Insurance King Guideline 4 All

Auto insurance

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Auto insurance

[[File:2008-07-23 Wrecked car in Durham 2.jpg|thumb|180px|right|A wrecked vehicle]]

Auto insurance protects you against financial loss if you have an accident. It is a contract between the insured and the insurance company. You agree to pay the premium and the insurance company agrees to pay losses as defined in the policy.

Auto insurance provides property, liability and medical coverage:

# Property coverage pays for damage to or theft of the car.

# Liability coverage pays for the legal responsibility to others for bodily injury or property damage.

# Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

An auto insurance policy comprises six kinds of coverage. Most countries require you to buy some, but not all, of these coverages. If you're financing a car, the lender may also have requirements. Most auto policies are for six months to a year.

In the [[United States]], the insurance company should notify you by mail when it’s time to renew the policy and to pay the premium.{{cite web | author = Insurance Information Institute | authorlink = Insurance Information Institute | title = What is auto insurance? | url = http://www.iii.org/individuals/auto/a/whatis/ | accessdate = 2008-11-11 }}

Types of insurance

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Types of insurance

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as "perils". An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are (non-exhaustive) lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. 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 [[home insurance|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 coverage for medical expenses of guests who are injured on the owner's property.

[[Business insurance]] can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of ''professional liability insurance'', also called ''professional indemnity insurance'', which are discussed below under that name; and (b) the business owner's policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverages that a homeowner needs.{{cite web | author = Insurance Information Institute | authorlink = Insurance Information Institute | title = Business insurance information. What does a businessowners policy cover? | url = http://www.iii.org/individuals/business/basics/bop/ | accessdate = 2007-05-09 }}

===Auto insurance===

[[File:2008-07-23 Wrecked car in Durham 2.jpg|thumb|180px|right|A wrecked vehicle]]

Auto insurance provides property, liability and medical coverage:

# Property coverage pays for damage to or theft of the car.

# Liability coverage pays for the legal responsibility to others for bodily injury or property damage.

# Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

===Home insurance===

Home insurance provides compensation for damage or destruction of a home from disasters. In some geographical areas, the standard insurances exclude certain types of disasters, such as flood and earthquakes, that require additional coverage. Maintenance-related problems are the homeowners' responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.{{cite web | author = Insurance Information Institute | authorlink = Insurance Information Institute | title = What is homeowners insurance? | url = http://www.iii.org/individuals/homei/hbasics/whatis/ | accessdate = 2008-11-11 }}

===Health===

[[File:NHS NNUH entrance.jpg|right|thumb|NHS Facility]]

Health insurance policies by the [[National Health Service]] in the [[United Kingdom]] (NHS) or other publicly-funded health programs will cover the cost of medical treatments. Dental insurance, like medical insurance, is coverage for individuals to protect them against dental costs. In the U.S. and Canada, dental insurance is often part of an employer's benefits package, along with health insurance.

===Accident, Sickness and Unemployment 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 [[mortgage loan]]s and [[credit card]]s.

*[[Business overhead expense disability insurance|Disability overhead insurance]] allows business owners to cover the overhead expenses of their business while they are unable to work.

* [[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.

* [[Workers' compensation]] insurance replaces all or part of a worker's [[wage]]s lost and accompanying medical expenses incurred because of a job-related injury.

===Casualty===

Casualty insurance insures against accidents, not necessarily tied to any specific property.

* [[Crime insurance]] is a form of casualty insurance that covers the policyholder against losses arising from the [[criminal act]]s of third parties. For example, a company can obtain crime insurance to cover losses arising from [[theft]] or [[embezzlement]].

* [[Political risk insurance]] is a form of casualty insurance that can be taken out by businesses with operations in [[country|countries]] in which there is a risk that [[revolution]] or other [[politics|political]] conditions will result in a loss.

===Life===

Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured

person's family, [[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.

[[Annuity (financial contracts)|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 [[pension]]s that pay a benefit for life are sometimes regarded as insurance against the possibility that a [[retirement|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.

Certain life insurance contracts accumulate [[cash]] values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and [[endowment policy|endowment policies]], are financial instruments to accumulate or [[liquidation|liquidate]] [[wealth]] when it is needed.

In many countries, such as the U.S. and the UK, the [[tax law]] provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of [[saving]] as well as protection in the event of early death.

In U.S., the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation.

===Property===

[[File:Tornado Damage, Illinois 2.JPG|right|thumb|This [[tornado]] damage to an [[Illinois]] home would be considered an "[[Act of God]]" for insurance purposes]]

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]].

* [[Auto insurance|Automobile insurance]], known in the [[United Kingdom|UK]] as ''motor insurance'', is probably the most common form of insurance and may cover both legal [[Legal liability|liability]] claims against the [[Driving|driver]] and loss of or damage to the insured's [[vehicle]] itself. Throughout 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 insurance|no-fault]] system, which reduces or eliminates the ability to sue for compensation but provides automatic eligibility for benefits. Credit card companies insure against [[Damage waiver|damage]] on rented cars.

** Driving School Insurance provides cover for any authorized driver whilst undergoing tuition, cover also unlike other motor policies provides cover for instructor liability where both the pupil and driving instructor are equally liable in the event of a claim.

* [[Aviation insurance]] insures against hull, spares, deductibles, hull wear and liability risks.

* [[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. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.{{cite web |url= http://www.adjustersinternational.com/AdjustingToday/ATfullinfo.cfm?start=1&page_no=1&pdfID=4 |title= Builder's Risk Insurance |accessdate= 2009-10-16 |publisher= Adjusters International }}

* [[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."{{US patent application|20060287896}} “Method for providing crop insurance for a crop associated with a defined attribute”

* [[Earthquake insurance]] is a form of property insurance that pays the policyholder in the event of an [[earthquake]] that causes damage to the property. Most ordinary [[homeowners insurance]] policies do not cover earthquake damage. Most earthquake insurance policies feature a high [[deductible]]. Rates depend on location and the probability of an earthquake, as well as the [[Earthquake engineering|construction of the home]].

* A [[fidelity bond]] is a form of casualty insurance that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

* [[Flood insurance]] protects against property loss due to flooding. Many insurers in the U.S. do not provide flood insurance in some portions of the country. In response to this, the federal government created the [[National Flood Insurance Program]] which serves as the insurer of last resort.

