an accident in year 2011 (out of the total vehicle insured that year 2011) can be determined from the number of vehicles that were involved in accidents in each of some previous years (out of the total vehicle insured those years).

The Jeep involved in an accident. The owner's loss is covered by his/her insurance policy.

Example2: The probability (or chance) that a man (or woman) of a certain age will die in the ensuring year can be estimated by the fraction of people of that age that died in each of some previous years.

Couple covered by life insurance

Non-insurable Risks

Non-insurable risks are type of risks which the insurer is not ready to insure against simply because the likely future losses cannot be estimated and calculated. It holds the prospect of gain as well as loss. The risk cannot be forecast and measured.

Example1: The chance that the demand for a commodity will fall next year due to a change in consumers’ taste will be difficult to estimate as previous statistics needed for it may not be available.

Example 2: The chance that a present production technique will become obsolete or out-of-date by next year as a result of technological advancement.

Other examples of non-insurable risks are:

Acts of God: All risks involving natural disasters referred to as acts of God such as

a. Earthquake

Residents look at a massive crack in the ground.

March 2011 Japan Earthquake/Tsunamis

Vehicles are crushed by a collapsed wall at a carpark in Mito City.

b. War

c. Flood

d. Tsunami etc. etc.

Cars and other debris swept away by tsunami tidal waves are seen in Kesennuma in Miyagi Prefecture, northern Japan.

Light planes and vehicles mashed together.

Cars collide with storage crates.

People watch the aftermath of the tsunami tides from a bridge.

It should be noted that any building, property or life insured but lost during an occurrence of any Act of God (listed above) cannot be compensated by an insurer. Also, this non-insurability is being extended to those in connection with radioactive contamination.

Gambling: You cannot insure your chances of losing a gambling game.

Loss of profit through competition: You cannot insure your chances of winning or losing in a competition.

Launching of new product: A manufacturer launching a new product cannot insure the chances of acceptability of the new product since it has not been market-tested.

Loss incurred as a result of bad/inefficient management: The ability to successfully manage an organization depends on many factors and the profit/loss depends on the judicious utilization of these factors, one of which is efficient management capability. The expected loss in an organization as a result of inefficiency cannot be insured.

Poor location of a business: A person situating a business in a poor location must know that the probability of its success is slim. Insuring such business is a sure way of duping an insurer.

Loss of profit as a result of fall in demand: The demand for any product varies with time and other factors. An insurer will never insure based on expected loss due to decrease in demand.

Speculation: This is the engagement in a venture offering the chance of considerable gain but the possibility of loss. A typical example is the action or practice of investing in stocks, property, etc., in the hope of profit from a rise or fall in market value but with the possibility of a loss. This cannot be insured because it is considered as a non-insurable risk.

Opening of a new shop/office: The opening of a new shop is considered a non-insurable risk. You don’t know what to expect in the operation of the new shop; it is illogical for an insurer to accept in insuring a new shop for you.

Change in fashion: Fashion is a trend which cannot be predicted. Any expected change in fashion cannot be insured. A fashion house cannot be insured because the components of the fashion house may become outdated at any point in time.

Motoring offenses: You cannot obtain an insurance policy against expected fines for offenses committed while on wheels.

However, it should be noted that there is no clear distinction between insurable and non-insurable risks. Theoretically, an insurance company should be ready to insure anything if a sufficiently high premium would be paid. Nevertheless, the distinction is useful for practical purposes.

HOW INSURANCE POLICY WORKS

2011-04-09T15:52:00.000-07:00

Insurance is synonymous to a lot of people sharing risks of losses expected from a supposed accident. Here, the costs of the losses will be borne by all the insurers.

For example, if Mr. Adam buys a new car and wishes to insure the vehicle against any expected accidents. He will buy an insurance policy from an insurance company through an insurance agent or insurance broker by paying a specific amount of money, called premium, to the insurance company.

Acura TSX V6 (2010)

The moment Mr. Adam pay the premium, the insurer (i.e. the insurance company) issue an insurance policy, or contract paper, to him. In this policy, the insurer analyses how it will pay for all or part of the damages/losses that may occur on Mr. Adam’s car.

However, just as Mr. Adam is able to buy an insurance policy and is paying to his insurer, a lot of other people in thousands are also doing the same thing. Any one of these people who are insured by the insurer is referred to as insured. Normally, most of these people will never have any form of accident and hence there will be no need for the insurer to pay them any form of compensation.

If Mr. Adam and a very few other people has any form of accidents/losses, the insurer will pay them based on their policy.

It should be noted that the entire premiums paid by these thousands of insured is so much more than the compensations to the damages/losses incurred by some few insured. Hence, the huge left-over money (from the premiums collected after paying the compensations) is utilized by the insurer as follows:

1. Some are kept as a cash reservoir.

2. Some are used as investments for more profit.

3. Some are used as operating expenses in form of rent, supplies, salaries, staff welfare etc.

4. Some are lent out to banks as fixed deposits for more profit etc. etc.