Insurance
What is insurance and how do insurance companies work? As we know one way of risk prevention is to insure a risk to the insurance company. This method is considered the most important method in tackling risk. So many people think that risk management is the same as insurance. Though the actual circumstances are not so.
Insurance means the insurance transaction, which involves two parties, the insured and the insurer. Where the insurer guarantees the insured person, that he will be reimbursed for a loss that he may suffer, as a result of an event that would not occur or which could not be determined when or when it occurred. As the insured in the obligation to pay some money to the insurer, the amount of proportion of the sum insured, called "premium".
Viewed from several angles, the insurance has a variety of goals and techniques of splitting, among others:
A. From an economic perspective, then:
The goal:
Reducing the uncertainty of the results of operations undertaken by a person or company to meet the needs or achieve goals.
Technique:
By transferring the risk to the other party and the other party combining a considerable amount of risk, it can be estimated with more precise the size of the possibility of loss.
B. Omit Law, then:
The goal:
Transferring the risks faced by an object or a business activity to another party.
Technique:
Through premium payments by the insured to the insurer in the indemnity contract (insurance policy), then the risk of transferring to the insurer.
C. Omit Trade, then:
The goal:
Share the risks faced to all participants of the insurance program.
Technique:
The transferred risk from individuals/companies to financial institutions engaged in risk management (insurance companies), which will share the risk to all participants of the insurance it handles.
D. From a societal standpoint, then:
The goal:
Bear losses among all participants of the insurance program.
Technique:
All group members (group members) of the insurance program contribute (in the form of premiums) to sympathize with losses suffered by a / some of its members.
E. Omit Mathematics, then:
The goal:
Predict the size of the possibility of risk and the outcome of the forecast is used to divide the risk to all participants (group of participants) insurance program.
Technique:
Calculates the probability based on probability theory ("Probability Theory"), performed by the actuary as well as by the underwriter.
What is insurance and how do insurance companies work? As we know one way of risk prevention is to insure a risk to the insurance company. This method is considered the most important method in tackling risk. So many people think that risk management is the same as insurance. Though the actual circumstances are not so.
Insurance means the insurance transaction, which involves two parties, the insured and the insurer. Where the insurer guarantees the insured person, that he will be reimbursed for a loss that he may suffer, as a result of an event that would not occur or which could not be determined when or when it occurred. As the insured in the obligation to pay some money to the insurer, the amount of proportion of the sum insured, called "premium".
Viewed from several angles, the insurance has a variety of goals and techniques of splitting, among others:
A. From an economic perspective, then:
The goal:
Reducing the uncertainty of the results of operations undertaken by a person or company to meet the needs or achieve goals.
Technique:
By transferring the risk to the other party and the other party combining a considerable amount of risk, it can be estimated with more precise the size of the possibility of loss.
B. Omit Law, then:
The goal:
Transferring the risks faced by an object or a business activity to another party.
Technique:
Through premium payments by the insured to the insurer in the indemnity contract (insurance policy), then the risk of transferring to the insurer.
C. Omit Trade, then:
The goal:
Share the risks faced to all participants of the insurance program.
Technique:
The transferred risk from individuals/companies to financial institutions engaged in risk management (insurance companies), which will share the risk to all participants of the insurance it handles.
D. From a societal standpoint, then:
The goal:
Bear losses among all participants of the insurance program.
Technique:
All group members (group members) of the insurance program contribute (in the form of premiums) to sympathize with losses suffered by a / some of its members.
E. Omit Mathematics, then:
The goal:
Predict the size of the possibility of risk and the outcome of the forecast is used to divide the risk to all participants (group of participants) insurance program.
Technique:
Calculates the probability based on probability theory ("Probability Theory"), performed by the actuary as well as by the underwriter.
For example, if Mr. Adam buys a new car and wishes to insure the vehicle against any expected accidents. He will buy an insurance policy from an insurance company through an insurance agent or insurance broker by paying a specific amount of money, called a premium, to the insurance company.