* [[Home insurance]], also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), is the type of property insurance that covers private homes.

* [[Landlord insurance]] covers residential and commercial properties which are rented to others. Most homeowner's insurance covers only owner-occupied homes.

* [[Marine insurance]] and marine cargo insurance cover the loss or damage of ships at sea or on inland waterways, and of cargo in transit, regardless of the method of transit. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. 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.

* [[Surety bond]] insurance is a three party insurance guaranteeing the performance of the principal.

* [[Terrorism insurance]] provides protection against any loss or damage caused by [[terrorist]] activities.

* Volcano insurance is an insurance that covers volcano damage in Hawaii.

* Windstorm insurance is an insurance covering the damage that can be caused by hurricanes and tropical cyclones.

===Liability===

Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and 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 wilful or intentional acts by the insured.

* Public [[liability insurance]] covers a business against claims should its operations injure a member of the public or damage their property in some way.

* [[Directors and officers liability insurance]] protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes made by directors and officers for which they are liable. In the industry, it is usually called "D&O" for short.

* 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.

* Errors and omissions insurance: See "Professional liability insurance" under "Liability insurance".

* [[Prize indemnity insurance]] protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a basketball game, or a hole-in-one at a golf tournament.

* [[Professional liability insurance]], also called ''professional indemnity insurance'', protects insured professionals such as architectural corporation and medical practice against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called ''malpractice insurance.'' Notaries public may take out ''errors and omissions insurance (E&O).'' Other potential E&O policyholders include, for example, real estate brokers, Insurance agents, home inspectors, appraisers, and website developers.

===Credit===

Credit insurance repays some or all of a [[loan]] when certain things happen to the borrower such as [[unemployment]], [[disability]], or [[death]].

* [[Mortgage insurance]] insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name ''credit insurance'' more often is used to refer to policies that cover other kinds of debt.

* Many credit cards offer payment protection plans which are a form of credit insurance.

===Other types===

* [[All-risk insurance]] is an [[insurance]] that covers a wide-range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy.http://www.business.gov/manage/business-insurance/insurance-types.html In [[car insurance]], all-risk policy includes also the damages caused by the own driver.

* [[Collateral protection insurance]] or CPI, insures property (primarily vehicles) held as collateral for loans made by lending institutions.

* [[Defense Base Act]] Workers' compensation or DBA Insurance provides coverage for civilian workers hired by the government to perform contracts outside the U.S. and Canada. DBA is required for all U.S. citizens, U.S. residents, U.S. 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.

* [[Expatriate insurance]] provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.

* Financial loss insurance or Business Interruption Insurance protects individuals and companies against various financial risks. For example, a [[business]] might purchase coverage 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 bond]]s and [[surety bond]]s 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.

* [[Kidnap and ransom insurance]]

* [[Legal Expenses Insurance]] covers policyholders against the potential costs of legal action against an institution or an individual.

* [[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 authorize 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.

* Media Insurance is designed to cover professionals that engage in film, video and TV production.

* Nuclear incident insurance covers damages resulting from an [[nuclear and radiation accidents|incident involving radioactive materials]] and is generally arranged at the national level. See the [[Nuclear exclusion clause]] and for the United States the [[Price-Anderson Nuclear Industries Indemnity Act]])

* [[Pet insurance]] insures pets against accidents and illnesses - some companies cover routine/wellness care and burial, as well.

* Pollution Insurance which consists of first-party coverage for contamination of insured property either by external or on-site sources. Coverage for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.

* 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.

* [[Title insurance]] provides a guarantee that title to [[real property]] is vested in the purchaser and/or [[mortgage law|mortgagee]], free and clear of [[lien]]s or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a [[real estate]] transaction.

* [[Travel insurance]] is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, personal liabilities, etc.

===Insurance financing vehicles===

* Fraternal insurance is provided on a cooperative basis by [[Benefit society|fraternal benefit societies]] or other social organizations.Margaret E. Lynch, Editor, "Health Insurance Terminology," Health Insurance Association of America, 1992, ISBN 1-879143-13-5

* [[No-fault insurance]] is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.

* Protected Self-Insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.

* [[Retrospectively Rated Insurance]] is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.

* Formal [[self insurance]] is the deliberate decision to pay for otherwise insurable losses out of one's own money. This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self insurance is usually used to pay for high-frequency, low-severity losses. Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.

* [[Reinsurance]] is a type of insurance purchased by insurance companies or self-insured employers to protect against unexpected losses. [[Financial reinsurance]] is a form of reinsurance that is primarily used for capital management rather than to transfer insurance risk.

* [[Social insurance]] can be many things to many people in many countries. But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), plus retirement savings, that requires participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ensures that everyone can become a claimant when or if he/she needs to. Along the way this inevitably becomes related to other concepts such as the justice system and the [[welfare state]]. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others):

** [[National Insurance]]

** [[Social safety net]]

** [[Social security]]

** [[Social Security debate (United States)]]

** [[Social Security (United States)]]

** [[Social welfare provision]]

* Stop-loss insurance provides protection against catastrophic or unpredictable losses. It is purchased by organizations who do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.

===Closed community self-insurance===

Some communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer, which assigns explicit numerical values to risk. A number of [[religion|religious]] groups, including the [[Amish]] and some [[Muslim]] groups, depend on support provided by their [[community|communities]] when [[disaster]]s strike. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind. In supportive communities where others can be trusted to follow community leaders, this tacit form of insurance can work. In this manner the community can even out the extreme differences in insurability that exist among its members. Some further justification is also provided by invoking the [[moral hazard]] of explicit insurance contracts.

In the [[United Kingdom]], [[The Crown]] (which, for practical purposes, meant the [[Civil service]]) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies, and rented back, this arrangement is now less common and may have disappeared altogether.

History of insurance

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History of insurance

In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread.

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively.[11] Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea.

Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.

The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much."[12]

A thousand years later, the inhabitants of Rhodes invented the concept of the 'general average'. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage.

