COMBINED INSURANCE PAPERS
Adam Lewis:
Property Insurance:
Property insurance is coverage that is provided to a person in the event of loss to a particular piece
of property. In 1997, there were 3366 property and liability insurers that provided this coverage. There are
many different types of property insurance in the United States. These types are as follows: fire insurance
and allied lines, Marine insurance, Casualty insurance, Multiple-line insurance, and Fidelity and surety
bonds. Each of these types goes in depth on what is actually covered. For the fire insurance and allied
lines the coverage is for “loss or damage to real estate and personal property because of fire, lightning, or
removal from the premises”. There are other things that can be covered by this insurance such as indirect
losses, which are loss of profits and rents as well as the extra expenses that built up as well as loss from
business not being able to be conducted. The Marine insurance covers ocean marine and inland marine.
This insurance covers goods that are “in transit” for all the risks associated with travel. The marine
insurance covers the loss of all boats as well as the cargo. Inland marine insurance is for “small property”
such as jewelry that can be moved quite frequently. This insurance also covers “imports, exports, domestic
shipments and the means of transportation”. Casualty insurance covers automobiles, general liabilities,
burglary and theft, workers compensation, glass insurance, boiler and machinery, nuclear, crop-hail, health,
and other miscellaneous lines. Auto insurance covers any and all legal liability that goes along with the
risk of driving and the damages that can be caused. General liability covers legal liability for property
damage and bodily injury to others. Insurance for theft and burglary covers the loss of property from that
situation. Workers compensation covers any job related injury in order to protect the company from legal
matters. Glass insurance is a broad coverage for buildings with glass that could possibly break. It covers
the buildings that had glass breakage. Boiler and machinery insurance is highly specialized insurance that
covers companies that have power-producing equipment that could get ruined. Nuclear insurance will
provide protection to the covered persons in the event of a nuclear accident. Crop-hail insurance will cover
farmer’s crops in the event that there is a hailstorm that could ruin the crops. Health insurance is coverage
that will pay for sickness or injury to the body. There are other miscellaneous lines and some of these are
title insurance, coverage for financial loss because of a defect legally in the title of real estate, and credit
insurance, which covers businesses due to loss because accounts receivable was not collected.
Life Health and Loss of Income Insurance:
Life insurance covers in the event of a person dying. This insurance would provide the family
members that remain with some money. This insurance will cover for funeral arrangements and other
financial loss that the family has incurred. Health insurance as stated before is coverage that will pay for
sickness or injury to the body. This insurance will reimburse a person if they get sick and have to pay for
doctor’s bills. Health insurance covers medicines and other medical needs. Loss of Income Insurance
would come into place if a person lost his or her normal income due to reasons like unemployment. If a
person looses his or her job and can not afford bills due to the fact that employment had been terminated
this insurance will fill in and provide some money back towards the person without the income. The
likelihood to premature death is how likely a person will die at any given moment. A table that provides
percentages and information on the likelihood of a given person passing away is available. This table is
called the mortality table.
Transportation Insurance:
Transportation insurance, also called Marine insurance was covered earlier. This insurance will
cover “goods in transit against most pure risks connected with transportation”. Types of transportation
insurance are ocean marine insurance and inland marine insurance. Ocean marine insurance is insurance
that covers damages to any boat as well as the cargo that that boat was carrying. Contracts can be written
to coincide with this insurance that would cover the legal liability that the owners and shippers could
possibly have against them. Under ocean marine insurance there is insurance that covers the Hull, cargo,
protection and indemnity, and freight. The hull insurance would cover any physical damage that the boat
received. The cargo insurance covers obviously any cargo that is either damaged or lost. The protection
and indemnity insurance is usually written as a separate contract that provides comprehensive liability
insurance for property damage or bodily injury to third parties. Freight insurance covers would cover the
boat owner or operator against financial loss due to damage or loss. Under transportation insurance there is
also inland marine insurance, which as stated before is for “small property” such as jewelry that can be
moved quite frequently. This insurance also covers “imports, exports, domestic shipments and the means
of transportation”. There are some major classes of inland marine insurance and these are domestic goods
in transit, property held by bailees, and mobile equipment and property.
Title, Burglary, and Robbery Insurance:
Title insurance covers a person in the event that there is financial loss to a person because of a
legal issue or defect within the title to real estate. Title insurance covers a person in case the purchase a
title and come to find out later that it was an illegal piece of property or there were illegal issues within the
Title. The definition of burglary is “taking of property from inside the premises by someone who
unlawfully enters or exits the premises, leaving behind marks of forcible entry or exit”. The definition of
robbery is “taking of property from a person by someone who (1) has caused or threatens to cause bodily
harm to that person, or (2) has committed an obviously unlawful act that is witnessed by that person”.
Burglary insurance would cover the person or persons that had damage to their property due to the breaking
in and damage done by someone that is not legally allowed to be there. The insurance would pay for the
damages that incurred from someone breaking and entering into someone else’s property. Robbery
insurance would cover the loss of property and money as well as injury sustained from the person doing the
robbing.
Anthony Craig:
Life insurance is an agreement between you and an insurer. Under the terms of a life insurance
contract, the insurer promises to pay a certain sum to someone when you die, in exchange for your
premium payments. The most common reason that people get life insurance is to replace the income lost
when you die. For instance, the main income provider of the family happens to die prematurely and his or
her paychecks stop the life insurance proceeds can be used to continue to support the family members that
they left behind. Another good reason to get life insurance is to pay off any debts you leave behind. For
example, mortgages, car loans, medical bills, and credit card debts are often left with an outstanding
balance when someone dies. This can take a huge load off of your family when you die.
There are lots of things that can be done with the money that is going to be left over after you pass
away. Life insurance creates an estate for your heirs. After your debts and expenses are paid, there may
not be much left over for your family. Life insurance can automatically provide assets for them after your
death. If you do not have any family living after your death and you may have always had a giving and
kind heart, you can use the money left over in your life insurance to give to a charity when you die.
There are several different types of policies that may be available to you, if you are healthy
enough. Term life insurance policies provide life insurance protection for a specific period of time or term.
If you die during the coverage period, the beneficiary named in your policy receives the policy death
benefit. If you do not die during the term, your beneficiary receives nothing. Permanent insurance policies
provide insurance protection for your entire life as long as the policy remains in force. In addition to the
insurance protection provided, this type of policy also builds internal cash values, often described as a
savings account within the policy. Here are some different types of permanent insurance policies: Whole
life, Ordinary level premium whole life, Limited-pay whole life, Variable life, Adjustable life, Universal
life, Variable universal life, Joint life (first to die), and Survivorship (second to die).
The cost of a life insurance policy depends on the type of policy, your age, and your health. A life
insurance contract is made up of provisions, options, and riders. Provisions describe or explain features,
benefits, conditions, or requirements of the contract. Options are features of the agreement that require you
to make a choice regarding some aspect of coverage. Riders are additional coverage offered by the insurer
at the time of application and added to the standard agreement in return for an additional premium.
The last thing that you need to know about life insurance is the tax consequences. Life insurance
premium payments are not tax-deductible expenses. In general, the death benefit paid to the beneficiary is
not included in gross income for federal income tax purposes, because it is paid with after-tax dollars. You
must be very careful about who owns the policy and who the beneficiaries are, in order to avoid estate taxes
on the proceeds when you die.
Health insurance basically is protection against medical costs. A health insurance policy is a
contract between an insurer and an individual or group, in which the insurer agrees to provide specified
health insurance at an agreed-price. Depending on your policy, your premium may be payable either in a
lump sum or in installments. Health insurance provides either direct payment or reimbursement for
expenses associated with illnesses and injuries. The cost and range of protection by your health insurance
will depend on your insurance provider and the particular policy you purchase.
Health insurance is a necessity in today’s world. The costs of medical care and treatment have
soared to new heights in recent years and are expected to rise even further in years to come. You never
know what is going to happen next. Think for a moment about the enormous medical costs you would
incur if you suffered a major injury tomorrow or were suddenly stricken with a life-threatening illness. In
addition to medical emergencies, routine conditions requiring visits to a physician happen all the time.
This is especially true when you have children.
Government-sponsored disability insurance programs are designed by federal, state, and local
governments to provide basic income protection, and sometimes medical benefits, to disabled individuals.
While these programs may not offer the comprehensive protection you’d like, they can help save you and
your family from financial ruin if you can not work. Two programs administered by the Social Security
Administration pay disability benefits. The Social Security disability insurance program pays benefits to
qualified individuals who are under the age of 65, regardless of income. The other program, Supplemental
Security Income, pays benefits to qualified individuals with limited income who are over age 65, or are
blind or disabled. Neither program covers partial disability, nor do both programs define disability strictly.
