2007-07-19 19:45:08

Insurance

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of catastrophic financial loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium and duty of care.

Principles of insurance

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From the point of view of the insurance company there are four general criteria for deciding whether to insure events or not.

1. There must be a larger number of similar objects so the financial outcome of insuring the pool of exposures is predictable. Therefore they can calculate a “fair” premium.
2. The losses have to be accidental and unintentional from the point of view of the insured.
3. The losses must be measurable, identifiable in location, time, and be definite. They also want the losses to cause economic hardship. That is, so the insured has an incentive to protect and preserve the property to minimize the probability that the losses occur.
4. The loss potential to the insurer must be non-catastrophic. It cannot put the insurance company in financial jeopardy.

Losses must be uncertain.

Insurance Contract Principles

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A property or liability insurance policy is a “personal contract,” a “conditional contract,” a “unilateral contract,” a “contract of adhesion,” a “contract of indemnity,” and a contract which requires that the person insured have an insurable interest at the time of the insured-against contingency.

History of insurance

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In some sense we can say that insurance appears simultaneously with appearance of human society. We know two types of economies in human societies: money (with markets, money, financial instruments and so on )and non-money or natural economy (without money, markets, financial instruments and so on). The second type is more ancient form than the first. In such type of economy and such type of community we can see insurance in the form of helping each other. For example, when your house is fired down, the members of your community come and help you to build new one. The next time, when the same thing happens to your neighbour – you must go to help otherwise, you will not get help in the future. This type of insurance survived till nowadays in some countries where modern money economy with its financial instruments are not so widespread (for example countries on the territory of the former Soviet Union).

Types of insurance

Any risk that can be quantified probably has a type of insurance to protect it. Among the different types of insurance are:

* Automobile insurance?, also known as auto insurance, car insurance and in the United Kingdom as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the vehicle itself. Over most of the United States purchasing an auto insurance policy is required to legally operate a motor vehicle on public roads. Recommendations for which policy limits should be used are specified in a number of books. In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to No Fault systems, which reduce or eliminate the ability to sue for compensation but provide automatic eligibility for benefits.
* Aviation insurance? insures against Hull, Spares, Deductible, Hull War and Liability risks
* Boiler insurance? (also known as Boiler and Machinery insurance or Equipment Breakdown Insurance)
* Casualty insurance? insures against accidents, not necessarily tied to any specific property.
* Credit insurance? pays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death.
* Directors and Officers Insurance? protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes incurred by directors and officers for which they are liable. In the industry, it is usually called “D&O” for short.
* Financial loss insurance? protects individuals and companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover failure of a creditor to pay money it owes to the insured. Fidelity bonds and surety bonds are included in this category.
* Health insurance? policies will often cover the cost of private medical treatments if the NHS or other health organizations. It will often mean quicker health care where better facilities are available.
* Income protection insurance? policies provide customers with financial support in the event of the policy holder being unable to work through illness or injury. It will provide monthly support to help pay of such financial commitment as mortgages and credit cards.
* Liability insurance? covers legal claims against the insured. For example, a homeowner's insurance policy provides the insured with protection in the event of a claim brought by someone who slips and falls on the property, and brings a lawsuit for her injuries. Similarly, a doctor may purchase liability insurance to cover any legal claims against him if his negligence (carelessness) in treating a patient caused the patient injury and/or monetary harm. The protection offered by a liability insurance policy is two-fold: a legal defense in the event of a lawsuit commenced against the policyholder, plus indemnification (payment on behalf of the insured) with respect to a settlement or court verdict.
* 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.
* Life insurance? provides a cash benefit to a decedent's family or other designated beneficiary, and may specifically provide for burial, funeral and other final expenses.
* Marine Insurance? covers the loss or damage of goods at sea. Marine insurance typically compensates the owner of merchandise for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier.
* Nuclear incident insurance? � damages resulting from an incident involving radioactivive materials is generally arranged at the national level.
* Environmental Liability Insurance? protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of a pollutant.
* Pet Insurance? insures pets against accidents and illnesses – some companies cover routine/wellness care and burial, as well.
* Political risk insurance? can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.
* Professional Indemnity Insurance? is normally a mandatory requirement for professional practitioners such as Architects, Lawyers, Doctors and Accountants to provide insurance cover against potential negligence claims. Non licensed professionals may also purchase malpractice insurance, it is commonly called Errors and Omissions Insurance and covers a service provider for claims made against them that arise out of the performance of specified professional services. For instance, a web site designer can obtain E&O insurance to cover them for certain claims made by third parties that arise out of negligent performance of web site development services.
* 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.
* Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, lost of personal belongings, travel delay, personal liabilities.. etc.
* Workers' compensation? insurance replaces all or part of a worker's wages lost and accompanying medical expense incurred due to a job-related injury.

A single policy may cover risks in one or more of the above categories. For example, car insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from say, causing an accident). A homeowner's insurance policy in the U.S. typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner's property.

Potential sources of risk that may give rise to claims are known as “perils”. Examples of perils might be fire, theft, earthquake, hurricane and many other potential risks. An insurance policy will set out in details which perils are covered by the policy and which are not.

Reference:

http://www.iii.org

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Ruslan Bondar Site - insurance

2007-07-19 19:45:08

Insurance

Principles of insurance

Insurance Contract Principles

History of insurance

Types of insurance

2007-07-19 19:44:04

2007-07-19 11:55:01

2007-07-19 11:54:33

2007-07-19 11:54:23

2007-07-19 11:53:19

2005-09-23 00:02:30

2005-09-21 15:57:54

2005-09-21 15:44:21

2005-09-21 15:42:18

2005-09-21 15:39:06

2005-09-21 15:34:47

2005-09-21 12:09:48