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

Some forms of insurance had developed in London by the early decades of the seventeenth century. For example, the will of the English colonist Robert Hayman mentions two "policies of insurance" taken out with the diocesan Chancellor of London, Arthur Duck. Of the value of £100 each, one relates to the safe arrival of Hayman's ship in Guyana and the other is in regard to "one hundred pounds assured by the said Doctor Arthur Ducke on my life". Hayman's will was signed and sealed on 17 November 1628 but not proved until 1633.[13] Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667."[14] A number of attempted fire insurance schemes came to nothing, but in 1681 Nicholas Barbon, and eleven associates, established England's first fire insurance company, the 'Insurance Office for Houses', at the back of the Royal Exchange. Initially, 5,000 homes were insured by Barbon's Insurance Office.[15]

The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional federal charter (OFC)) for insurance similar to that which oversees state banks and national banks.

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nsurers' business model

===Underwriting and investing===

The business model can be reduced to a simple equation: Profit = [[earned premium]] + investment income - incurred loss - underwriting expenses

Insurers make money in two ways:

# Through [[underwriting]], the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks;

# By [[investing]] the premiums they collect from insured parties.

The most complicated 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); insurance companies essentially use actuarial science to attempt to underwrite enough "winning" policies to pay out on the "losers" while still maintaining profitability.

An insurer's underwriting performance is measured in its ''combined ratio''{{cite book

|url=http://books.google.com/books?id=Juc4fb1Fx1cC&lpg=PA614&ots=IryMrWB21p&pg=PA614#v=onepage&f=false

|title=The Handbook of Municipal Bonds

|first1=Sylvan G.

|last1=Feldstein

|first2=Frank J.

|last2=Fabozzi

|year=2008

|page=614

|publisher=[[John Wiley %26 Sons|Wiley]]

|isbn=978-0470108758

|city=

|accessdate=February 8, 2010}} which is the [[loss ratio|ratio of losses]] and expenses to earned premiums. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss. A company with a combined ratio over 100% may nevertheless remain profitable due to investment earnings.

Insurance companies 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 paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest or other income on them until claims are paid out. The ''[[Association of British Insurers]]'' (gathering 400 insurance companies and 94% of UK insurance services) has almost 20% of the investments in the [[London Stock Exchange]].http://www.abi.org.uk/About_The_ABI/role.aspx

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 [[Maurice R. Greenberg|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 market#Bear market|Bear market]]s 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]].Fitzpatrick, Sean, [http://ssrn.com/abstract=690316 ''Fear is the Key: A Behavioral Guide to Underwriting Cycles,''] 10 Conn. Ins. L.J. 255 (2004).

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 [[United States]], due to unpredictable natural catastrophes, have exacerbated this trend.

===Claims===

Claims and loss handling is the materialized utility of insurance; it is the actual "product" paid for, though one hopes it will never need to be used. Claims may be filed by insureds directly with the insurer or through brokers or agents. The insurer may require that the claim be filed on its own proprietary forms, or may accept claims on a standard industry form such as those produced by [[ACORD]].

Insurance company claims departments employ a large number of [[claims adjuster]]s supported by a staff of [[records management]] and [[data entry clerk]]s. Incoming claims are classified based on severity and are assigned to adjusters whose settlement authority varies with their knowledge and experience. The adjuster undertakes a thorough investigation of each claim, usually in close cooperation with the insured, determines if coverage is available under the terms of the insurance contract, and if so, the reasonable monetary value of the claim, and authorizes payment. Adjusting liability insurance claims is particularly difficult because there is a third party involved, the plaintiff, who is under no contractual obligation to cooperate with the insurer and may in fact regard the insurer as a [[deep pocket]]. The adjuster must obtain legal counsel for the insured (either inside "house" counsel or outside "panel" counsel), monitor litigation that may take years to complete, and appear in person or over the telephone with settlement authority at a mandatory settlement conference when requested by the judge.

If a claims adjuster suspects underinsurance, the [[condition of average]] may come into play to limit the insurance company's exposure.

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|fraudulent insurance practices]] are a major business risk that must be managed and overcome. Disputes between insurers and insureds over the validity of claims or claims handling practices occasionally escalate into litigation; see [[insurance bad faith]].

Save life insurance

2010-09-15T10:00:00.000-07:00

Your 5-minute guide to life insurance

Life insurance provides families with financial security should a spouse or parent die. Once you have dependents, the question "What if you got hit by a bus?" requires serious consideration. (See the video "Preparing for the worst.")

First, the basics

There are essentially two types of life insurance: term and whole. You can apply for a policy online, seek help from a financial planner or buy through an agent.

A term policy covers a period of one to 30 years. When the insured dies, the face amount of the policy is paid to the beneficiary. Term life has no savings component. If you haven't died by the end of the term, you don't get any money back. For most Americans ages 20 to 50, a term policy is the best and simplest option. (See "The debate: Term vs. whole life")

In the past, rates skyrocketed if you were older than 40. But now good rates are available in your 40s and 50s if you're in good health. Insurers today can better estimate risk by taking into account everything from cholesterol levels to family history. (See "Now's the time to buy term-life coverage.")

A whole-life policy, also called permanent life insurance, not only protects you from the day you purchase it until you die, but it also includes an investment in bonds, money markets or stocks. The policy builds cash value that you can borrow against. The three most common types of whole-life insurance are traditional, universal and variable.

The downside of whole life: It's expensive because part of the money is put into a savings program, and it typically comes with high fees and commissions. (See "When it pays to consult an insurance pro.")

If you already have a policy but think you are paying more than you would had you opened it recently, shop around.

How much is enough?

Deciding how much really just depends. If you're single with no dependents, you probably don't need any at all. The key time to get life insurance is when you have children. In addition, get coverage if you have a spouse who doesn't work. (See the video "How much life insurance is right?")

A rule of thumb for life insurance is five to 10 times your annual salary. MSN Money's estimator of life insurance needs can help you decide how much coverage you should have. (Also see the video "A lifetime of life insurance.")

Consider these tips:

Don't buy life insurance for young children. It's largely wasted because you're not replacing income. (See "Insurance plans you can avoid.")

Look at your budget before committing to a premium. When you buy life insurance, you have to keep paying the premiums throughout the term, no matter what, or lose your coverage. (See "Your 5-minute guide to budgeting.")

Don't let a policy lapse if you plan to buy another one at some point. A high number of lapses could indicate financial instability. (See "The effects of lapsing on your policy.")

You might be able to drop your life insurance if your children are grown and your spouse has income.

An insurance policy is only as good as the company that backs it, so check out a company's financial rating before signing on. Avoid advisers who say the ratings are unimportant or unavailable.