Your impairment must prevent you form earning a substantial income, must be medically determined, and
must twelve months or more. Like other Social Security benefits, disability benefits are based on your
Social Security earnings record.
Owning a car involves several risks. When a car accident occurs, people may be injured and
vehicles may be damaged. Damage can also occur through theft, vandalism, or natural disasters. Auto
insurance can protect you against these risks. Insurance companies provide auto insurance through
personal auto polices. These polices are contracts between you and your insurer, specifying each party’s
rights and obligations. Essentially, your insurer promises to provide specific coverage for you in return for
you payment of a premium.
All states require you to be financially responsible when driving a car. Depending on your state,
you may be required to purchase auto insurance or post a bond. State law often requires you to purchase at
least a minimum amount of auto insurance. You may find it prudent to purchase greater coverage,
however, in order to protect your auto investment, pay for necessary medical expenses, cover your legal
liability, and cover any additional losses related to driving.
Homeowners insurance protects you if your home is damaged or destroyed. In addition, it covers
your family’s possessions and can provide you with compensation for liability claims, medical expenses,
and other amounts that result from property damage and personal injury suffered by others. By paying
insurance premiums, and satisfying the other requirements of your insurance company, you can protect
yourself in the event of loss due to unpredictable catastrophic events.
You may need homeowner's insurance because your mortgage lender requires it. But, even if you
own your home outright, you still need homeowners insurance to protect that which you can't afford to lose.
It is really that simple. You spend years building up a solid financial foundation for you and your family.
All that hard work can go down the drain in a matter of minutes when, for example, a tornado devastates
your house, a burglar robs and vandalizes your home while you're gone, your dog bites and severely injures
a neighborhood child, a guest in your home is hospitalized after falling on your icy stairs, or a neighbor
sues you for personal injury after your chimney topples over on his head. There are virtually thousands of
possible scenarios that could result in severe financial loss or even the loss of your home. Homeowner's
insurance is designed to help prevent that result.
The property insurance section of your homeowner’s policy protects more than just your actual
home or dwelling. In most cases, your insurance company should reimburse you for damage or theft
affecting your dwelling, any structures attached to the dwelling, structures on your premises that are not
attached to the dwelling, personal property, loss of use of your dwelling, and liability if you or another
insured are found responsible for personal injury or property damage to another. There is a wide variety of
damages, conditions, and costs that are not covered by homeowners insurance. Here are just a few
examples of situations that are not covered by a homeowners insurance policy: the land underneath your
home is damaged, your claim exceeds your maximum stated coverage amount, you have flood damage, you
have losses related to business activities in your home, your liability results from injuries suffered by a
tenant, your claim is covered by other insurance, or your claim was caused by someone else who is insured
under your party. Your homeowner’s policy may exclude coverage that you can purchase by adding an
endorsement to your policy. Other coverage, such as flood insurance, has to be purchased under a separate
insurance program. Still other coverage can be obtained by purchasing a policy that covers a broader list of
perils. The cost of homeowner's insurance will depend upon the amount of your coverage, any
endorsements you add to the policy, and the deductibles you choose.
Whether you just bought a fishing boat or a ski boat you need protection against loss and damage
from being sunk, capsized, or stranded. You also need protection against loss from fire, collision,
explosion, theft, storms, personal injury claims or property damage claims. Boat insurance gives you that
coverage. There are three types of policies available for pleasure boats. Outboard motor and boat
insurance is a policy that only covers physical damage. It is commonly provided under an open peril inland
marine floater. Boat owners or watercraft package policies are a type of policy that provides both liability
and physical damage coverage. It typically protects your boat, motor, and boat trailer. Property covered
generally includes anchors, oars, electric trolling motors, extra fuel tanks, tools, detachable canopies, seat
cushions, life preservers, skis and tow ropes, dinghies, and remote controls and batteries. Property generally
excluded includes portable electronic equipment, photographic equipment, fishing gear, damage caused by
wear and tear, and damage caused by repair or restoration. Liability coverage pays for medical expenses up
to the limits of the policy for you and other occupants of the boat, and provides protection for legal liability
resulting from an accident. Personal yacht insurance is an ocean marine policy which provides physical
damage and liability coverage. Sections of the policy may provide "all risk" coverage on the boat and its
equipment and marine liability coverage. This type of policy generally does not have specific territorial
limits. It usually has "cruising limits" defined in the policy. The larger the cruising limits, the larger the
premium.
Grant Conaway:
The first thing that one must do when look objectively at a subject, is define any terms that may appear.
This will make sure that whoever is reading and trying to understand what is going on will be one the same
page as the author. Insurance is the pooling of fortuitous losses by transfer of such risks to insurers, who
agree to indemnify insured for such losses, to provide other pecuniary benefits on their occurrence, or to
render services connected with the risk (Principles of risk management and insurance). Insurance different
parts and definable aspects to it; such as: characteristics, requirements of insurable risk, hedging, benefits
and costs, and types of insurance.
First of these are the basic characteristics of insurance. Quite simple they are Pooling of Losses,
Payment of Fortuitous Losses, Risk transfer, and Indemnification. To help better understand pooling of
losses one first must say that pooling is the spreading of losses incurred by the few over the entire group, so
that in the process average losses substituted for actual loss (Principles of risk management and
insurance). This will take the probability of losses and decrease them because of the fact that when two
people pooling their money and probabilities together then it multiplies the two probabilities together;
therefore, decreasing the chance of a loss. Secondly, there is the Payment of fortuitous losses. A
Fortuitous loss is one that is unforeseen and unexpected and occurs as a result of chance. This means that
a loss is accidental and a loss is random. Thirdly, stated is Risk transfer, which mean that a pure risk is
transferred from the insured tot eh insurer, who typically is in a stronger financial position to pay the loss
than the insured. This goes hand in hand with the idea of pooling losses. Fourthly, is Indemnification that
means that the insured is restored to his or her approximate financial position prior to the occurrence of
the loss. In other words the insurance secures the fact that one will obtain the same status as before the
random accident occurred. There may be more characteristics, but these are the main ones.
Requirements of an insurable risk fit hand in hand with the characteristics of insurance. First,
there must be a large number of exposure units like, for example, the population of a city who all have cars
and need to drive. Secondly, the loss must be accidental and unintentional. Otherwise there would be no
need to insure against it. People would just plan ahead and save their money because they would know
where and when an accident would occur. Thirdly, the loss must be determinable and measurable. Take
the car insurance and the driver example again. When people get in a car accident, they find out how much
it would cost to fix the car; then based on statistics of many people and their accidents, they come up with a
premium. This premium is determinable and measurable. Fourthly, the loss should not be catastrophic.
This is a euphemism for when people die in an accident. After all, what is the point in bringing people
back to their financial statue if they are not living? Fifthly, the chance of loss must be calculable. Once
again people judge the probability of an accident by using statistics equations using the data from
thousands of people. From this data they can come up with the calculable expected loss of an individual or
individuals. Sixthly, and lastly, the premium must be economically feasible. In other words no one is
going to pay three million dollars a year to insure a five thousand dollar car.
People need insurance for many different things, thus there are different types of insurance.
Private insurance is broken down into Life and Health Insurance and Property and Liability Insurance. Life
and health insurance is to insure that if a person gets injured or even dies that the people they leave behind
will have some money coming in to help them pay for the funeral or to just pay the bills. Mostly the people
who will get this kind of insurance are the main breadwinners of the household. Under this same category
is property and liability insurance. This insures against the loss of privately owned things that might
include Fire and allied lines, Marine, casualty, Multiple-line, Fidelity and surety bonds. Basically these are
just names of names of specific insurances that people need. The second big group is Governmental
insurance. This includes Social insurance and other government insurances. Major social insurance
programs in the United States include the following: Old-Age, survivors, and Disability insurance,
Medicare, unemployment insurance, workers compensation, Compulsory temporary disability insurance,
Railroad Retirement Act, and Railroad Unemployment insurance Act. Other Governmental insurance
programs are things like pension termination insurance, insurance on checking and savings accounts in
commercial banks and saving and loan associations, and federal flood insurance.
Benefits of insurance to society are what people are really after when they talk about insurance.
