Type :Insurance Review

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 coverage that exist. A single policy that may cover risks in one or more of the categories set out below. For example, vehicle coverage would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident A home insurance  policy in the United States typically includes coverage for damage to the home and the owner’s belongings, 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.

Insurance,

Business policies can take a number of different forms, such as the various kinds of professional liability coverage, also called professional indemnity (PI), which are discussed below under that name; and the Business Owner’s  policy (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners coverage packages the coverages that a homeowner needs.

Auto insurance :

Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision .

Coverage typically includes:

• Property coverage, for damage to or theft of the car
• Liability coverage, for the legal responsibility to others for bodily injury or property damage
• Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses

Health insurance :

Income Protection :

Insurance,

• Disability coverage provide financial support in the event of the policyholder becoming unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as Mortgage Loans  and Credit cards. Short-term and long-term disability policies are available to individuals, but considering the expense, long-term policies are generally obtained only by those with at least six-figure incomes, such as doctors, lawyers, etc. Short-term disability coverage covers a person for a

• Disability coverage provide financial support in the event of the policyholder becoming unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as Mortgage Loans  and Credit Cards. Short-term and long-term disability policies are available to individuals, but considering the expense, long-term policies are generally obtained only by those with at least six-figure incomes, such as doctors, lawyers, etc. Short-term disability coverage covers a person for a period typically up to six months, paying a stipend each month to cover medical bills and other necessities.
• Long-term disability coverage covers an individual’s expenses for the long term, up until such time as they are considered permanently disabled and thereafter  companies will often try to encourage the person back into employment in preference to and before declaring them unable to work at all and therefore totally disabled..
• Total and permanent disability coverage, provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life policy.
• Workers compensation policy,  replaces all or part of a worker’s wages lost and accompanying medical expenses incurred because of a job-related injury.

Casualty insurance :

Insurance,

Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum that a number of other types of insurance could be classified, such as auto, workers compensation, and some liability insurances.

• Crime policies is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts  of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement
• Terrorism policies  provides protection against any loss or damage caused by terrorist  activities. In the United States in the wake of 09/11, the Terrorism risk insurance act 2002 (TRIA) set up a federal program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).
• Kidnap and ransom coverage is designed to protect individuals and corporations operating in high-risk areas around the world against the perils of kidnap, extortion, wrongful detention and hijacking  political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution insurance  or other political conditions could result in a loss.

Life insurance :

Insurance,

Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and  pensions  that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life policy and, from an underwriting perspective, are the mirror image.

Certain life policies accumulate  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 policies, are financial instruments to accumulate or liquidate wealth when it is needed.

In many countries, such as the United States 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 policies as a tax-efficient method of saving as well as protection in the event of early death.

In the United States, the tax on interest income on 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.

Burial insurance :

Insurance,

Burial coverage is a very old type of life coveragee which is paid out upon death to cover final expenses, such as the cost of a funeral. The Greeks and Romans introduced burial insurance c. 600 CE when they organized guilds called “benevolent societies” which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose, as did friendly societies during Victorian times.

Property :

Insurance,

• Boiler policies (also known as boiler and machinery coverage, or equipment breakdown insurance) insures against accidental physical damage to boilers, equipment or machinery.
• Builder’s risk policy insures against the risk of physical loss or damage to property during construction. Builder’s risk coverage is typically written on an “all risk” basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder’s risk is coverage that protects a person’s or organization’s insurable interest in materials, fixtures or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.
• Crop policies purchased by farmers 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.
• Earthquake policy, is a form of property coverage that pays the policyholder in the event of an earthquakethat causes damage to the property. Most ordinary home insurance policies do not cover earthquake damage. Earthquake insurance policies generally feature a high deductible. Rates depend on location and hence the likelihood of an earthquake, as well as the construction of the home.
• Fidelity Bond, is a form of casualty coverage that covers policyholders for losses incurred 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 policy, protects against property loss due to flooding. Many U.S. insurers do not provide flood insurance in some parts of the country. In response to this, the federal government created the National flood coverage program  which serves as the insurer of last resort.
• Home policy, is so commonly called hazard coverage or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder’s home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner’s responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.
• Landlord coverage, covers residential and commercial properties which are rented to others. Most homeowners’ policy covers only owner-occupied homes.
• Marine Insurance, and marine cargo  cover the loss or damage of vessels 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 coverage typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier Many marine policies 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.
• Supplemental natural disaster insurance covers specified expenses after a natural disaster renders the policyholder’s home uninhabitable. Periodic payments are made directly to the insured until the home is rebuilt or a specified time period has elapsed.
• Surety Bond, coverage is a three-party coverage the performance of the principal.tinc@edge.net@

• Volcano policy is a specialized coverage protecting against damage arising specifically from volcanic eruptions and storm coverage is an insurance covering the damage that can be caused by wind events such a hurricanes.

Liability Insurance:

Insurance,

Liability policy 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 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 policy 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.

• Directors and officers liability coverage (D&O) protects an organization (usually a corporation) from costs associated with litigation resulting from errors made by directors and officers for which they are liable.
• Environmental liability or environmental impairment 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 coverage (E&O) is business liability insurance for professionals such as agents, real estate agents and brokers, architects, third-party administrators (TPAs) and other business professionals.
• Prize indemnity coverage 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  also called professional indemnity insurance (PI), protects insured professionals such as architectural corporations and medical practitioners against potential negligence claims made by their patients/clients. Professional liability coverage may take on different names depending on the profession. For example, professional liability coverage in reference to the medical profession may be called medical malpractice coverage.