The moment Mr. Adam pays the premium, the insurer (i.e. the insurance company) issues an insurance policy, or contract paper, to him. In this policy, the insurer analyses how it will pay for all or part of the damages/losses that may occur on Mr. Adam's car.
But, as Mr. Adam is able to buy an insurance policy and is paying to his insurer, a lot of other people in thousands are also doing the same thing. Any one of these people who are insured by the insurer is referred to as insured. , most of these people will never have any form of accidents and hence there will be no need for the insurer to pay them any form of compensation.
If Mr. Adam and a very few other people have any form of accidents/losses, the insurer will pay them based on their policy.
It should be noted that the entire premiums paid by these thousands of insured is so much more than the compensations to the damages/losses incurred by some few insured. Hence, the huge left-over money (from the premiums collected after paying the compensations) is utilized by the insurer as follows:
1. Some are kept as a cash reservoir.
2. Some are used as investments for more profit.
3. Some are used as operating expenses in form of rent, supplies, salaries, staff welfare, etc.
4. Some are lent out to banks as fixed deposits for more profit etc. etc.
Apart from the vehicle insurance taken by Mr. Adam on his new vehicle, he can also decide to insure himself. This one is different because it involves human life and is thus termed Life Insurance or Assurance.
Life insurance (or assurance) is the insurance against certainty or something that is certain to happen such as death, rather than something that might happen such as loss of or damage to property.
The issue of life insurance is a paramount one because it concerns the security of human life and business. Life insurance offers real protection for your business and it also provides some sot of motivation for any skilled employees who decide to join your organization.
Life insurance insures the life of the policyholder and pays a benefit to the beneficiary. This beneficiary can be your business in the case of a key employee, partner, or co-owner. In some cases, the beneficiary may be one's next of kin or near or distant relation. The beneficiary is not limited to one person; it depends on the policyholder.
Life insurance policies exist in three forms:
• Whole life insurance
• Term Insurance
• Endowment insurance
• Whole Life Insurance
In Whole Life Insurance (or Whole Assurance), the insurance company pays an agreed sum of money (i.e. sum assured) upon the death of the person whose life is insured. As against the logic of term life insurance, Whole Life Insurance is valid and it continues in existence as long as the premiums of the policyholders are paid.
When a person expresses his wish in taking Whole Life Insurance, the insurer will look at the person's current age and health status and use this data to reviews longevity charts that predict the person's life duration/lifespan. The insurer then presents a monthly/quarterly/bi-annual/annual level premium. This premium to be paid depends on a person's present age: the younger the person the higher the premium and the older the person the lower the premium. But, the high premium being paid by a younger person will reduce with age over the course of many years.
In case you are planning life insurance, the insurer is in the best position to tell you the type you should take. Whole life insurance exists in three varieties, as follows: variable life, universal life, and variable-universal life; and these are very good options for your employees to consider or in your personal financial plan.Term Insurance
In Term Insurance, the life of the policy-holder is insured for a specific period of time and if the person dies within the period the insurance company pays the beneficiary. Otherwise, if the policy-holder lives longer than the period of time stated in the policy, the policy is no longer valid. In a simple word, if death does not occur within the stipulated period, the policy-holder receives nothing.
For example, Mr. Adam takes a life policy for a period of not later than the age of 60. If Mr. Adam dies within the age of fewer than 60 years, the insurance company will pay the sum assured. If Mr. Adam's death does not occur within the stated period in the life policy (i.e. Mr. Adam lives up to 61 years and above), the insurance company pays nothing no matter the premiums paid over the term of the policy.
A term assurance will pay the policyholder only if death occurs during the "term" of the policy, which can be up to 30 years. Beyond the "term", the policy is use either null or void (i.e. worthless). Term life insurance policies are of two types:
o Level term: In this one, the death benefit remains constant throughout the duration of the policy.
o Decreasing term: Here, the death benefit decreases as the course of the policy's term progresses.