Why else would we even have insurance if there were no benefits to it? Indemnification for loss, less worry
and fear, source of investment funds, loss prevention, and enhancement of credit are most of the benefits to
insurance. Indemnification for loss once again permits individuals and families to be restored to their
former financial position after a loss occurs. When a person purchases insurance they can sleep easier at
night knowing that a financial catastrophe is taken care of when or if one does occur. This is less worry
and fear for the person and the second benefit to insurance. The third is that having insurance is a source of
investment funds for capital investment and accumulation. Premiums are collected in advance of the loss,
and funds not needed to pay immediate losses and expenses can be loaned to business firms. Fourth is loss
prevention. These things include highway safety and reduction of automobile deaths, fire prevention,
reduction of work-related disabilities, Prevention and detection of arson losses, prevention of defective
products that could injure the user, Prevention of boiler explosions, and the educational programs on loss
prevention. Fifth and last is Enhancement of Credit, which basically means that when a person buys
insurance and is driving and taking risks that they will get better credit with the company. As time goes on,
this is how it works also with credit card companies or financing a car or a loan on a house.
The costs of insurance must also be looked at when considering the overall worth of it. Cost of
doing business, fraudulent claims, and inflated claims are mostly the costs that come as a side effect of
insurance in society. The cost of doing business is basically the expense load on the company. Expense
loading is the amount needed to pay all expenses, including commissions, general administrative expenses,
state premium taxes, acquisition expenses, and an allowance for contingencies and profit. From an
accounting perspective it’s the sales minus the expenses. Fraudulent Claims are the second cost of
insurance on society. This in actually not part of insurance, but it accompanies it through other means.
Several examples of these are Auto accidents that are faked or staged to collect benefits, Dishonest
claimants fake slip-and-fall accidents, Phony burglaries, thefts, or acts of vandalism are reported to
insurers, False health insurance claims are submitted to collect benefits, and Dishonest policy owners take
out life insurance policies on insured who are later reported as having died. Many people will do some bad
things just to get some money in this world. Thirdly, there are inflated claims or “padded” claims. This is
where the dollar amount of the claim exceeds the actual financial loss. Examples of these are: Attorneys
for plaintiffs sue for high liability judgments that exceed the true economic loss of the victim, Insured
inflate the amount of damage in automobile collision claims so that the insurance payments will cover the
collision deductible, and Disabled persons often malinger to collect disability-income benefits for a longer
duration.
Many times insurance companies figure out that people of the same risk have some of the same
characteristics about them. For this reason, people who drive red sports cars have a higher premium than
others. Also people who have just turned sixteen and are of a certain race may have a higher premium. On
the contrary, people who are pooled together and people who are married have lower premiums. Insurance
on cheater cars is not as expensive as cars that cost more. Insurance comes down to as small of things as
where you live in the country, county, or city. Many people have dropped their car insurance rates by
taking a defensive driving course or by getting a car alarm.
So while many people do not like insurance companies simply because they take their money, one
must realize that the reason that the premiums are where they are because of the statistical fact the
accidents do occur even if they are accidental and random. People also need to realize that if they have one
or two bad accidents in their life time that the probability for those accidents were accounted for in the
statistical analysis that was done for each company.
Ian Todd:
1.
Identify the kinds of Property Insurance: Property loss exposures, and Types of liability exposures
(contractual, professional, etc.)
The first property insurance I am going to look will be homeowner’s Insurance.
I will briefly discuss
what it is, why you need it, what it does and does not cover and special circumstances you may want
to know about. What is homeowners insurance? As you probably suspect, homeowners insurance
protects you if you home is damaged or destroyed. Why do I need insurance you ask? First off, most
mortgage lenders require you to. How quick can a tornado come and rip your house apart leaving you
with nothing. This is how you can recover what you lost. What about when you are away on vacation
enjoying yourself and you come home to find out that burglars helped themselves out to all of your
possessions, how would you go about getting them back. Homeowner insurance covers more than just
the house from damages that may occur; it also covers medical if by chance a person were to hurt him
or herself on your property. For instance, if a neighbor were to come over and slip walking up the
stairs they do have a right to sue you, and with the right homeowner insurance plan, you will not have
to fork out tons of money to them. What all will your homeowner’s insurance cover? Of course you
insurance will cover the house, and any personal possessions you may have on the property, including
your car (if you have the right plan), or luggage lost during travel. Now let’s look at what it will not
cover. The land that the house is on is not covered. Damage greater than the coverage limit you set,
flood damage cause it has a separate policy available, any business related activity in the home. The
special insurance that you can place on your home is moving insurance to protect property while in
transit from one home to another. Construction insurance will help prevent a loss that may incur while
building your new home. And condo or apartment insurance to cover your unit as if it were your
home.
The other property insurance is your automobile insurance and special policies for motorcycle,
RV, or boat. What is automobile insurance? Automobile insurance protects you against the risk of
being in a car wreck, where damage done to property or medical will be covered up to a limit
depending on the policy. Why do you need car insurance? Well, in all states you are required to carry
a minimum amount. It is more or less to protect your auto investment. The basic facts for auto
insurance and what you need to know. Most insurance companies use what they call a deductible to
help lower the cost of the premiums. A deductible is self –insured risk where you are required to pay
before the insurance will kick in. Most deductibles are generally $100, $250, $500, or $1000. What
you need to think about is how much you would be able to cover if by chance you get involved in a
wreck. How to choose the appropriate level of coverage? The factors are: the value of you vehicle,
value of assets you must protect, the amount of money you can afford to pay out of pocket, and your
tolerance for risk. One thing you must remember is that any amount of money that goes over your
maximum allowed amount will come out of your pocket.
2.
Life, Health, and Loss of Income Insurance.
Life insurance is provided to you so that when you die, the insurance company will pay a beneficiary
an amount you decided upon, and you will pay the premiums for that contract. Life insurance is used
to help support your family in the case that you die. If you are the only one that works to support
yourself and your family, then what would happen to them if your paychecks stopped coming. That is
where this insurance would seem like your paycheck. In addition life insurance can be used to pay off
any outstanding debt you may have incurred so your assets will stay intact for your family. There are
many types of insurance policies available to choose from. Term life means that if you die during the
time period your beneficiaries will receive the allotted sum, but if you don’t die by the terms end date
then you get nothing. Permanent insurance provides protection for entire life as long as the policy
remains intact. This is sometimes described as a savings account within the policy, because the
account will build internal cash value. The cost of life insurance will depend on the amount of
coverage, health, and age of the one being covered. The contract itself is made up of three parts. The
first one is provisions. Provisions explain the features, benefits, conditions and requirements. Options
are choices regarding some aspects of coverage. And last the riders, which are additions in coverage
at an extra charge.
Health insurance is simply protection against medical costs. In recent years the price for medical
has soared to new heights and with medical insurance it helps you be able to afford the proper treatment
you may need to keep you well. You will need to look at the different types of plans that you can get. The
ones offered are usually HMO, PPO, or POS plans. These plans have few differences as to what they cover
and the amount the will cover. One thing you would want to keep in mind is what the out of pocket fees
will be for medicine, office visits, and emergency room visits. Are they lump sums or just co-payments.
3.
Transportation Insurance
What coverage do you have when you leave on vacation? Do you have any coverage if bags are stolen
at the airport, hotel, or on the street. What options do you have then? Travel insurance will cover for one
trip, multi trips, business trips, long trips, adventure trips, and medical.
John Mellon:
Insurance is a transfer of the risk of economic loss from the insured to the insurance company. Life is full
of risks and uncertainties. Hazards such as accidents, fire, and illness pose a constant threat to our wellbeing. The principal protection against losses from such hazards is insurance. The purpose of insurance is
to spread the losses among a greater number of people. Insurance is used to spread each person’s risk
among all others who may or may not experience losses.
Property insurance can be purchased to protect both real and personal property. In order for the
insured to establish the existence of an insurable interest in property, they must demonstrate a monetary
interest in the property. This insurance must exist when the loss occurs.
Property Insurance comes in many kinds of insurance. Fire Insurance, marine insurance,
homeowner’s insurance, renter’s insurance, and automobile insurance are some of the different types of
property insurance. Fire insurance is a type of insurance that promises to pay the insured if some real or
personal property is damaged or destroyed by fire. Marine insurance is insurance that covers ships at sea
and covers goods that are moved by land carriers such as rail, truck, and airplane. Homeowner’s insurance
gives protection for all types of losses and liabilities related to home ownership. Renter’s insurance
protects tenants against loss of personal property, against liability for a visitor’s personal injury, and against
liability for negligent destruction of the rented premises. Automobile insurance protects against losses
resulting from fire, theft, or collision with another vehicle and damages arising out of injury by motor
vehicles to the person or property of another.