Often a commercial insured’s liability  program consists of several layers. The first layer of  primary coverage, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary coverage is subject to a deductible and obligates the insured to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure. Above the primary coverage or self-insured retention, the insured may have one or more layers of excess insurance to provide coverage additional limits of indemnity protection. There are a variety of types of excess coverage, including “stand-alone” excess policies (policies that contain their own terms, conditions, and exclusions), “follow form” excess insurance (policies that follow the terms of the underlying policy except as specifically provided), and “umbrella” insurance policies  some circumstances could provide coverage that is broader than the underlying coverage,Credit :

Insurance,

Credit insurance repays some or all of a loan when the borrower is insolvent.

• Mortgage insurance insures the lender against default by the borrower. Mortgage coverage is a form of 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.
• Trade credit insurance is business coverage over the accounts receivable of the insured. The policy pays the policy holder for covered accounts receivable if the debtor defaults on payment.
• Collateral protection insurance (CPI) insures property (primarily vehicles) held as collateral for loans made by lending institutions.

Other types :

Insurance,

• All-risk insurance is an coverage that covers a wide range of incidents and perils, except those noted in the policy. All-risk coverage is different from peril-specific insurance that cover losses from only those perils listed in the policy.  In car coverage, all-risk policy includes also the damages caused by the own driver.

• Bloodstock insurance covers individual horses or a number of horses under common ownership. Coverage is typically for mortality as a result of accident, illness or disease but may extend to include infertility, in-transit loss, veterinary fees, and prospective foal.
• Business interruption policy covers the loss of income, and the expenses incurred, after a covered peril interrupts normal business operations.
• Defense Base Act (DBA) policy provides coverage for civilian workers hired by the government to perform contracts outside the United States 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 policy provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
• Legal expenses insurance covers policyholders for the potential costs of legal action against an institution or an individual. When something happens which triggers the need for legal action, it is known as “the event”. There are two main types of legal expenses insurance: before the event insurance and after the event insurance.
• Livestock insurance is a specialist policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.
• Media liability insurance is designed to cover professionals that engage in film and television production and print, against risks such as defamation.
• Nuclear incident insurance covers damages resulting from an 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 usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. Coverage is also afforded 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.
• Tax insurance is increasingly being used in corporate transactions to protect taxpayers in the event that a tax position it has taken is challenged by the IRS or a state, local, or foreign taxing authority
• Title insurance provides a guarantee that title to real property is vested in the purchaser or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
• 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, and personal liabilities.
• Tuition insurance insures students against involuntary withdrawal from cost-intensive educational institutions
• Interest rate insurance protects the holder from adverse changes in interest rates, for instance for those with a variable rate loan or mortgage
• Divorce insurance is a form of contractual liability insurance that pays the insured a cash benefit if their marriage ends in divorce.

Insurance financing vehicles :

Insurance,

• Fraternal insurance is provided on a cooperative basis by fraternal benefit societies or other social organizations.
• 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):
  • 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 and governmental self-insurance :

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 religious groups, including the Amish and some Muslim groups, depend on support provided by their communities when disasters 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 States, the most prevalent form of self-insurance is governmental risk management pools. They are self-funded cooperatives, operating as carriers of coverage for the majority of governmental entities today, such as county governments, municipalities, and school districts. Rather than these entities independently self-insure and risk bankruptcy from a large judgment or catastrophic loss, such governmental entities form a risk pool. Such pools begin their operations by capitalization through member deposits or bond issuance. Coverage (such as general liability, auto liability, professional liability, workers compensation, and property) is offered by the pool to its members, similar to coverage offered by insurance companies. However, self-insured pools offer members lower rates (due to not needing insurance brokers), increased benefits (such as loss prevention services) and subject matter expertise. Of approximately 91,000 distinct governmental entities operating in the United States, 75,000 are members of self-insured pools in various lines of coverage, forming approximately 500 pools. Although a relatively small corner of the insurance market, the annual contributions (self-insured premiums) to such pools have been estimated up to 17 billion dollars annually.

Insurance companies  :

Insurance,

Insurance companies may be classified into two groups:

• Life insurance companies, which sell life insurance, annuities and pensions products.
• Non-life or property/casualty insurance companies, which sell other types of insurance.

General insurance companies can be further divided into these sub categories.

• Standard lines
• Excess lines

In most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature – coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year.

Insurance companies are generally classified as either mutual or proprietary companies. Mutual companies are owned by the policyholders, while shareholders (who may or may not own policies) own proprietary insurance companies.

Demutualization of mutual insurers to form stock companies, as well as the formation of a hybrid known as a mutual holding company, became common in some countries, such as the United States, in the late 20th century. However, not all states permit mutual holding companies.

Other possible forms for an insurance company include reciprocals, in which policyholders reciprocate in sharing risks, and Lloyd’s organizations.

Insurance companies are rated by various agencies such as A. M. Best. The ratings include the company’s financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products.

Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.

Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company’s customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a “pure” entity (which is a 100% subsidiary of the self-insured parent company); of a “mutual” captive (which insures the collective risks of members of an industry); and of an “association” captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.

The types of risk that a captive can underwrite for their parents include property damage, public and product liability, professional indemnity, employee benefits, employers’ liability, motor and medical aid expenses. The captive’s exposure to such risks may be limited by the use of reinsurance.

Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:

• Heavy and increasing premium costs in almost every line of coverage
• Difficulties in insuring certain types of fortuitous risk
• Differential coverage standards in various parts of the world
• Rating structures which reflect market trends rather than individual loss experience
• Insufficient credit for deductibles or loss control efforts

There are also companies known as “insurance consultants”. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies. Similar to an insurance consultant, an ‘insurance broker’ also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.

Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have.

The financial stability and strength of an insurance company should be a major consideration when buying an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). A number of independent rating agencies provide information and rate the financial viability of insurance companies.

Across the world

 premiums written in 2017