It should be noted that Term Life Insurance can be used in a debtor-creditor scenario. A creditor may decide to insure the life of his debtor for a period over which the debt repayment is expected to be completed so that if the debtor dies within this period, the creditor (being the policy-holder) gets paid by the insurance company for the sum assured).Endowment Life Insurance
In Endowment Life Insurance, the life of the policyholder is insured for a specific period of time (say, 30 years) and if the person insured is still alive after the policy has timed out, the insurance company pays the policy-holder the sum assured. But, if the person assured dies within the "time specified" the insurance company pays the beneficiary.
For example, Mr. Adam took Endowment Life Insurance for 35 years when he was 25 years of age. If Mr. Adam is lucky to meet the age of 60 (i.e. 25 + 35), the insurance company will pay the policy-holder (i.e. whoever is paying the premium, Mr. Adam if he is the one paying the premium) the sum assured. But, if Mr.
Adam dies at the age of 59 years before completing the assured time of 35 years, his sum assured will be paid to his beneficiary (i.e. policy-holder). In case of death, the sum assured is paid at the age at which Mr. Adam dies.
David Mog is the owner of the blog http://insurancefarmland.blogspot.com/ and he is giving you as a reader the right to use this writeup as you deem fit in your research work on the basis that the blog link and the contents will not be tampered with but will remain as it is without being edited.
I am a Mathematician by profession. I studied in Ontario, Canada. For the past 15 years, I've been almost all over the globe in my consultancy jobs.
I specialize in Research & Development that deals with the design of computer programs in solving specific problems.
I was one-time an Insurance Salesman before I went for my college education. So, all the pros and cons of the Insurance world are well known to me as the lines on my palms.
I've been to Japan, South Korea, Australia, England, Netherlands, South Africa, Egypt, to mention a few.
For example, if Mr. Adam buys a new car and wishes to insure the vehicle against any expected accidents. He will buy an insurance policy from an insurance company through an insurance agent or insurance broker by paying a specific amount of money, called a premium, to the insurance company.
The moment Mr. Adam pays the premium, the insurer (i.e. the insurance company) issues an insurance policy, or contract paper, to him. In this policy, the insurer analyses how it will pay for all or part of the damages/losses that may occur on Mr. Adam's car.
But, as Mr. Adam is able to buy an insurance policy and is paying to his insurer, a lot of other people in thousands are also doing the same thing. Any one of these people who are insured by the insurer is referred to as insured. , most of these people will never have any form of accidents and hence there will be no need for the insurer to pay them any form of compensation.
If Mr. Adam and a very few other people have any form of accidents/losses, the insurer will pay them based on their policy.
It should be noted that the entire premiums paid by these thousands of insured is so much more than the compensations to the damages/losses incurred by some few insured. Hence, the huge left-over money (from the premiums collected after paying the compensations) is utilized by the insurer as follows:
1. Some are kept as a cash reservoir.
2. Some are used as investments for more profit.
3. Some are used as operating expenses in form of rent, supplies, salaries, staff welfare, etc.
4. Some are lent out to banks as fixed deposits for more profit etc. etc.
Apart from the vehicle insurance taken by Mr. Adam on his new vehicle, he can also decide to insure himself. This one is different because it involves human life and is thus termed Life Insurance or Assurance.
Life insurance (or assurance) is the insurance against certainty or something that is certain to happen such as death, rather than something that might happen such as loss of or damage to property.
The issue of life insurance is a paramount one because it concerns the security of human life and business. Life insurance offers real protection for your business and it also provides some sot of motivation for any skilled employees who decide to join your organization.
Life insurance insures the life of the policyholder and pays a benefit to the beneficiary. This beneficiary can be your business in the case of a key employee, partner, or co-owner. In some cases, the beneficiary may be one's next of kin or near or distant relation. The beneficiary is not limited to one person; it depends on the policyholder.