If you are single and simply don't want your relatives burdened with the cost of a funeral, consider contributing to a Totten trust savings account. (See "Plan -- and pay for -- your own funeral.") Should you take out a life insurance policy later on, you could use all your contributions to the trust, as well as the interest earned, for something else.

Your 5-minute guide to car insurance

2010-09-15T09:57:00.000-07:00

Your 5-minute guide to car insurance

Here's some basic advice, plus 22 tips to help you protect yourself and get the best value for the money you spend on automobile coverage.
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By MSN Money staff
Your car insurance rates are based on a few factors you can't readily change -- your sex, age, marital status and where you live -- and many that you can -- your credit scores, what you drive, how well you drive and how much coverage you buy.
Here's how to get the best deal.
First, let's review the basics. Details vary from state to state. (See "Shopping for auto insurance.")
Liability insurance pays for injuries and property damage caused by a crash if an insurance adjuster determines you were at fault. It does not cover your injuries or those of other people on your policy, or damage to your vehicle. State minimum requirements provide inadequate protection. Buy no less than $100,000 per person, $300,000 per accident and $50,000 for property damage, or no less than $300,000 if your policy has a single limit. You are personally liable for claims that exceed your coverage, so buy even more if you can, and consider an umbrella policy.
Uninsured/underinsured motorist protection covers injuries to the occupants of your car -- and property damage in some states -- if the other driver has no insurance or too little.
Collision insurance pays for damage to your vehicle in an accident. If your car is totaled, you'll get what the insurer considers the pre-crash market value of your car, minus your deductible. To get a general idea of what that may be, check the Kelley Blue Book private-party price or visit the Web site of the National Automobile Dealers Association. You can pay extra for replacement-cost coverage for newer cars.
Get a quote on auto insurance Compare what Farmers, Geico, Nationwide, Progressive and State Farm have to offer.
Comprehensive insurance covers theft of your vehicle and noncollision damage to your car, as well as animal collisions. You may be eligible for lower rates if your vehicle has anti-theft and tracking devices.
Medical or personal-injury protection provides coverage for you and your passengers, regardless of fault. You may not need this insurance if you have good health insurance.
Twelve states have no-fault insurance, which generally covers the insured person's injuries and property damage no matter who is at fault.
Consider gap insurance if you owe more on your car than it's worth.
Reduce your rates
The company you select and the coverage you buy can greatly reduce your rates.
Shop around. Check rates online at InsWeb.com, call companies, and consult an agent through the Independent Insurance Agents & Brokers of America. Rates vary greatly depending on a company's operating expenses, history of claims and formulas for setting premiums. Check a company's financial status and consumer record. The last thing you need is to go cheap and then find it's all but impossible to file a claim.
Increase your deductibles on comprehensive and collision coverage to an amount you can cover out of pocket.
Consider dropping both if you own your vehicle outright and the combined annual cost for that coverage is more than 10% of what you would get if you car were totaled. (See "Dump the insurance on your clunker.")
Ask your insurer about all available special discounts.
If you're switching insurance companies, do it in writing. Your credit scores will suffer if you're canceled for nonpayment.
Control yourself
Your behavior on and off the road has a bearing on your rates.
Pay all bills on time. Your premiums are based in part on your credit scores or an insurance risk score based on your credit reports. (See "The new math of car insurance.") TransUnion's TrueCredit will provide your auto insurance risk score for $9.95.
Drive defensively, and avoid distractions such as text messaging or talking on a cell phone. One speeding ticket may not raise your rates, but an accident you caused probably would -- generally by 40% of the company's base rate.
Don't drink and drive. (See "DUI: The $10,000 ride home.")
Don't lend out your car. If your friend wrecks it, your rates will go up. If your uninsured friend wrecks your car, you'll be liable for claims exceeding your policy.
The type of vehicle you drive affects your rates.
Check the cost of insuring that sports car before you buy it. You'll pay higher premiums for a vehicle with higher collision-damage costs or that's attractive to thieves. Use MSN Money's comparison tool. And no, it doesn't cost more to insure a red car.
High-tech items are more expensive to replace after a crash.
The deal on discounts
Factors such as age, how much you drive, where you live and, sometimes, what you do for a living affect insurance premiums. You can take some steps to get a better rate.
If you get married, you'll get a discount and benefit from combining policies. (See "Paying too much for car insurance?")
People 55 and older get a discount for taking a driving class.
Adding your newly licensed teen to your policy will increase your premiums 50% to 200%. One way to reduce costs: Buy a beater and list your child as the driver. Teen drivers can get discounts for drivers ed courses or good grades. (See "Cut the cost of insuring your teen driver.")
You may get a discount if your child attends college away from home.
If you wreck your car
If you've been in a collision, tell your insurance company for your own protection, even if injuries are not readily apparent. Informing the company doesn't mean you're filing a claim.
If you disagree with the value assigned to your totaled vehicle, provide quotes from local dealers and proof that your vehicle was well-maintained. (See "12 secrets your car insurer won't tell you.") Still unsatisfied? Your options are mediation, arbitration and, finally, a lawsuit.
Twenty-eight states require insurance companies to pay the sales tax on a replacement vehicle, based on the settlement value of your totaled car. Request it, as well as registration and title fees, wherever you live.
In 14 states you can get payment for the "diminished value" of your damaged car.
If the driver at fault in a crash is uninsured, consider "stacking" or collecting on all of your policies that have uninsured/underinsured motorist coverage to fully cover the damage, unless state law prohibits it.
Body shops may be tempted to cut corners to meet insurance companies' pricing requirements. Check Assured Performance Collision Care for qualified repair shops. (See "7 things auto-body shops won't tell you.")
If you cause an accident, does your policy require you to pay the difference between generic and original-equipment manufacturer parts? If someone else caused the accident, request original-equipment parts for your repairs

