Insurance is a social device for spreading the chance of financial loss among
a large number of people. Insurance protects against pure risk.
Risk is the possibility of losing economic security.
Risk can be of two kinds: speculative or pure And only pure risks are insurable
Pure risk involves only two possible outcomes:
loss or no loss, with no possibility of gain or profit
Speculative Risk
involves three possible outcomes: loss, no loss or profit
The Law of Large Numbers:
The average of the results obtained from a large number of trials should
be close to the expected value.
Underwriting:
The process of selecting certain types of risks that have historically
produced a profit.
Peril:
A potential cause of loss. Accident, fire, and theft are common perils.
Hazard:
Anything that increases the seriousness of a loss or increases
the likelihood that a loss will occur.
Adverse Selection:
Is the tendency of person with a higher than average chance
of loss to seek insurance at the average state, which if not
Controlled by underwriting, result in higher than expected
Loss levels.
Insurance is not same as gambling. Gambling is creat a new
speculative risk and socially is unproductive but insurance
Deals with pure risk and socially is productive.
Insurance is not same as hedging. Insurance involves the
Transfer of pure risk and reduce objective risk but hedging
Involves just the transfer of speculative risk not risk
Reduduction.
Types of Insurance:
Private insurance, consist of health insurance, property and
liabilty insurance.
Government Insurance, cnosist of social insurance and other
Government insurance programs.
How does insurance work?
You pay a fee called a premium, and in exchange,
the insurance company agrees to pay you a certain
amount of money
-Basic Characteristics Of Insurance
Pooling of losses
Payment of fortuitous losses
Risk transfer
Indemnification
-Pooling of losses
Spreading of losses incurred by the few over the entire group.
• Key mechanism is “law of large number”.
• Future losses are predicted based on law of large number.
Note
• Pooling of loss is the spreading of losses incurred by the few over the
entire group so that in the process average loss is substituted for actual loss.
• The primary purpose of pooling is to reduce the variation in possible
Outcomes , which reduces risk.
-Payment of fortuitous losses
A fortuitous loss is one that is unforeseen and
unexpected and occurs as a result of chance.
Insurance policies do not cover intentional losses
-Risk Transfer
Risk transfer means that a pure risk is transferred from
the insured to the insurer,who typically is in a stronger
Financial position to pay the loss than the insured.
-Indemnification
Means that the insured is restored to his or her approximate
financial position prior to the occurrence of the loss.
- Insurable Risk
Insurer normally insure only pure risk.
Property & Liability insurance involves the equitable transfer of risk, where many policyholders share the financial losses of a few through premium contributions. P&L insurance company investments total around $789 billion, with most assets invested in securities to pay claims if needed. Net premiums written for all lines were around $300 billion. P&L policies are short-term, and claims payments can vary greatly depending on catastrophes. Various rating systems like schedule, experience and retrospective ratings adjust premiums based on risk factors of individual policies.
This document discusses intermediate term financing. It defines intermediate term as between 1-7 years. It notes the characteristics of intermediate term financing include maturity of 1-5 years, typically for machinery or expansion. Sources include commercial banks, insurance companies, and leasing firms. Cost is higher than short term but lower than long term financing. Types of intermediate financing discussed include bank term loans, revolving credit, and equipment financing. Methods of repayment include the balloon method, where the principal is due at the end of the term, and the capital recovery method, where installments include principal and interest payments. An example problem calculates the costs and effective interest rates of revolving credit and a term loan.
What is an annuity?
An annuity is an insurance-based contract between you, the owner, and the contract issuer.
This is basically how annuities work: You pay after-tax dollars to the issuer, the issuer invests the money for you, and any earnings accumulate tax deferred. At some point, the issuer pays out the principal and earnings to you or to your beneficiaries. Earnings are taxed as ordinary income when they’re distributed.
The document provides an overview of the history and types of life insurance. It discusses that life insurance originated in India from the Vedas. The first Indian life assurance society was formed in 1870. There are various types of life insurance policies including term life insurance, permanent/whole life insurance, and unit linked insurance plans. The document also outlines the claims process, exclusions in accident benefits, top insurance companies in India, and current news in the life insurance sector.
Annuities explained is a presentation which will explain everything you need to know about the major types of annuities, what are the best annuities and how to select the most appropriate annuity in your particular situation.