The primary ways intellectual property can be lost by its owner is by theft, infringement and
encroachment. After the loss, the value of the owner's use is diminished because others are using the
property without permission. To recover for the loss, the owner must be prepared to prove legal ownership,
establish the infringement, set the value of the property, and determine the amount of the loss sustained.
Some insurance companies are offering abatement coverage to cover a portion of the loss sustained as well
as the expenses incurred to bring legal action to protect the right of ownership.
When a company or its employees are accused of infringement of another entity's intellectual
property, a legal response is mandatory. The plaintiff may be seeking injunctive relief, damages, or a
combination of both. Often the courts are asked to determine the legal liability and establish a value for the
property in question. These questions can result in lengthy, expensive legal proceedings. A variety of
insurance policies are available to cover the expenses associated with defending and paying damages for
the infringement of another's intellectual property.
Contractual liability, tort liability, and professional liability are types of liability exposures.
Contractual liability is when an agent is appointed by a principal to negotiate and enter into contracts on
behalf of the principal. This means that the principal is bound to the terms of those contracts. The
distinction between master-servant and proprietor-independent contractor relationships is especially critical
in determining the nature and the extent of tort liability. Even though everyone is responsible for their own
tortuous conduct, there are times when the law will hold not only the tortfeasor, but also the person who
engaged the trotfeasor, liable for the tort. Professional liability insurance was designed to cover not only
the professional’s tangible performance of duties, but also the more intangible obligations of professionals,
fiduciaries, officers, and directors, in making decisions which most benefit the company, without regard to
self- interest.
Life insurance is an insurance contract that provides monetary compensation for losses suffered by
another’s death. Anyone has an insurable interest in the life of another if a financial loss will occur if the
insured dies. A life insurance policy will remain valid and enforceable even if the insurable interest
terminates. If a person takes out life insurance on someone else, that person must have an insurable interest
in the insured’s life. The principal types of life insurance are straight life, limited-payment life, term, and
endowment insurance.
Straight life insurance requires the payment of premiums throughout the life of the insured and
pays the beneficiary the face value of the policy upon the insured’s death. Limited-payment life insurance
provides that the payment of premiums will stop after a stated length of time. The amount of the policy
will be paid to the beneficiary upon the death of the insured, whether the death occurs during the payment
period or after. Term insurance is issued for a particular period, usually five or ten years. The time period
is known as the term. Term insurance is the least expensive kind of life insurance because term policies
have no cash or loan value, as others do. Premiums for term insurance commonly go up at the end of each
term. Endowment insurance is a type of protection that combines life insurance and investment so that if
the insured outlives the time-period of the policy, the face value is paid to the insured. If the insured does
not outlive the time-peiod of the policy, the face value is paid to the beneficiary.
Health insurance is protection against medical costs. A health insurance policy is a contract
between an insurer and an individual or group, in which the insurer agrees to provide specified health
insurance at an agreed-upon price (the premium). Depending on your policy, your premium may be payable
either in a lump sum or in installments. Health insurance usually provides either direct payment or
reimbursement for expenses associated with illnesses and injuries. The cost and range of protection
provided by your health insurance will depend on your insurance provider and the particular policy you
purchase. If your employer does not offer a health insurance plan, you may wish to purchase health
insurance on your own.
Disability insurance is income insurance; it protects your ability to earn an income. With disability
insurance, you receive a monthly benefit to replace a portion of your income if you can't work because of
an accident or illness. There are two types of disability insurance: short-term and long-term. Short-term
disability insurance covers you for disabilities lasting up to 12 months, and can allow you to meet your
daily living expenses during this time. In all likelihood, you will be able to keep your life intact. By
contrast, long-term disability insurance covers you for permanent disabilities, and can allow you to meet
some, if not most, of your long-term financial obligations.
Transportation Insurance is protection when traveling. This could be by automobile, boat, plain,
or train. There are many different types of transportation insurance. Marine insurance covers the ocean
and the inland. Ocean marine insurance covers ships at sea. Inland marine insurance covers goods that are
moved by land carriers such as rail, truck, and airplane. Automobile insurance covers against losses
resulting from fire, theft, or collision with another vehicle and damages arising out of injury b motor
vehicles to the person or property of another.
Title insurance protects your ownership interest in property, but it does not protect you against
damage to the property. Protecting purchasers against loss is accomplished by the issuance of a title
insurance policy, which states that if the status of the title to a parcel of real property is other than as
represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured
for that loss and any related legal expenses, up to the face amount of the policy. Title insurance differs
significantly from other forms of insurance. While the functions of most other forms of insurance is risk
assumption through the pooling of risks for losses arising out of unforeseen future events (such as death or
accidents), the primary purpose of title insurance is to eliminate risks and prevent losses caused by defects
in title arising out of events that have happened in the past. To achieve this goal, title insurers perform an
extensive search of the public records to determine whether there are any adverse claims to the subject of
real estate. Those claims are either eliminated prior to the issuance of a title policy or their existence is
accepted from coverage.
Burglary insurance covers forcible and violent entry into or exit from the insured premises and
provides indemnity against loss of or damage to the premises caused by burglary or attempt thereat.
Robbery is limited to a felonious and forcible taking of property by violence inflicted upon the
custodian or custodians in the actual care of the property at the time or by putting such custodian or
custodians in fear of violence.
Insurance covers many different aspects of a person’s life. If it is driving a vehicle to buying a
home, a person can always buy insurance to cover them from accidents that happen to their property or
themselves.
Jesh Johnson:
One of the main categories of insurance is property insurance. This coverage is for business, both
large and small, and for individuals wishing to hedge against possible property losses due to extraneous
circumstances.
Property insurance is usually sold in packages, based on the level and need for the property
insurance. These packages cover commercial property, losses due to crime, boiler and machinery
coverage, inland marine coverage, as well as automobile, and farm coverage.
The individual property covered by property insurance can take the form of buildings, business
personal property such as furniture and fixtures, equipment, stock, etc; personal property, debris removal,
preservation of property, fire department service charge, and finally pollutant cleanup and removal. You
can expand your coverage to include newly acquired or constructed property, personal effects, valuable
papers and documents, property off the premises, and outdoor property, if and only if the coinsurance
requirement of 80 percent or higher is shown in the declarations. 1
There are several forms included in the policy package. One of these is the cause-of-loss form.
They include four different forms, each detailing a different kind of cause for a loss occurrence. For
example, the cause-of-loss broad form includes provisions for falling objects, weight of snow, ice, or sleet,
and water damage. Another of the forms is the reporting form. This form is for reevaluation of inventory
in a business to make sure adequate records are kept in the event of a theft.
If you fear loss from potential, uncontrollable occurrences of loss of income due to suspension of
operations during a period of restoration, you might want to consider business income insurance. This
covers net profit or loss, before income taxes, that would have been earned through normal operations of a
business. This coverage can be expanded to include extra expenses, action of civil authority, alterations
and new buildings, extended business income.
A different type of insurance is life insurance. This insurance pays a sum of money to the
beneficiary of the policy upon the death of the insured. This allows the beneficiary, in most cases, to pay
off all of the death expenses and burial expenses, as well as any other incurred debts of the insured. Life
insurance creates in essence an estate for the survivors to help them adapt to the change in source of care
1
Principles of Risk Management and Insurance 7th ed.
and well-being. There are several kinds of insurance. They include whole life, ordinary level of premium
whole life, limited-pay whole life, current assumption whole life, variable life, adjustable life, universal
life, variable universal life, joint life (first to die), and survivorship (second to die). 2
In the case of premature death, it is essential to have life insurance to combat the death expenses,
the loss of income (especially if the death is the main source of income for a family), and to maintain the
standard of living of the survivors. The basis of coverage is dependent on the mortality table.
Data for the Mortality Table:
Age
0
5
10
15
20
25
30
35
40
45
50
55
60
2
3
Within a year Prior to age 65
0.01
0.21
0.0003
0.2
0.0002
0.2
0.0006
0.2
0.0011
0.19
0.0012
0.19
0.0014
0.18
0.0017
0.18
0.0022
0.17
0.0032
0.16
0.005
0.14
0.0081
0.12
0.0126
0.07
http://life.insurance.com/insurance_options/life/life_basics_index.asp
Principles of Risk Management and Insurance 7th ed.