A Fact: Car Insurance is maximized during Holidays By Jasper Ericks

2010-09-15T09:55:00.001-07:00

A Fact: Car Insurance is maximized during Holidays By Jasper Ericks
Published: Friday, July 30th, 2010
The holiday seasons are the busiest time of the year. Shoppers, who rush for last-minute shopping, crowd the malls, the parking lots and the slippery roads. As cars speed on these slippery and dangerous roads, accidents are very hard to avoid even on the jolly holidays.
According to statistics, the number of road incidents that happens around the days approaching the holidays is significantly higher compared to the road incidents during regular days. This is not really surprising considering how busy the roads get when people go out to shop or visit their families. Just as well, the holiday season is the time when the snowstorms can be unforgiving.
Holiday car accidents can also be caused by the blinding Christmas lights and other holiday decorations that can block roads and distract drivers. To avoid spending more than the amount you will spend for holiday treats, it is absolutely necessary for you to get car insurance. “Drive safely” is almost a metaphor for “good luck on avoiding accidents” during holiday seasons that you can almost be sure that you will be maximizing your policy during this time of the year.
If you drive full-time, your automobile insurance policy will certainly help you handle the expenses should you get into road incidents. However, if you are a non-regular driver but you get busy on the road during the holidays, getting the expenses covered when you get into road mishaps can a problem if the car rental does not issue a policy along with the vehicle you rented.
You may get yourself a short term/temporary policy if you are a non-regular driver. This type of policy will cover you for a certain period of days or weeks. This is really the best insurance that non-regular drivers can get because they will only be paying for premiums on daily or weekly basis. It would be impractical for non-regular drivers to get full coverage because premiums for full coverage policy can be really expensive.
Another option that non-regular drivers can get is to have an insured household member list them down in their name. This is considerably cheaper than having a policy of your own because there will only be a small amount added to the original policy as compared to paying for two separate policies on regular premiums.
There are a number of companies who offer a policy on a relatively cheaper amount but be sure that, if you opt for this, you are getting the best car insurance available from the company.
Do not sacrifice quality for the amount because you can suffer just the same if the company refuses to pay for medical coverage because the cheap policy does not include such coverage. You can always depend on your medical insurance but what if there are other people involved in the accident? What if these people are not listed down as your dependent? Just to be sure, settle for an affordable policy that offers you a fair number of coverage rather than settling for a cheap one with a cheap quality.

Types of Insurance

2010-09-15T09:53:00.000-07:00

Insurance can be described as a form of risk management which is mainly used to protect an individual against the risk of potential financial losses, if any. Insurance can be used as a tool to protect a person against the potential risks, such as travel accidents, death, unemployment, theft, property destruction by natural disasters, fires, accidents etc.

Types of Insurance

Different types of insurance used to cover the different properties and assets such as vehicles, home, health care etc. Basically, an insurance policy may also be known as a safety net which ensures that from any future financial loss.
All you have to do is pay insurance companies a certain amount each month, known as premium, so they can care for you by providing you with financial backing in case of sudden health emergency or a fatal incident.

There are two ways to get insurance done.

One way is to visit an agent and consult with him the best choice you can make for your situation. And then trust him her for their suggestions on the type of insurance they think is right for you.

The other way is to research and choose for him, the type of insurance that is best for your situation. You should research the market and the network to find the best insurance companies, and moreover, the most appropriate type of insurance they offer.
They also explore different types of policies are available on the market, and then compare to decide which one to choose finally.

Insurance Health Care

With such high costs of medical and health care these days, it’s hard to even think of visiting a doctor. But what about an unexpected accident or disability or unexpected attack, where the potential for medical bills can shoot up to heaven? Where to get that money?

These are exactly the situations where you think you had a safety, which could come to their rescue and save him from the financial crisis. While some companies offer their employees health insurance, for others, this is a necessity.
Especially for aging couples, who have relatively more likely to need money emergency law. Health insurance does everything, so you do not have to worry about the huge expenditure in the last minute.
Health insurance may cover all routine immunization of a serious illness.

Life Insurance

The loss of a family member is a catastrophe that sadness of a family life. But even more tragic is the death of a bread only source of income for the family, which then has to go through the pain of losing loved ones, financial losses and threatening their survival.

This financial burden due to sudden death of a relative or disability resulting in loss of employment or inability to work can be largely avoided by adopting a policy of life insurance.
A life insurance or disability insurance covers such losses and pays a family to restore compensation for loss of income for them because of the sudden death or disability.

A monthly premium for life insurance is usually based on age, health and information of the occupation of the applicant, in addition to the total benefits payable to him by his policies.

Home Insurance

The real estate and hard assets are subject to accidental risks like theft, destruction due to natural disasters or fire accidents, so huge investments icon gone to buy a property as your home or office, the risk that involves a loss of large amount of money.

Home and property insurance helps in the management and protection against these risks. The cost of real estate and insurance is mainly based on the value of hard assets and insured, and also the place where the assets are located.

Travel Insurance

This is intended to cover any financial or any other losses which were incurred by the insured during the trip, whether national or international law, as mountain trekkers, cruise travelers etc.

Auto Insurance

Every vehicle on the road, no matter how secure it is their driver, is required to meet with an accident or two, so you can leave with just a few scratches, or fall up completely. Most countries today require you to have car insurance while on the road in their vehicles.

If you have an accidental car crash, a total repair can cost a fortune. Furthermore, a small scratch on his Land Cruiser could also rise to their accounts and higher.
Whether or not you need car insurance mostly depends on the type of car you own.

If you have an expensive car and a little repair could remove you financially, you should do well in a purchase of an all-inclusive and accident insurance that would protect against any and all damage caused to your vehicle

Principles of insurance

2010-09-15T09:51:00.000-07:00

Principles of insurance

Principles of insurance
Commercially insurable risks typically share seven common characteristics.

1. 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, proportionally the actual results are increasingly likely to become close to expected proportions. There are exceptions to this criterion. Lloyd’s 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.

2. Definite Loss. The event that gives rise to the loss that is subject to the insured, 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 person 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.

3. 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.

4. 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.

5. 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. (See the U.S. Financial Accounting Standards Board standard number 113)

6. Calculable Loss. There are two elements that must be at least estimable, 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.

7. 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 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurer’s 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 affect the entire industry, since the combined capital of insurers and re insurers 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

History of Insurance

2010-09-15T09:49:00.000-07:00

In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one’s neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread.

History of Insurance

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel’s capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender’s guarantee to cancel the loan should the shipment be stolen or lost at sea.

Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.

The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: “[W]whenever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much.”

A thousand years later, the inhabitants of Rhodes invented the concept of the ‘general average’. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sink age.