Sharing with you my dear readers who may find it useful.
Feel free to connect with me at maxermesilliam@gmail.com.
P/S: taken the insurance exam but has yet to practice as an insurance agent.
Intermediate term financing refers to loans between 1 to 10 years. It is provided by private banks, finance companies, and insurance companies. Term loans must be repaid in regular installments over a set period of time and have various repayment structures like straight repayment, balloon payment, or deferred principal payment. Borrowers are subject to covenants restricting dividends, debt levels, and asset sales during the loan term.
Insurance is a social device for spreading the chance of financial loss among
a large number of people. Insurance protects against pure risk.
Risk is the possibility of losing economic security.
Risk can be of two kinds: speculative or pure And only pure risks are insurable
Pure risk involves only two possible outcomes:
loss or no loss, with no possibility of gain or profit
Speculative Risk
involves three possible outcomes: loss, no loss or profit
The Law of Large Numbers:
The average of the results obtained from a large number of trials should
be close to the expected value.
Underwriting:
The process of selecting certain types of risks that have historically
produced a profit.
Peril:
A potential cause of loss. Accident, fire, and theft are common perils.
Hazard:
Anything that increases the seriousness of a loss or increases
the likelihood that a loss will occur.
Adverse Selection:
Is the tendency of person with a higher than average chance
of loss to seek insurance at the average state, which if not
Controlled by underwriting, result in higher than expected
Loss levels.
Insurance is not same as gambling. Gambling is creat a new
speculative risk and socially is unproductive but insurance
Deals with pure risk and socially is productive.
Insurance is not same as hedging. Insurance involves the
Transfer of pure risk and reduce objective risk but hedging
Involves just the transfer of speculative risk not risk
Reduduction.
Types of Insurance:
Private insurance, consist of health insurance, property and
liabilty insurance.
Government Insurance, cnosist of social insurance and other
Government insurance programs.
How does insurance work?
You pay a fee called a premium, and in exchange,
the insurance company agrees to pay you a certain
amount of money
-Basic Characteristics Of Insurance
Pooling of losses
Payment of fortuitous losses
Risk transfer
Indemnification
-Pooling of losses
Spreading of losses incurred by the few over the entire group.
• Key mechanism is “law of large number”.
• Future losses are predicted based on law of large number.
Note
• Pooling of loss is the spreading of losses incurred by the few over the
entire group so that in the process average loss is substituted for actual loss.
• The primary purpose of pooling is to reduce the variation in possible
Outcomes , which reduces risk.
-Payment of fortuitous losses
A fortuitous loss is one that is unforeseen and
unexpected and occurs as a result of chance.
Insurance policies do not cover intentional losses
-Risk Transfer
Risk transfer means that a pure risk is transferred from
the insured to the insurer,who typically is in a stronger
Financial position to pay the loss than the insured.
-Indemnification
Means that the insured is restored to his or her approximate
financial position prior to the occurrence of the loss.
- Insurable Risk
Insurer normally insure only pure risk.
Property & Liability insurance involves the equitable transfer of risk, where many policyholders share the financial losses of a few through premium contributions. P&L insurance company investments total around $789 billion, with most assets invested in securities to pay claims if needed. Net premiums written for all lines were around $300 billion. P&L policies are short-term, and claims payments can vary greatly depending on catastrophes. Various rating systems like schedule, experience and retrospective ratings adjust premiums based on risk factors of individual policies.
This document discusses intermediate term financing. It defines intermediate term as between 1-7 years. It notes the characteristics of intermediate term financing include maturity of 1-5 years, typically for machinery or expansion. Sources include commercial banks, insurance companies, and leasing firms. Cost is higher than short term but lower than long term financing. Types of intermediate financing discussed include bank term loans, revolving credit, and equipment financing. Methods of repayment include the balloon method, where the principal is due at the end of the term, and the capital recovery method, where installments include principal and interest payments. An example problem calculates the costs and effective interest rates of revolving credit and a term loan.
What is an annuity?
An annuity is an insurance-based contract between you, the owner, and the contract issuer.