3
Mortality Table
0.014
0.012
0.008
Within a Year
0.006
0.004
0.002
0
0
5
10
15
20
25
30
35
40
45
50
55
60
Age
Mortality Table
0.25
0.2
Percentile
Pe rce ntile
0.01
0.15
Prior to Age 65
0.1
0.05
0
0
5
10
15
20
25
30
35
40
45
50
55
60
Age
Health insurance is a hedge against high medical expenses that could occur in the course of a
lifetime. Since medical expenses are so high, the fact that health insurance will pay most of the cost of the
expenses is a nice way to prevent high medical bills from
coming directly out of your personal income.
There are various types of health insurance, which include HMOs, PPOs, and POS plans. The
basic coverage of health insurance is hospital expense, surgical expense, and physicians’ expense. The
following is a list of expenses that are covered by health insurance: hospital services and supplies, hospital
room and board, physicians’ services, nursing services, other medical practitioners services, anesthesia and
anesthesiologists’ fees, ambulance service, laboratory and diagnostic tests, radiology and other therapy,
blood and plasma, oxygen, dental treatment resulting from injury, prescription drugs, 0utpatient services,
convalescent nursing home care, home health care, purchase of prosthetic devices, and casts, splints, and
crutches.4
Health insurance usually carries with it deductibles, co-payments, and coinsurance fees. These
offset the premiums already paid for the insurance. Fortunately for the insured the maximum you can be
charged for your medical expenses is usually 80% of the first $10,000 and any medical expenses above
$10,000 the coverage is 100%.
These plans also usually include a benefit ceiling. The recommended level is $1,000,000. 5
Yet another kind of insurance is transportation insurance. This insurance covers loss due to
merchandise being shipped by businesses. This transportation can occur over land, across the sea, or by air.
In shipping, insurance covers hull damage, cargo, and protection and indemnity. This also covers loss due
to fire, enemies, pirates, jettison*, and other similar perils. 6
* Jettison loss is covered by the general average rule. This is found by dividing what was lost, or
jettisoned, by the entire net worth of the cargo. For instance, if the net worth is 30 million, and 1
million dollars worth of cargo is jettisoned, then the liability would be $100,000 or 3/30.
In transporting the goods across land, inland marine insurance is used. This coverage includes
imports, exports, domestic shipments, means of transportation and communication, personal property
4
http://health.insurance.com/insurance_options/health/health_basics_provisions.asp
http://health.insurance.com/insurance_options/health/health_basics_provisions.asp
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Principles of Risk Management and Insurance 7th ed.
5
floater risks, and commercial property floater risks. 7 The major categories of inland marine insurance are
domestic goods in transit, property held by bailees, mobile equipment and property, property of certain
dealers, and means of transportation and communication.
If you desire to protect your title to property then title insurance is the way to go. It protects the
owner of property against possible deviations from a quality piece of land. Such deviations can be in the
form of liens, encumbrances, and numerous other legal imperfections. 8 They have several distinct
characteristics:
1.
The policy provides protection against title defects that have occurred in the past, prior to the
effective date of the policy.
2.
The policy is written by the insurer based on the assumption that no losses will occur.
3.
The premium is paid only once the when the policy is issued.
4.
The policy term runs indefinitely into the future.
5.
If a loss occurs, the insured is indemnified in dollar amounts up to the policy limit, which is
usually the purchase price of the house. 9
If burglary or robbery is a major concern…that’s right you guessed it, there’s insurance for that as
well. The first form of coverage is employee dishonesty coverage. This comes in the form of
either a blanket coverage, which covers general losses or in a scheduled format, which covers
specific names of employees or positions. There are several limitations though; employee is
cancelled under prior insurance, inventory shortages, cancellation as to any employee. There are
numerous other forms of coverage as shown in the following list:
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Principles of Risk Management and Insurance 7th ed.
Principles of Risk Management and Insurance 7th ed.
9
Principles of Risk Management and Insurance 7th ed.
8
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
Form
A
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
Employee Dishonesty (Blanket)
Employee Dishonesty (Schedule)
Forgery or Alteration
Theft, Disappearance, and Destruction
Robbery and Safe Burglary - Property Other than Money and Securities
Premises Burglary
Computer Fraud
Extortion
Premises Theft and Robbery Outside the Premises - Property Other than Money and Securities
Lessees of Safe Deposit Boxes
Securities Deposited with Others
Liability for Guests' Property - Safe Deposit Box
Liability for Guests' Property - Premises
Safe Depository Liability
Safe Depository Direct Loss
Public Employee Dishonesty (Per Loss)
Public Employee Dishonesty (Per Employee)
Robbery and Safe Burglary - Money and Securities
Money Orders and Counterfeit Paper Currency
10
Kerri Mills:
One basic type of insurance is property insurance. It protects your home or business against the loss of or
damage to your assets. In extreme cases such as fire, flood, or even theft, property insurance helps in
recovering your costs, be it replacing or repairing the damage done. Your coverage will vary from policy
to policy in terms of the property that is insured and the events that lead to a loss. Some policies cover
basic equipment such as building structure, furniture, inventory, equipment and supplies, while others may
insure things like money and securities, lost revenue or cash on the premises, or hard to replace records
such as accounts receivable.
Perils, or causes or loss, are events that do damage. They may include weather-related events such
as lightening, flood, or hail. They may also include human caused loss such as robbery. “There are two
types of policies available to cover perils: a named-perils policy, which covers losses resulting from only
those perils the policy names, and an all-risk policy (a.k.a. special form coverage), which offers coverage
for all perils except those specifically named.”1 Most of the time you can go with an all-risk policy and in
addition can pick up coverage for additional perils if it necessary for the area that you live. For example, if
10
Principles of Risk Management and Insurance 7th ed.
you live in East Texas, you would most likely not need additional earthquake coverage, but may need flood
coverage instead.
Premiums need to be set to begin your insurance coverage. A premium, according to the Richard
H. Reynolds Glossary of Insurance Terms, is the sum paid by the policyholder to keep their insurance
policy in force. Insurers know exactly what the statistical frequency of any major risk is in any area and
therefore can easily adjust your policy so that it will take into account the exact protect that you need.
According to information on Yahoo’s small business website2 , the primary factors in setting property
insurance premiums include the type of building structure, the presence or absence of protective safety
measures, and the proximity of your property to other high-risk areas.
There are many ways that you can help keep this premium as low as possible. Begin with making
sure that your home or business is adequately installed with safety devices such as fire extinguishers,
burglar alarms, smoke detectors, and fire doors. If you are looking to insure a business, some changes,
such as keeping duplicate records off-site, may help lower your premium. Some smaller things that may
need to taken into consideration, is how well is the interior of your building or home lighted? How well
lighted in the outside? Is the kitchen free of clutter and combustibles? Is everything turned off or
unplugged at night? Are your electrical cords frayed? 3
The next types of insurance we are going to look at are life, health, and loss of income insurance.
First, life insurance covers a very broad area, one that could be a five page paper in itself. Life insurance is
defined as insurance that pays a specified sum of money to designated beneficiaries if the insured person
dies during the policy term.4 In planning for the future, one of the things you would like to be able to count
on is continued income for yourself and your family. Consider your premature death, in which there could
be a drastic reduction in your family’s standard of living. Life insurance addresses this concept by
providing tax free funds to help your surviving family in the case of a tragedy. Life insurance provides an
instant tax free estate. There are life insurance policies, such as accidental death and dismemberment, that
will provide coverage benefits for death by accident, loss of limb or limbs, or loss of use of a limb or limbs
resulting from accidental means only. Another example is a critical illness living policy. This kind of
benefit generally pays a lump sum tax free in the event of a heart attack, stroke, life-threatening cancer, etc.
To get this kind of coverage, however, not only does the applicant have to be healthy, but the applicant’s
immediate family has to have a history of good health, also.5 The likeliness of premature death can be
looked at through a tool called a mortality table. This is a table that indicates the number of individuals
within a specified group of individuals (males, females, airline pilots, etc.), starting at a certain age, who
are expected to be alive at succeeding ages. It is used to derive the “natural premium” for an individual life
policy.6 On the Berkley University website, they have a page dedicated to the research of human mortality
and data that they have gathered over many years on this subject. Some things that contribute to how long
you may live include your current age, gender, and blood pressure. Your family’s health history is also
very important in decided how your health will turn out. You can increase your life expectancy by eating
well, exercising regularly, and not smoking or drinking excessively.