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called “benevolent societies” which cared for the families and paid funeral expenses of members upon death. Guilds in the middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, “friendly societies” existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

Some forms of insurance had developed in London by the early decades of the seventeenth century. For example, the will of the English colonist Robert Hayman mentions two “policies of insurance” taken out with the diocesan Chancellor of London, Arthur Duck. Of the value of £100 each, one relates to the safe arrival of Hayman’s ship in Guyana and the other is in regard to “one hundred pounds assured by the said Doctor Arthur Ducke on my life”. Hayman’s will was signed and sealed on 17 November 1628 but not proved until 1633. Toward the end of the seventeenth century, London’s growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd’s of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance “from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren’s inclusion of a site for ‘the Insurance Office’ in his new plan for London in 1667.” A number of attempted fire insurance schemes came to nothing, but in 1681 Nicholas Barbon, and eleven associates, established England’s first fire insurance company, the ‘Insurance Office for Houses’, at the back of the Royal Exchange. Initially, 5,000 homes were insured by Barbon’s Insurance Office.

The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contribution ship for the Insurance of Houses from Loss by Fire. Franklin’s company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners’ organization. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional federal charter (OFC) for insurance similar to that which oversees state banks and national banks.

Insurance Policy

2010-09-15T09:48:00.000-07:00

nsurance Policy

In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for payment, known as the premium, the insurer pays for damages to the insured which are caused by covered perils under the policy language. Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts. Since insurance policies are standard forms, they feature boilerplate language which is similar across a wide variety of different types of insurance policies.

Insurance Policy

The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer. In some cases, however, supplementary writings such as letters sent after the final agreement can make the insurance policy a non-integrated contract. One insurance textbook states that “courts consider all prior negotiations or agreements … every contractual term in the policy at the time of delivery, as well as those written afterwards as policy riders and endorsements … with both parties’ consent, are part of written policy”. The textbook also states that the policy must refer to all papers which are part of the policy. Oral agreements are subject to the parol evidence rule, and may not be considered part of the policy. Advertising materials and circulars are typically not part of a policy. Oral contracts pending the issuance of a written policy can occur.

General features

The insurance contract is a contract whereby the insurer will pay the insured (the person whom benefits would be paid to, or on the behalf of), if certain defined events occur. Subject to the “fortuity principle”, the event must be uncertain. The uncertainty can be either as to when the event will happen (i.e. in a life insurance policy, the time of the insured’s death is uncertain) or as to if it will happen at all (i.e. in a fire insurance policy, whether or not a fire will occur at all).

Insurance contracts are generally considered contracts of adhesion because the insurer draws up the contract and the insured has little or no ability to make material changes to it. This is interpreted to mean that the insurer bears the burden if there is any ambiguity in any terms of the contract. Insurance policies are sold without the policyholder even seeing a copy of the contract.
Insurance contracts are aleatory in that the amounts exchanged by the insured and insurer are unequal and depend upon uncertain future events.
Insurance contracts are unilateral, meaning that only the insurer makes legally enforceable promises in the contract. The insured is not required to pay the premiums, but the insurer is required to pay the benefits under the contract if the insured has paid the premiums and met certain other basic provisions.
Insurance contracts are governed by the principle of utmost good faith (uberrima fides) which requires both parties of the insurance contact to deal in good faith and in particular it imparts on the insured a duty to disclose all material facts which relate to the risk to be covered. This contrasts with the legal doctrine that covers most other types of contracts, caveat emptor (let the buyer beware). In the United States, the insured can sue an insurer in tort for acting in bad faith.
Structure

Early insurance contracts tended to be written on the basis of every single type of risk (where risks were defined extremely narrowly), and a separate premium was calculated and charged for each. This structure proved unsustainable in the context of the Second Industrial Revolution, in that a typical large manufacturer might have dozens or hundreds of types of risks to insure against.

In the 1930s, the insurance industry shifted to the current system where covered risks are initially defined broadly in an insuring agreement on a general policy form, then narrowed down by subsequent exclusion clauses. If the insured desires coverage for a risk taken out by an exclusion on the standard form, the insured can pay an additional premium for an endorsement to the policy that overrides the exclusion.

Parts of an insurance contract

Declarations – identifies who is an insured, the insured’s address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount. These are usually provided on a form that is filled out by the insurer based on the insured’s application and attached on top of or inserted within the first few pages of the standard policy form.
Definitions – define important terms used in the policy language.
Insuring agreement – describes the covered perils, or risks assumed, or nature of coverage, or makes some reference to the contractual agreement between insurer and insured. It summarizes the major promises of the insurance company, as well as stating what is covered.
Exclusions – take coverage away from the Insuring Agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.
Conditions – provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not met, the insurer can deny the claim.
Endorsements – additional forms attached to the policy form that modify it in some way, either unconditionally or upon the existence of some condition. Instead of allowing nonlawyer underwriters to directly customize core policy language with word processors, insurers usually direct underwriters to modify standard forms by attaching endorsements preapproved by counsel for various common modifications.
Life insurance specific features

Incontestability – in the United States, life insurance contracts may not be contested by the insurer at any point after the contract has been in force for two years. The insurer has the burden to investigate fully anything they wish to make sure the insured is an acceptable risk within those two years. Any material misstatements on the insurance application (which generally forms a part of the contract) cannot be used as a reason for the insurer not to pay the death benefit, as long as it does not constitute fraud on the part of the insured. The insurer’s only recourse if there is no fraud is to adjust the death benefit to correct for the insured’s age or sex if they different from what was stated on the application.

Travel insurance

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Travel Insurance is insurance that is intended to cover medical expenses and financial (such as money invested in nonrefundable pre-payments) and other losses incurred while traveling, either within one’s own country, or internationally.

Travel insurance

Temporary travel insurance can usually be arranged at the time of the booking of a trip to cover exactly the duration of that trip, or a more extensive, continuous insurance can be purchased from travel insurance companies, travel agents or directly from travel suppliers such as cruiselines or tour operators. However, travel insurance purchased from travel suppliers tends to be less inclusive than insurance offered by insurance companies.

Travel insurance often offers coverage for a variety of travelers. Student travel, business travel, leisure travel, adventure travel, cruise travel, and international travel are all various options that can be insured.