This is basically how annuities work: You pay after-tax dollars to the issuer, the issuer invests the money for you, and any earnings accumulate tax deferred. At some point, the issuer pays out the principal and earnings to you or to your beneficiaries. Earnings are taxed as ordinary income when they’re distributed.
The document provides an overview of the history and types of life insurance. It discusses that life insurance originated in India from the Vedas. The first Indian life assurance society was formed in 1870. There are various types of life insurance policies including term life insurance, permanent/whole life insurance, and unit linked insurance plans. The document also outlines the claims process, exclusions in accident benefits, top insurance companies in India, and current news in the life insurance sector.
Annuities explained is a presentation which will explain everything you need to know about the major types of annuities, what are the best annuities and how to select the most appropriate annuity in your particular situation.
Sharing with you my dear readers who may find it useful.
Feel free to connect with me at maxermesilliam@gmail.com.
P/S: taken the insurance exam but has yet to practice as an insurance agent.
Intermediate term financing refers to loans between 1 to 10 years. It is provided by private banks, finance companies, and insurance companies. Term loans must be repaid in regular installments over a set period of time and have various repayment structures like straight repayment, balloon payment, or deferred principal payment. Borrowers are subject to covenants restricting dividends, debt levels, and asset sales during the loan term.
Insurance originated thousands of years ago when groups would pool resources to protect merchants transporting goods from losses. The first formal insurance company was formed in London in 1688 and focused on protecting sea voyages. Modern insurance developed further after the Great Fire of London in 1666 when societies were formed for people to pool money to cover losses. The first American insurance company was established in Charleston, South Carolina in 1735 and the industry has grown significantly over the centuries to become a trillion dollar business employing millions of people.
The document provides an overview of how insurance companies work. It discusses key terms like insurer, insured, and premium. It explains that insurance companies collect premiums from customers, invest those funds, and use the money to pay claims when insured events occur. The document also outlines some common types of insurance like life, health, property, and car insurance. It discusses factors that determine insurance rates and gives examples of career paths within an insurance company.
The document discusses various types of insurance and risk management strategies. It provides information on auto, health, property, life and disability insurance. It also covers insurance terminology like premiums, deductibles, and factors that influence policy costs. Additionally, the document discusses estate planning tools like wills, trusts, and powers of attorney to transfer assets and minimize taxes after death.
This document discusses different types and sources of intermediate-term financing for businesses. Intermediate-term financing refers to borrowing that must be repaid within 1-10 years. Common sources include private commercial banks, insurance companies, finance companies, and government institutions like the Land Bank of the Philippines. Private banks may provide term loans with repayment terms and conditions outlined in loan agreements. Repayment options for term loans include equal principal payments, equal amortization, balloon payments, and deferred principal payments. The document provides examples of each repayment method.
The document provides an overview of life insurance basics, including defining life insurance as an agreement where the insurer promises to pay a sum to a beneficiary upon the policy owner's death in exchange for premium payments. It discusses the different types of life insurance policies including term, whole life, universal life and variable life, and how they differ in terms of coverage duration, premium structure, and cash value growth. The document also reviews important considerations for determining coverage needs and affordability, as well as how to name beneficiaries under a policy.
The document summarizes key concepts about bonds from Chapter 7. It defines different types of bonds like debentures, mortgage bonds, and convertible bonds. It also explains important bond terminology such as par value, coupon interest rate, maturity, and bond ratings. Finally, it discusses methods of valuing bonds and factors that influence their value and ratings.
This document provides an overview of insurance concepts and types of insurance in India. It defines insurance as a contract where one party agrees to indemnify another for financial losses from uncertain future events in exchange for premium payments. There are two main types of insurance in India - life insurance and general insurance, which includes fire, marine, and miscellaneous. Life insurance protects against risks to life, while fire insurance indemnifies for property damage or loss from fire. Marine insurance covers losses from sea perils during ocean transit.
Life insurance is a legal agreement between an insurance policy holder and an insurance company. The policy holder pays a fixed premium amount regularly, and in the event of their death, the insurance company pays a designated beneficiary a sum of money. There are several types of life insurance policies, including term life (pays out if the policy holder dies within a specified term), whole life (pays out upon death at any time), and endowment policies (pays out a predefined amount either on death or at a set maturity date). Life insurance offers tax benefits under Indian tax laws and helps secure the financial future of a policy holder's family.