An important type of coverage is your loss of income insurance. This may be caused by a couple
of different factors, the most likely being disability. It is insurance that provides payments on a periodic
basis (usually monthly) to replace income lost because of a disability that prevents the insured from
working. A separate health policy with a disability benefit normally either excludes coverage for an injury
covered by workers’ compensation to which the insured is entitled. The Social Security program includes
disability insurance as one of its benefits.7 Another type of loss of income coverage is the business income
coverage form. It is defined as commercial property coverage (ISO forms CP 00 30 and CP 00 32, which
excludes extra expenses) that reimburses lost earnings when normal business operations are temporarily
suspended because of property loss caused by insured perils. Coverage usually includes salaries, taxes,
rents, net profits, and necessary operating expenses during the period required to restore operations with
due diligence. This policy replaced previous business interruption forms. 8
Transportation insurance is insurance that covers merchandise or goods in the course of transit by
air, rail, truck, barge or ship from a starting location to a final destination. This type of insurance may be
purchased by the vessel owner or any party interested in or responsible for insurable property by reason of
maritime perils. For frequent shippers, it may be better to have one policy that covers all shipments
automatically, rather than insuring each shipment individually. This is called an Open Cargo Policy. A
couple of factors in determining whether a person should carry such a policy is decided exactly how often
they are shipping goods and how valuable their shipments are. By buying one policy it could reduce the
costs of insurance and the policy can be personally tailored to a person’s individual needs. With a personal
policy, the insuring conditions are specifically suited to your individual requirements rather than to the
wide diversity of commodities and trades which concern a freight forwarder or customer broker. 9
Title Insurance is a class of insurance that provides coverage for the risk that the title to real estate
may be found to contain defects. Indemnification is provided to the property owner for losses resulting
from such defects.10 Some risks that would be covered by this type of insurance would be: documents
executed under false, revoked or expired powers of attorney; false impersonations of the true property
owner; undisclosed heirs; improperly recorded legal documents; prescriptive rights in another not
appearing of record and not disclosed by survey; defective acknowledgements due to improper or expired
notarization; gaps in the chain of title; mistakes and omissions resulting in improper abstracting; forged
deeds, mortgages, wills, releases of mortgages and other instruments; deeds by minors; deeds which appear
absolute, but which are held to be equitable mortgages, inadequate legal descriptions; and errors in tax
records.11 Having title insurance can protect you from financial loss, payment of legal costs if your title
needs to be defended in court, and payment of successful claims against the title to your property covered
by the policy.
You may also need your home or business against crime, which in a broad sense would be crime
coverage. This is insurance that applies to the taking of money, securities and other property, such as
dishonesty, forgery, theft, robbery, burglary and fraud coverage. Specifically, burglary and robbery
insurance are basically the same thing. There are many different types of burglary insurance that could be
issued under different circumstances. It depends on what you want covered and what is valuable to you or
your business. Burglary, or robbery, insurance covers property taken or destroyed by breaking and entering
into an insured premise. Most burglary insurance would be purchased if you live in a city, or the crime
rate is high. Usually, there is a need for a sign of forced entry into the establishment that is insured for the
policy to be paid.
You can basically insure anything you find of value to you, which will give you peace of mind, or
that will help your business or protect your family. There are many aspects of insurance, and each aspect
has a list of their own aspects, which makes it hard to describe each one fully. I have given you a general
overview of some of the major insurance needs, but by no means is this anything but a scratch on the
surface.
Randy Aram:
1. Identify the kinds of property insurance
Property insurance covers against risk from loss or damage to personal property. Property insurance can
cover anything that is personally owned by an individual or company. Homeowners insurance covers of
your house, the contents of your house, and other property other than vehicles, which have their own type
of insurance. Generally a limit of 50% of the value of property is placed on the amount of insurance
coverage that can be obtained. Other specified limits can be placed regarding the maximum amount of
coverage that an insurance company will accept when dealing with property damage. Personal property
will cover against theft or damage of property. People who rent residences should also obtain property
insurance, as it also will cover their personal property against loss or damages. Property insurance is not
restricted to covering property that is at the insuree’s residence, as property is also covered if it is lost or
damaged while the insuree is on vacation, at work, or elsewhere outside their home. Property insurance
will also cover the named insuree, their spouse, other dependents, employees, or guests.
Insurance
companies will use one of two methods to determine the value of coverage. They will either use the
replacement cost method that covers the cost of replacing damaged property without consideration to
depreciation, or will use actual cash value, which covers the actual current value of the property including
reasonable depreciation. Homeowners insurance will frequently cover personal property to some extent,
but frequently additional property insurance is required to adequately cover personal property. Another
type of insurance that should be considered to cover property is flood insurance, which is usually not
included in regular property insurance.
2. Life, health, and loss of income insurance
Life insurance is an agreement that the insurer will pay the beneficiary of the insuree an amount of money
when the insuree dies, in exchange for premium payments. Life insurance is generally used to replace the
income of the insuree when they die, to cover any funeral and burial costs that might be incurred, or to
cover debts that might be left behind. Life insurance comes in many different forms, from term life
insurance that covers the insuree for a specified period of time, to permanent insurance that covers the
insuree for the length of their life, as long as the premiums are paid. There are also many forms of
permanent life insurance, and the cost of the premiums for life insurance will vary depending on the type of
policy, the insuree’s age, and their health. Several factors should be considered when deciding which kind
of insurance policy to get, including the insuree’s current life situation, the amount of coverage they need,
the amount of money they are willing to spend on periodic premium payments, and the length of time that
they will be insured. Life insurance will sometimes include what is called double indemnity, which will
provide double the specified compensation for the sudden, unexpected death of the insuree. Accidental or
other kinds of premature death are included in the double indemnity clause of some types of life insurance.
Life insurance on an individual is only available to that individual and anyone else who has an insurable
interest in that person, or a logical reason for having an insurance policy on their life. Coverage for life
insurance can also be calculated using a mortality table, which is a listing of the number of deaths per 1000
people at each age and divided by male and females, and the expectancy for their remaining life. Health
insurance protects against medical costs. The insurer agrees to pay a specified amount of money for certain
types of medical costs. The costs of medical treatment and general care have increased drastically recently,
and insurance is a good way to cover the inflating costs. Health insurance can cover against hospital
expenses, surgical expenses, and general physician expenses. Health insurance also can carry a deductible,
an amount that the insuree will pay before the insurer pays the remaining costs. Health insurance can be
individual, covered on a family basis, or acquired through companies that provide general health insurance
for their employees. More specific kinds of health insurance that can be acquired in addition to general
health insurance include vision care insurance, dental insurance, medicare, and medicaid. Loss of income
insurance can be included in these two types of insurance if the loss of income is due to medical problems
or death of the insuree. However, other types of insurance against the loss of income can exist. Situations
where this would apply would include if the insuree is laid off or if the company that the insuree works for
goes bankrupt or otherwise ceases to exist. This kind of insurance can be purchased by an individual,
although it is not very common, or can be provided by a company. Companies will frequently provide a
package if an employee is laid off due to downsizing or corporate mergers, although insurance will
frequently not be provided if the company experiences problems that are severe enough to cause the
company to cease its existence.
3. Transportation insurance
Transportation insurance covers losses to motorized vehicles and losses caused by vehicles. Insurance
protects individuals from losing their personal assets to cover the costs of damages. The most common
type of transportation insurance that is issued is automobile insurance. Cars can create risks to people,
other vehicles, or property, in addition to the vehicles itself, and these potential losses must be covered in
an insurance policy. Theft, vandalism, or damages from weather and natural disasters can also occur.
Automobile insurance covers the insuree against these damages. Insurance companies generally provide
automobile insurance through personal auto policies, also known as PAPs. A PAP is a contract between
the client and the insurance company that identifies each party’s rights and obligations, basically that the
insuree agrees to pay a premium and the insurer agrees to provide financial cover in the case of damages
due to a vehicle. In addition to providing financial security for the insuree, operators of cars are required
by law to have auto insurance. Usually the law only requires a minimum level of liability insurance, while
other types of insurance for automobiles include personal harm, property damage, and uninsured motorist.
Personal harm insurance will cover medical costs of anyone injured in an accident in which the insuree was
responsible. Property damage will cover any damages to property, whether it be other vehicles or real
estate property. Uninsured motorist will cover the insuree if a motorist without insurance is involved in an
accident with the insuree, or if damage is done to the insuree’s vehicle and the person at fault cannot be
found. Additional kinds of transportation insurance include insurance for motorcycles, ATVs, RVs, and
boats. While the law does not always require a minimum level of insurance to operate these vehicles, it is
definitely advantageous to have these modes of transportation insured. Some insurance coverages for
transportation insurance will have a deductible included. This is the cost that the insuree will pay when
they are at fault before the insurance company pays any money. Any losses beyond the deductible will be
covered by insurance. Transportation insurance will vary between individuals being insured and businesses
being insured. Businesses that own and operate vehicles, whether it is just to transport employees or for
specific tasks that are required by the company, are required to own insurance on their vehicles. Like
personal transportation insurance, this covers against property damage and personal injury. Generally
companies are required to carry a much higher level of insurance, since they will usually have a much
higher value of assets that must be protected.