Life insurance policies exist in three forms:
• Whole life insurance
• Term Insurance
• Endowment insurance
• Whole Life Insurance
In Whole Life Insurance (or Whole Assurance), the insurance company pays an agreed sum of money (i.e. sum assured) upon the death of the person whose life is insured. As against the logic of term life insurance, Whole Life Insurance is valid and it continues in existence as long as the premiums of the policyholders are paid.
When a person expresses his wish in taking Whole Life Insurance, the insurer will look at the person's current age and health status and use this data to reviews longevity charts that predict the person's life duration/lifespan. The insurer then presents a monthly/quarterly/bi-annual/annual level premium. This premium to be paid depends on a person's present age: the younger the person the higher the premium and the older the person the lower the premium. But, the high premium being paid by a younger person will reduce with age over the course of many years.
In case you are planning life insurance, the insurer is in the best position to tell you the type you should take. Whole life insurance exists in three varieties, as follows: variable life, universal life, and variable-universal life; and these are very good options for your employees to consider or in your personal financial plan.
Term Insurance
In Term Insurance, the life of the policy-holder is insured for a specific period of time and if the person dies within the period the insurance company pays the beneficiary. Otherwise, if the policy-holder lives longer than the period of time stated in the policy, the policy is no longer valid. In a simple word, if death does not occur within the stipulated period, the policy-holder receives nothing.
For example, Mr. Adam takes a life policy for a period of not later than the age of 60. If Mr. Adam dies within the age of fewer than 60 years, the insurance company will pay the sum assured. If Mr. Adam's death does not occur within the stated period in the life policy (i.e. Mr. Adam lives up to 61 years and above), the insurance company pays nothing no matter the premiums paid over the term of the policy.
A term assurance will pay the policyholder only if death occurs during the "term" of the policy, which can be up to 30 years. Beyond the "term", the policy is use either null or void (i.e. worthless). Term life insurance policies are of two types:
o Level term: In this one, the death benefit remains constant throughout the duration of the policy.
o Decreasing term: Here, the death benefit decreases as the course of the policy's term progresses.
It should be noted that Term Life Insurance can be used in a debtor-creditor scenario. A creditor may decide to insure the life of his debtor for a period over which the debt repayment is expected to be completed so that if the debtor dies within this period, the creditor (being the policy-holder) gets paid by the insurance company for the sum assured).
Endowment Life Insurance
In Endowment Life Insurance, the life of the policyholder is insured for a specific period of time (say, 30 years) and if the person insured is still alive after the policy has timed out, the insurance company pays the policy-holder the sum assured. But, if the person assured dies within the "time specified" the insurance company pays the beneficiary.
For example, Mr. Adam took Endowment Life Insurance for 35 years when he was 25 years of age. If Mr. Adam is lucky to meet the age of 60 (i.e. 25 + 35), the insurance company will pay the policy-holder (i.e. whoever is paying the premium, Mr. Adam if he is the one paying the premium) the sum assured. But, if Mr.
Adam dies at the age of 59 years before completing the assured time of 35 years, his sum assured will be paid to his beneficiary (i.e. policy-holder). In case of death, the sum assured is paid at the age at which Mr. Adam dies.
David Mog is the owner of the blog http://insurancefarmland.blogspot.com/ and he is giving you as a reader the right to use this writeup as you deem fit in your research work on the basis that the blog link and the contents will not be tampered with but will remain as it is without being edited.
I am a Mathematician by profession. I studied in Ontario, Canada. For the past 15 years, I've been almost all over the globe in my consultancy jobs.
I specialize in Research & Development that deals with the design of computer programs in solving specific problems.
I was one-time an Insurance Salesman before I went for my college education. So, all the pros and cons of the Insurance world are well known to me as the lines on my palms.
I've been to Japan, South Korea, Australia, England, Netherlands, South Africa, Egypt, to mention a few.
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