The document provides an introduction to various concepts in insurance including the life insurance contract, principles of insurance, utmost good faith, insurable interest, and different types of insurance policies like term insurance, whole life insurance, endowment policies, and annuities. It explains that a life insurance contract is a valid legal agreement between the insurer and insured where the insurer agrees to pay claims on the happening of an insured event in exchange for premiums paid by the insured.
This document discusses the key principles of insurance. It defines insurance as a form of risk management that involves the equitable transfer of risk from one entity to another in exchange for payment. The main entities in an insurance agreement are the insurer, who sells the insurance, and the insured, who buys the insurance policy. Premiums are the amounts charged for a certain level of insurance coverage. Several acts govern insurance in India. The document also discusses insurable risks, types of insurance, fundamental insurance principles like indemnity and insurable interest, and circumstances under which an insurer must return paid premiums.
The document provides an introduction to insurance concepts, including the basic principles of insurance, risk management, the insurance market and regulatory framework. It discusses key insurance concepts such as insurable interest, utmost good faith, indemnity, subrogation and proximate cause. It also introduces the role of agents and intermediaries and the importance of marketing and after-sales services in the insurance industry.
The document provides information about different types of life insurance policies. It defines life insurance as a contract between a policy owner and insurer where the insurer agrees to pay a sum of money upon the death of the insured. It discusses term life insurance, which provides coverage for a set period of time, and permanent insurance like whole life, which provides lifetime coverage. It also summarizes different types of term policies, endowment policies, whole life policies, and unit linked plans. Finally, it provides an overview of life insurance claims processes.
This document discusses various insurance documents and forms used in the insurance process. It describes the purpose and contents of key documents like proposal forms, cover notes, certificates of insurance, policy forms, endorsements, renewal notices, claim forms, and discharge letters. Proposal forms are used to gather risk information and form the basis of the insurance contract. Cover notes provide temporary coverage until the full policy is issued. Policy forms contain the terms and conditions of the insurance agreement. Endorsements are used to modify policy terms, and discharge letters confirm that claims have been fully settled.
The document provides an introduction to key concepts and terminology in insurance law, including the definition of risk, risk management, insurance terminology such as policies and premiums, the concept of risk pooling, classifications of insurance, and the requirement of insurable interest. It also summarizes the nature of insurance contracts as governed by contract law and regulated by states, how applications and provisions work, and types of defenses insurers can raise.
The document discusses various methods for valuing different types of securities, including bonds, common stocks, and preferred stocks. It introduces the concepts of book value, market value, and intrinsic value. For bonds, it explains how to calculate value based on periodic interest payments and principal repayment. For common stocks, it presents the dividend discount model based on expected infinite growth of dividends. For preferred stocks, it notes they are valued similarly but with constant dividends. Several examples are provided to illustrate the valuation of each type of security.
The document provides an overview of insurance concepts including the definition of insurance, features of insurance contracts, need for insurance, objectives of insurance contracts, insurable risks, legal aspects of insurance contracts, types of insurance policies, and reinsurance. It defines insurance as a contract where an individual or organization receives financial protection and reimbursement of damages from an insurer in exchange for payment of a premium. Key features of insurance include risk sharing among a large number of insured persons, payment on a contingency or insurable event, and payment of a premium. [END SUMMARY]
This document discusses different types of bonds such as government bonds, corporate bonds, debentures, and mortgage bonds. It describes how bonds differ from stocks in that bonds are a form of debt, bondholders are paid interest before stockholders receive dividends, and bonds mature on a set date while stocks are a permanent investment. The document also outlines various ways bonds can be issued, classified, and retired, such as through sinking funds, serial issuance, or conversion to stock. Overall, the document provides an overview of the key characteristics and classifications of different bond types.
The document discusses the key objectives and process of underwriting in the insurance industry. It provides definitions of underwriting as examining and classifying risks to determine appropriate premiums. The objectives are outlined as providing equitable, profitable and deliverable insurance policies. Key aspects covered include risk factors considered, principles of utmost good faith and moral hazard, types of underwriters and their roles, and importance of sound underwriting. Rules for application forms and documentation requirements are also summarized.