4. Title, burglary, and robbery insurance
Title is the right to own, possess, use, control, and dispose of property. When a personal purchases any
type of property, they are purchasing the title to that property. An examination of the title is frequently
used during an exchange of especially valuable property, which looks for problems that might prevent an
individual from gaining title to that property. If these problems are not discovered, it can delay or void the
contractual process of exchanging the title and property. Regarding real estate property, title problems can
include an unclear description of who owns the property or unpaid loans for repairs or maintenance. For
other types of property, title problems could arise if there is no proof that the seller actually owns the
property, whether they directly received it in an illegal manner or bought it from another individual that
did. Title insurance is generally paid just one time, not periodically. Title insurance protects the insuree
against title defects, liens, or encumbrances that may not be discovered until long after the property has
exchanged ownership. The insurance will cover your loss in case a title defect is discovered at some point
in time.
Burglary and robbery insurance are sometimes covered in general homeowners or renters
insurance.
Burglary and robbery insurance covers against the loss incurred from stolen property.
However, unlike regular homeowners insurance that will usually have a relatively low limit to coverage for
lost or damaged property, burglary and robbery insurance usually will have a higher coverage value,
although it still has limits. While theft of vehicles is covered under transportation insurance, most other
property will not be covered except by burglary and robbery insurance.
Skyler Harper:
An Overview of Insurance: The Necessary Evil
The entire concept of insurance, its necessity, and how it works is a very difficult concept to
understand. There is one thing that everyone understands about insurance, and that is that it is very
expensive. Insurance as a general concept is very nice to have when you are visibly receiving the benefits
of your insurance. Those times when one doesn’t visibly see the rewards of coverage, when you aren’t
having auto accidents, is very discouraging. One may sit and think, “Why am I paying all of this money for
coverage, and I’m not making any claims against my premiums?” That in and of itself is a very good
question. The entire concept of insurance is built around the premise that you will not be using the
coverage nearly as often as you are making claims against it. For example, the times that your car is in
accidents will be much lower than the times that your car is being driven safely without incidents. The law
of averages says that accidents will occur, but insurance operates on the opposite side of that average in
feeling that accidents will not occur very often. In risk management terms, insurance is a hedge against risk
of loss associated with the ownership/possession of property or the risks associated with living in the case
of life insurance.
The insurance industry is just that, an industry. That is, it is a business industry that provides a
service to home/car owners, guarantee on one’s life, etc. for a premium. The premium includes the
expected loss on the item/person being insured, an expense provision, and a profit loading expense. Thus,
insurance companies are in the business of insuring people/property to cover for loss in the event that an
incident occurs, but they are also in the business of making money. This need to make money is not unlike
any other industry, but the insurance industry is operated on the premise that mass loss will not occur at the
same time, and if it does, then the insurance company will have catastrophic coverage to aid them in paying
claims. Several different types of insurance are offered on the open market to consumers. Property
insurance, life insurance, health insurance, loss of income insurance, transportation insurance (marine
insurance and inland marine insurance), title insurance, burglary insurance, and robbery insurance are
several of the different types of insurance available. Through reading this brief synopsis of insurance, a
greater understanding of the necessary evil can be attained, and a greater respect for the insurance
companies will be noted.
Property Insurance is a very broad umbrella of insurance under which the bulk of insurance
policies fall. The only types of insurance not under this umbrella are life insurance, health insurance, social
insurance, and other government insurance. Very simply stated, property insurance is coverage against risk
of loss associated with owning or possessing property. As with any type of insurance, loss aversion is the
point of attaining an insurance policy. Property loss exposure is a requirement of insurance. If there is no
risk of loss, there is no need for insurance. Property loss exposure is the amount of loss that is possible, and
it is necessary for insurance companies to have a large number of exposure units that are subject to the
same perils or group of perils. The importance of having a large group of exposure units is found in the fact
that this allows insurance companies to predict loss based on the law of large numbers. Property insurance
works when loss is accidental and unintentional, the loss is determinable and measurable, loss is not
catastrophic, the chance of loss is calculable, and the premium for the policy is economically feasible.
There are different types of liability exposure, and they are the reason that owning an insurance
policy is necessary. The necessity of insurance arises from the legal liability associated with ownership and
maintenance of the premises where a firm does business. The different types of liability are products
liability, completed operations, contractual liability, contingent liability, professional liability,
environmental pollution, fire legal liability, liquor liability, directors and officers liability, personal injury,
property in the insured’s care, custody or control, sexual harassment, and employment practices. Not all of
these liabilities will be discussed in this article, but it is necessary to know that all of these situations are
grounds for liability and lawsuits if they are breached. Products Liability arises from the legal liability
associated with the manufacture, wholesale, and retail of products and the loss due to injury or property
damage because of use of a product. Contractual liability arises from a firm agreeing to assume liability of
another person or party because of an agreement upon a contract. Contingent liability arises from work
done by independent contractors, and businesses are generally not liable for work done by independent
contractors. Personal injury refers to bodily injury incurred due to false pretenses. Sexual harassment is a
liability that is often overlooked, but one is liable for the damage done as a result of sexually harassing
another person.
Professional liability belongs to a different area of liability. It arises from the trust that one puts in
a person of professional status to provide the best possible service/care available and within their power.
Doctors, lawyers, teachers, architects, engineers, and other professions have been subject to liability suits in
the past. Doctors often face medical malpractice suits due to improper or negligent treatment of patients in
the eyes of the law. Medical malpractice is a particularly large problem in today’s society, and has lead to
physicians erring on the side of caution in all situations, which leads to increased medical costs. This is
because doctors are likely to order tests that are very costly in order to avoid lawsuits because they missed
an illness in diagnosis. Medical malpractice suits have led to deterioration in patient-doctor relationships
because of patient zeal for suing their physicians. Errors and omissions by attorneys are another formidable
case of professional liability. Attorneys are responsible to their clients, and they are to provide the best
legal advice to their knowledge at all times. In the case that this does not happen, or the relationship
between attorney and client is compromised, the attorney is often held liable in the courts. Liability of
architects, engineers, and other professions arise from the services that they provide for their clients. If they
provide a faulty product that is injurious to their client, they are liable for the damages. All of these
professionals have insurance policies available to them to help cover some of their liabilities, but they are
very costly.
Life, Health, and Loss of Income insurance are the most common types of insurance that do not
fall under the umbrella of property insurance. Life insurance is an insurance policy that pays a monetary
benefit to the insured person’s survivors after death. There are types of life insurance policies that can pay
benefits during the person’s life, and those are called whole life insurance policies. These insurance policies
can be drawn against during the insured’s life, or they can be cashed in once the policy has reached its cash
value equivalent to its death value equivalent. Life insurance is necessary because of the exposure due to
premature death. Premature death is the death of a family head with outstanding unfulfilled financial
obligations, such as dependents to support, children to educate, and a mortgage to pay off. Kenneth Black,
Jr. and Harold D. Skipper, Jr. have composed a table that shows the probability of death prior to the age of
65, which is classified as premature death in the United States. For a person that is age 20, there is a
probability of 0.0011 that they will die within the next year, and there is a probability of 0.19 that they will
die prior to the age of 65. The Department of Health and Human Services has constructed a Life Insurance
Mortality Table, and it is used to compare people at given ages and find their average life expectancy from
that point. The exposure due to premature death is the very reason that life insurance is an important thing
to have. For each type of family situation, other than single people living on their own, premature death
probably will result in a financial hardship in the absence of life insurance. Health insurance is an insurance
policy designed to help subsidize the costs of health care in both catastrophic cases and routine healthcare
situations. Health insurance can be a hedge against catastrophic illnesses, but it typically is used for minor
illnesses and injuries. Exposure due to loss of health is something that can be covered by supplemental
insurance policies such as those that are offered by AFLAC. Loss of health is a particular problem in family
situations where there is a single income, both parties are working, or the family has taken on extra care
responsibilities in the form of parents or other children. Coverage for loss of health is particularly important
for these types of families, but it is sold at a reasonably high premium. Exposure due to loss of income is
seen when people are unexpectedly put out of work due to financial troubles or a change in direction for
their employers. Loss of income insurance is coverage that will pay out income that a policyholder loses as
a result of a disability, injury, or business disruption.