The most common risks that are covered by travel insurance are:

Medical expenses
Emergency evacuation/repatriation
Trip cancellation/interruption
Accidental death, injury or disablement benefit
Overseas funeral expenses
Curtailment
Delayed departure
Loss, theft or damage to personal possessions and money (including travel documents)
Delayed baggage (and emergency replacement of essential items)
Legal assistance
Personal liability and rental car damage excess

Travel insurance

Some travel policies will also provide cover for additional costs, although these vary widely between providers.

In addition, often separate insurance can be purchased for specific costs such as:

pre-existing medical conditions (e.g. asthma, diabetes)
sports with an element of risk (e.g. skiing, scuba-diving)
travel to high risk countries (e.g. due to war or natural disasters or acts of terrorism)
Common Exclusions:

pre-existing medical conditions
war or terrorism – but some plans may cover this risk
injury or illness caused by alcohol or drug use
Usually, the insurers cover pregnancy related expenses, if the travel occurs within the first trimester. After that, insurance coverage varies from insurer to insurer.

Travel insurance can also provide helpful services, often 24 hours a day, 7 days a week that can include concierge services and emergency travel assistance.

Typically travel insurance for the duration of a journey costs approximately 5-7% of the cost of the trip.

Motorcycle Insurance

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Motorcycle Insurance

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The coverage for different types of bikes

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Life Insurance

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Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual’s or individuals’ death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form simply specifies a lump sum to be paid on the insured’s demise.

As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.

The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the ‘peace of mind’ experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.

To be a life policy the insured event must be based upon the lives of the people named in the policy.

Insured events that may be covered include:

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

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

• Protection policies – designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
• Investment policies – where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.

Health Insurance

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One of the most important types of insurance to have is health insurance. Your good health is what allows you to work and earn money and otherwise enjoy life. If you were to come down with a sickness or have an accident without health insurance you may find yourself unable to receive treatment or even in debt to the hospital.

Thankfully, many employers provide health insurance benefits to full-time and even some part-time employees. If you do not currently have health insurance coverage this is the first place to check as it will generally be the most affordable. If you are married, you may both be able to receive coverage under just one of the employer plans.

If your employer does not offer health-insurance/”>health insurance or you are self-employed you still need it. While it may not be cheap the fact remains; what do you have if you don’t have your health? Even a basic hospital bill without insurance can run into the thousands of dollars. It isn’t worth risking financial ruin to save a few bucks on a health insurance premium

Fire insurance

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Fire insurance business means the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies.

Most homeowners have fire insurance, but few truly understand what it is and how it works. We spoke with two experts in the field to get an accurate definition. The first is fire insurance expert Dave Peterson who has practiced in the insurance industry for over 30 years and acts as an expert witness on behalf of plaintiffs. The second is Advocate Law Group partner Bob Scott, who has also practiced in the insurance industry for over 30 years and is a champion of consumer rights. Here’s what they had to say:

Dave Peterson: Generally, insurance policies are broken down into four areas. One is the insuring agreement. The second are the definitions. The third would be exclusions, and the fourth would be conditions. Every fire policy – almost every fire policy – has four areas of coverage.

The first area would be the dwelling. The second area would be other structures like a detached garage, gazebo, guest house, etc. The third area is personal property – the property that the insured would have in the home when the fire took place. The fourth would be what they call loss of use or additional living expenses and that coverage helps to pay for the insured to move out and live somewhere else for the period of time it takes to repair the structure before they can move back.

You can get additional coverage by way of endorsements, which might add such important coverages as jewelry or furs because the policies will limit the amount of coverage for those and also for code upgrades. This is a pretty important coverage area that insureds should try to get because if the home is destroyed or significantly impaired, sometimes the cities require different construction than it would take to just put it back together as it was before. In that regard, the insurance industry will deny that code upgrade coverage unless there is a specific endorsement providing that coverage. There are some policies that provide that coverage to a limited basis, usually around $10,000, and most of the time, the losses are much more than that. Bob, anything you want to add?

Bob Scott: Yes. Dave did a great job of it; let me just give my perspective. I think one thing that would also be considered a “structure” is a shed, something you would commonly find next to a house in some places. Personal property is pretty straightforward. It’s all your “stuff”. As we pass by these different coverages, it’s important to note that policyholders should take a moment with their video camera and just stand outside the house and shoot the whole outside of the house and then walk through the house and just identify all of their personal property.

Open the closets. Look inside. Just make, if you would, a very simple 10 to 15 minute video of their house, their property and their other structures. In other words, videotape the home, the other structures and their personal property by just showing the camera around, not too fast, using slow pans and give that to a family member to put someplace else in case your house burns down. That’s probably the best thing one could do to prepare for this other than to learn more about their coverages.”

Is your fire insurance company denying your claim wrongfully or underpaying your claim. You may a lawsuit. Click here to have a fire insurance attorney review your claim.

Auto Insurance

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Another type of policy that is often required is auto insurance. Most states require by law that you have basic auto insurance. While it may be a law, too many people still drive around without it.

The most common reason to have auto insurance is to cover the replacement of an expensive asset. Like a home, automobiles can be quite expensive and if it gets damaged you want to be able to repair or replace it. But there is more to auto insurance than just covering the car itself.

Most automotive insurance policies cover bodily injury or death of another person in an incident that you are legally responsible. While it generally pays for medical expenses related to the incident it can also cover legal defense costs. You will also generally find medical payment coverage that pays for medical treatment for you and your passengers during an accident regardless of who was at fault.

Auto Insurance Another type of policy that is of Policy

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Auto Insurance

Another type of policy that is often required is auto insurance. Most states require by law that you have basic auto insurance. While it may be a law, too many people still drive around without it.

The most common reason to have auto insurance is to cover the replacement of an expensive asset. Like a home, automobiles can be quite expensive and if it gets damaged you want to be able to repair or replace it. But there is more to auto insurance than just covering the car itself.

Most automotive insurance policies cover bodily injury or death of another person in an incident that you are legally responsible. While it generally pays for medical expenses related to the incident it can also cover legal defense costs. You will also generally find medical payment coverage that pays for medical treatment for you and your passengers during an accident regardless of who was at fault.

Controversies

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Jewish rabbinical scholars have also expressed reservations about insurance as an escape from the will of God, but find it more acceptable in moderation.

Some Christians believe that insurance is a lack of faith and there is a long history of resistance to commercial insurance in communities Anabaptists (Mennonites, Amish, Hutterites, Brethren in Christ), but many involved in programs of self- community-based insurance risk is spread within their communities.