The document discusses life insurance and presents information about American Life Insurance Company (Alico) in Bangladesh. It defines life insurance as an agreement where the insurer reimburses the beneficiary for death or other events in exchange for premium payments. Alico began operations in Bangladesh in 1974 and is the largest international life insurer. It aims to provide quality insurance products through multiple channels. However, Alico faces challenges like communication issues, high prices, unskilled employees, and limited product offerings. Recommendations to address these problems include hiring English-speaking staff, improving quality, opening Islamic branches, reducing prices, enhancing training, expanding operations, and increasing marketing.
Insurance originated thousands of years ago when groups would pool resources to protect merchants transporting goods from losses. The first formal insurance company was formed in London in 1688 and focused on protecting sea voyages. Modern insurance developed further after the Great Fire of London in 1666 when societies were formed for people to pool money to cover losses. The first American insurance company was established in Charleston, South Carolina in 1735 and the industry has grown significantly over the centuries to become a trillion dollar business employing millions of people.
The document provides an overview of how insurance companies work. It discusses key terms like insurer, insured, and premium. It explains that insurance companies collect premiums from customers, invest those funds, and use the money to pay claims when insured events occur. The document also outlines some common types of insurance like life, health, property, and car insurance. It discusses factors that determine insurance rates and gives examples of career paths within an insurance company.
The document discusses various types of insurance and risk management strategies. It provides information on auto, health, property, life and disability insurance. It also covers insurance terminology like premiums, deductibles, and factors that influence policy costs. Additionally, the document discusses estate planning tools like wills, trusts, and powers of attorney to transfer assets and minimize taxes after death.
This document discusses different types and sources of intermediate-term financing for businesses. Intermediate-term financing refers to borrowing that must be repaid within 1-10 years. Common sources include private commercial banks, insurance companies, finance companies, and government institutions like the Land Bank of the Philippines. Private banks may provide term loans with repayment terms and conditions outlined in loan agreements. Repayment options for term loans include equal principal payments, equal amortization, balloon payments, and deferred principal payments. The document provides examples of each repayment method.
The document provides an overview of life insurance basics, including defining life insurance as an agreement where the insurer promises to pay a sum to a beneficiary upon the policy owner's death in exchange for premium payments. It discusses the different types of life insurance policies including term, whole life, universal life and variable life, and how they differ in terms of coverage duration, premium structure, and cash value growth. The document also reviews important considerations for determining coverage needs and affordability, as well as how to name beneficiaries under a policy.
The document summarizes key concepts about bonds from Chapter 7. It defines different types of bonds like debentures, mortgage bonds, and convertible bonds. It also explains important bond terminology such as par value, coupon interest rate, maturity, and bond ratings. Finally, it discusses methods of valuing bonds and factors that influence their value and ratings.
This document provides an overview of insurance concepts and types of insurance in India. It defines insurance as a contract where one party agrees to indemnify another for financial losses from uncertain future events in exchange for premium payments. There are two main types of insurance in India - life insurance and general insurance, which includes fire, marine, and miscellaneous. Life insurance protects against risks to life, while fire insurance indemnifies for property damage or loss from fire. Marine insurance covers losses from sea perils during ocean transit.
Life insurance is a legal agreement between an insurance policy holder and an insurance company. The policy holder pays a fixed premium amount regularly, and in the event of their death, the insurance company pays a designated beneficiary a sum of money. There are several types of life insurance policies, including term life (pays out if the policy holder dies within a specified term), whole life (pays out upon death at any time), and endowment policies (pays out a predefined amount either on death or at a set maturity date). Life insurance offers tax benefits under Indian tax laws and helps secure the financial future of a policy holder's family.
The document provides an introduction to various concepts in insurance including the life insurance contract, principles of insurance, utmost good faith, insurable interest, and different types of insurance policies like term insurance, whole life insurance, endowment policies, and annuities. It explains that a life insurance contract is a valid legal agreement between the insurer and insured where the insurer agrees to pay claims on the happening of an insured event in exchange for premiums paid by the insured.
This document discusses the key principles of insurance. It defines insurance as a form of risk management that involves the equitable transfer of risk from one entity to another in exchange for payment. The main entities in an insurance agreement are the insurer, who sells the insurance, and the insured, who buys the insurance policy. Premiums are the amounts charged for a certain level of insurance coverage. Several acts govern insurance in India. The document also discusses insurable risks, types of insurance, fundamental insurance principles like indemnity and insurable interest, and circumstances under which an insurer must return paid premiums.