Transportation Insurance is necessary for manufacturers, retailers, shipping companies and other
people who have a vested interest in the shipment of goods. The two major types of transportation
insurance are Ocean Marine Insurance and Inland Marine Insurance. Ocean Marine Insurance provides
protection for all types of ocean-going vessels and their cargoes. This insurance is important due to the fact
that losses can be incurred as a result of inclement weather, piracy, or crashes. Inland Marine Insurance
provides coverage for goods being shipped on land. Included in this area are imports, exports, domestic
shipments, and the means of transportation. Inland Marine Insurance is important for much the same
reasons as ocean marine insurance.
Title Insurance is a form of general liability insurance. Title Insurance protects the owner of
property or the lender of money for the purchase of property against any unknown defects in the title to the
property under consideration. Premiums for this type of insurance are paid only once, and are paid that the
issuance of the insurance. Liens, encumbrances, and easements against real estate are typical types of
situations that need to be guarded against by title insurance. Burglary is the taking of property from inside
the premises by someone who unlawfully enters and/or exits the premises leaving signs of forcible entry.
Burglary Insurance is a general property liability insurance that protects against the loss of property,
money, and securities resulting from a burglary. This type of insurance is necessary for any home, rental
unit, or domicile to hedge against loss associated with the chance of property being burglarized. Robbery is
the taking of property from a person by someone who has caused or threatens to cause bodily harm to that
person, or has committed and obviously unlawful act that is witnessed by that person. Robbery insurance is
typically coverage that is an extension of burglary insurance, and is used to hedge against the dangers of
loss due to robbery.
Although insurance is something that most everyone dreads shopping for and eventually
purchasing, it is a necessary evil. Insurance has several benefits to society and economic benefits include:
indemnification for loss, less worry and fear, source of investment funds, loss prevention, and enhancement
of credit. Through an analysis of the various types of insurance and the benefits that they provide, it is
hopeful that a greater understanding of insurance has been attained. Most people have yet to see all of the
benefits of insurance, and complain about the prices and lack of benefits that their insurance coverage
provides. Insurance as a general rule has been provided to hedge against the risk of losses associated with
ownership/possession of property.
Travis May:
Identify the kinds of Property Insurance
There are many different kinds of property insurance. Automobile, Dwelling property (1,
2, or 3 under Insurance Services Office), Mobile Home, Marine Floaters, personal articles, boat, motor,
flood insurance for your home or building, federal crop, and probably many others. Any insurance that
would hedge the loss of property would be defined as property insurance.
On each of these different styles of property insurance you can have different types of
coverage. For instance, you can have homeowner’s insurance that covers only certain items, which are
specified in the policy. The exposure to each of these is defined in the policy. Some policies also have
deductibles that have you pay for part of the loss. For instance, basic dwelling property insurance will only
cover “falling water,” it will not cover the house if water runs into it, say in a flood. So to protect your
property, you must also purchase flood insurance to hedge the loss. Each policy will determine the
property loss exposure.
With each of these types of insurance, there can be different types of liability exposure.
One of these is contractual. Contractual liability comes up daily in making agreements with others (written
or oral) and one assumes the liability of another. This is a type of exposure that must be dealt with when
dealing with property insurance. If I assumed the liability of another, this increases my exposure to loss
(www.coverageglossary.com).
Another liability exposure is professional liability. Professionals of all kinds have
responsibilities to the public. Malpractice comes to mind (although it doesn’t necessarily deal with
property insurance). The doctor must perform the service to his full ability or he has the chance to be sued
and have a huge loss, malpractice insurance covers this. Liability exposure to professionals can sometimes
be huge.
Umbrella liability coverage is also another kind of liability that covers a wide variety of
ways, but in the context we are talking about, it covers liability of property damage. This covers most
anything (with a few specific exclusions) that are not covered in your other basic insurance policies. This
gives another type of liability exposure.
Life, Health, and Loss of Income Insurance
Life insurance is another type of insurance that has a wide variety of options to take. One may
choose from term, whole, universal, and variable (www.insurancebook.com). Where life insurance gets its
exposure is when people die, or in whole life, when they liquidate the worth of the policy. Upon death or
liquidation, the insurance is paid to the beneficiary and that is where the liability lies. However, there is an
added exposure when there is a premature death. Insurance companies must take premature death into
account when figuring a premium. The policy still stands if there is a premature death, so the companies
must hedge the liability exposure. To do this, they use a table of probabilities call a mortality table. Here
is a sample table from the Berkeley Mortality Database:
Born Age Female
Male
Total
1983
0 0.010027 0.012423 0.011224
1983
1 0.000748 0.000871 0.000799
1983
2 0.000475 0.000598 0.000537
1983
3 0.000334 0.000477 0.000405
1983
4 0.000293 0.000375 0.000334
1983
5 0.000243 0.000325 0.000289
1983
6 0.000223 0.000294 0.000253
1983
7 0.000182 0.000264 0.000223
1983
8 0.000172 0.000223 0.000203
http://www-mtl.mit.edu/Courses/6.095/notes/mortality.html
The table is used during the calculation for fair premium. The table above is the probability of death during
one year. As you can see, it takes the year born, the age, the gender, and gives a probability. So if there is
a male 8 year old, born in 1983, with a $50,000 coverage, his premium for premature death only would be
$11.15. However, a baby’s premium would be $501.35 because the chance of death is much greater.
Term insurance is the most popular life insurance because it is the cheapest. This insurance only
covers you for a specified “term” or time. Under this kind of policy, you will receive the money, usually,
upon death. The policies hold little or no cash value (www.insrancebook.com).
Whole life insurance guarantees a continued death benefit for the insured's entire life upon
payment of fixed annual premiums. The premiums are usually level for life, based on the insured's age at
issue. It builds up cash value in a tax-deferred accumulation fund. You can withdraw or borrow against the
cash value. This type of policy will pay dividends to its holders if the premiums are excessive. Whole life
insurance premiums are determined, but if they are not met by the loss you get a dividend
(www.insurancebook.com).
The other types of life insurance, universal and variable, are investments into a cash-value
insurance. You may make payments in a universal life insurance at any time after the initial premium is
met. There is no need to make a payment annually or semi-annually. These two insurances bring exposure
through the initial premium.
Health insurance gets its exposure from losing one’s health (obviously). This type of insurance
would help to pay medical bills, prescriptions, check-ups, etc. Taken from averages based on gender, age,
and other specific aspects, the probabilities are figured to give the exposure.
Insurance is also provided to cover your income in case of unemployment or any other reason that
you are unable to work. The exposure of income is figured through how much income you are receiving
and bases averages on the likelihood the income will be lost. Workman’s Compensation falls in this
category. As mentioned above, the higher the probability of one being without income, the higher the
premium so that the exposure will be covered.
Transportation Insurance (including Land and Ocean)
I am assuming, when you say transportation insurance, that you mean the property used in
transportation, such as an automobile or boat. If you are talking about these types of insurance, then
automobile insurance can cover the comprehensive and collision aspects of your automobile. Collision and
comprehensive automobile insurance will cover your vehicle from mishaps that happen while driving such
as accidental direct physical loss or damage. Personal liability coverage is included and covers the property
damage or bodily injury to the other person. When figuring the liability of the insurance and the value of
the premium, the insurance company must take in the probability of it being stolen (national averages), the
probability that there will be a wreck (mostly through age and gender), and other probabilities. These
probabilities are figured by your gender, your age, where you live, etc. Medical Expense coverage is also
included and pays for the necessary medical expenses due to the accident.
Physical damage or loss, liability, and medical expense is also covered for boats on an “all-risks”
basis. It is much the same as automobile insurance.
Title, Burglary, and Robbery Insurance
“Title insurance protects the owner of property or the lender of money for the purchase of property
against unknown defects in the title to the property under construction.” This, obviously, is a textbook
definition. Title insurance, simply, protects the bank or you from defects in a title when you own the
property you are constructing. They have some characteristics that distinguish them from other contracts,
they provide protection against title defects prior to the date of the policy, its written based on the
assumption that no losses will occur, there is only one premium, the term is indefinite, and if a loss does
occur, the insured is indemnified in a dollar amount to the policy limit, this does not give a guarantee of
ownership, it just pays the policy out.
Burglary and Robbery insurance will cover a loss in which your home was broken into, or
something was stolen without breaking in. This will cover you from the effective date of the policy on to
the end of the term. Usually, it must be specific in nature of the things you are insuring. There are some
personal articles umbrella policies however.
I enjoyed getting to learn about the many kinds of insurance. I hope that I answered your
questions fully and correctly and hope that I learned what I was suppose to learn.