Insurance insulates too much

By creating a security blanket for its insured, an insurance company may inadvertently find that its insured’s may not be as risk averse, since otherwise there could be (since, by definition, the insured has transferred risk to the insurer), a concept known as moral hazard. To reduce its own financial exposure, insurance companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in behavior that grossly magnifies the risk of loss or responsibility.

For example, life insurance companies may require higher premiums or deny coverage to people working in hazardous occupations or engage in dangerous sports. Insurance providers do not offer liability coverage for liability for intentional torts committed by or under the direction of the insured. Even if a supplier were as irrational as to want to provide such coverage is against public policy of the safest countries to allow the existence of these, and therefore it is usually illegal.

The complexity of insurance contracts

Insurance policies can be complex and some policyholders may not understand all the fees and coverage’s included in a policy. As a result, people may buy policies on unfavorable terms. In response to these issues, many countries have enacted laws and regulatory regimes that govern all aspects of insurance business, including minimum standards for policies and forms that may be advertised and sold.

For example, most insurance policies in the English language today have been carefully drafted in plain English; the industry learned the hard courts to apply the policy against the insured, when the judges themselves can not understand what policies are saying. Generally, courts interpret ambiguities in insurance policies against the insurer and in favor of policy coverage.

Many institutional insurance purchasers buy insurance through an insurance broker. While on the surface it appears that the broker representing the buyer (not the insurance company), and usually advises the buyer adequate coverage and political constraints, it is noted that in most cases compensation a runner comes in the form of a commission as a percentage of the premium, creating a conflict of interest that the financial interests of the corridor is inclined to encourage a policyholder to purchase additional insurance which may be necessary at a higher price. A broker generally holds contracts with many insurers, thereby allowing the broker to “buy” the market for the best rates and coverage possible.

Insurance can also be purchased through an agent. Unlike a broker, who represents the policyholder, an agent represents the insurance company that the policyholder buys. An agent can represent more than one company.

An independent insurance agent advises policyholders on a retainer fee-for-service, similar to a lawyer, and therefore offers totally independent advice, free of financial conflict of interest of intermediaries and / or agents. However, as a consultant has yet to work through brokers and / or agents to ensure coverage for their clients.

Redlining

Redlining is the practice of denying insurance coverage in specific geographic areas, purportedly because of a high probability of losses, while the alleged motivation is unlawful discrimination. Racial profiling or redlining has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research of government agencies, industry and community groups and academics, it is clear that race has always affected and continues to affect policies and practices of the insurance industry.

In July 2007, the Federal Trade Commission released a report outlining the results of a study on insurance scores based on credit and motor insurance. The study found that these results are effective predictors of the claims that consumers will file.

All states have provisions in their rate laws and regulations in their acts of fair trade practice prohibiting unfair discrimination, often called red line, setting rates and insurance available.

In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, credit scores, gender, occupation, marital status and educational level. However, the use of these factors is often considered to be unfair or unlawfully discriminatory, and the reaction against this practice has sometimes led to political disputes about the way that insurers determine premiums and regulatory intervention to limit the factors used.

The job of an insurance underwriter is to evaluate a given risk as to the likelihood that a loss will occur. Any factor that causes an increased risk of loss should theoretically charge a higher rate. This basic principle of insurance must be followed if insurance companies are to remain solvent. [Citation needed] Thus, “discrimination” against (i.e. treatment, the negative differential of) potential uninsured risk assessment and the process of fixing the premium is a necessary by product of the fundamentals of insurance underwriting. For instance, insurers charge higher premiums charged significantly higher than young people for life insurance. The elderly are treated differently to younger people (i.e., a distinction is made, discrimination occurs). The justification for the difference in treatment is in the heart of the risk of a life insurer takes: Old people are likely to die sooner than young people, so the risk of loss (death of the insured) is greater in a period of time and therefore the risk premium should be higher to cover the increased risk. However, treatment of policyholders differently when there are no sound actuarial reasons for doing so is unlawful discrimination.

What is often missing in the debate is that prohibiting the use of legitimate factors, actuarially sound means that an insufficient amount is being charged for a given risk, and is not therefore a deficit in the system. [Citation needed] The failure to address the deficit may mean insolvency and hardship to all policyholders of the company. [Citation needed] The options for addressing the deficit seem to be: Charge the deficit to other policyholders or charge the government (i.e., externalize outside the enterprise to society in general).

Insurance patents
More information: Insurance patent
The new insurance products can now be protected against copying of a business method patent in the United States.

A recent example of a new insurance product that is patented is an insurance based on car use. Early versions were independently invented and patented by an insurance major U.S. automobile, Progressive Auto Insurance (U.S. Patent 5,797,134) and a Spanish independent inventor, Salvador Pérez Minguijon (patent EP 0,700,009).

Many independent inventors are in favor of patenting new insurance products, as it gives them protection from big companies when they bring their new insurance products to market. Independent inventors account for 70% of new U.S. patent applications in this area.

Many insurance executives are opposed to patenting insurance products because it creates a new risk for them. The Hartford insurance company, for example, recently had to pay $ 80 million for an independent inventor, Bancorp Services, in order to settle a patent infringement and theft of trade secrets claim of a type of corporate ownership of products life insurance invented and patented by Bancorp.

There are about 150 new patent applications on insurance inventions filed per year in the United States. The speed at which patents have been issued has increased steadily from 15 in 2002 to 44 in 2006.

Inventors can now have their insurance applications for U.S. patents reviewed by the public in the Patent Exchange program. The insurance application that was sent first patent was US2009005522 “risk Assessment Company.” It was published on March 6, 2009. This patent application describes a method for increasing the ease of changing insurance.

The insurance industry and rent seeking

Certain insurance products and practices have been described as rent seeking by critics. [Citation needed] That is, some insurance products or practices are useful primarily because of legal benefits, such as reducing taxes, rather than providing protection against the risk of adverse events. According to the tax laws of the United States, for example, most owners of variable annuities and variable life insurance can invest their premium payments in the stock market and defer or eliminate the payment of taxes on their investments that withdrawals are made. Sometimes this tax deferral is the only reason people use these products. [Citation needed] Another example is the legal infrastructure which allows life insurance to be held in an irrevocable trust used to pay estate tax, while revenues themselves are immune to estate tax.

Auto Insurance

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