The document provides an introduction to insurance concepts, including the basic principles of insurance, risk management, the insurance market and regulatory framework. It discusses key insurance concepts such as insurable interest, utmost good faith, indemnity, subrogation and proximate cause. It also introduces the role of agents and intermediaries and the importance of marketing and after-sales services in the insurance industry.
The document provides information about different types of life insurance policies. It defines life insurance as a contract between a policy owner and insurer where the insurer agrees to pay a sum of money upon the death of the insured. It discusses term life insurance, which provides coverage for a set period of time, and permanent insurance like whole life, which provides lifetime coverage. It also summarizes different types of term policies, endowment policies, whole life policies, and unit linked plans. Finally, it provides an overview of life insurance claims processes.
This document discusses various insurance documents and forms used in the insurance process. It describes the purpose and contents of key documents like proposal forms, cover notes, certificates of insurance, policy forms, endorsements, renewal notices, claim forms, and discharge letters. Proposal forms are used to gather risk information and form the basis of the insurance contract. Cover notes provide temporary coverage until the full policy is issued. Policy forms contain the terms and conditions of the insurance agreement. Endorsements are used to modify policy terms, and discharge letters confirm that claims have been fully settled.
The document provides an introduction to key concepts and terminology in insurance law, including the definition of risk, risk management, insurance terminology such as policies and premiums, the concept of risk pooling, classifications of insurance, and the requirement of insurable interest. It also summarizes the nature of insurance contracts as governed by contract law and regulated by states, how applications and provisions work, and types of defenses insurers can raise.
The document discusses various methods for valuing different types of securities, including bonds, common stocks, and preferred stocks. It introduces the concepts of book value, market value, and intrinsic value. For bonds, it explains how to calculate value based on periodic interest payments and principal repayment. For common stocks, it presents the dividend discount model based on expected infinite growth of dividends. For preferred stocks, it notes they are valued similarly but with constant dividends. Several examples are provided to illustrate the valuation of each type of security.
The document provides an overview of insurance concepts including the definition of insurance, features of insurance contracts, need for insurance, objectives of insurance contracts, insurable risks, legal aspects of insurance contracts, types of insurance policies, and reinsurance. It defines insurance as a contract where an individual or organization receives financial protection and reimbursement of damages from an insurer in exchange for payment of a premium. Key features of insurance include risk sharing among a large number of insured persons, payment on a contingency or insurable event, and payment of a premium. [END SUMMARY]
This document discusses different types of bonds such as government bonds, corporate bonds, debentures, and mortgage bonds. It describes how bonds differ from stocks in that bonds are a form of debt, bondholders are paid interest before stockholders receive dividends, and bonds mature on a set date while stocks are a permanent investment. The document also outlines various ways bonds can be issued, classified, and retired, such as through sinking funds, serial issuance, or conversion to stock. Overall, the document provides an overview of the key characteristics and classifications of different bond types.
The document discusses the key objectives and process of underwriting in the insurance industry. It provides definitions of underwriting as examining and classifying risks to determine appropriate premiums. The objectives are outlined as providing equitable, profitable and deliverable insurance policies. Key aspects covered include risk factors considered, principles of utmost good faith and moral hazard, types of underwriters and their roles, and importance of sound underwriting. Rules for application forms and documentation requirements are also summarized.
The document discusses life insurance and presents information about American Life Insurance Company (Alico) in Bangladesh. It defines life insurance as an agreement where the insurer reimburses the beneficiary for death or other events in exchange for premium payments. Alico began operations in Bangladesh in 1974 and is the largest international life insurer. It aims to provide quality insurance products through multiple channels. However, Alico faces challenges like communication issues, high prices, unskilled employees, and limited product offerings. Recommendations to address these problems include hiring English-speaking staff, improving quality, opening Islamic branches, reducing prices, enhancing training, expanding operations, and increasing marketing.
The Four Actuarial Risks (IAFP Symposium 2015: Insurance Issues)Promod Sharma
This is the slide deck used at The Trusted Advisor Symposium 2015 of the Institute of Advanced Financial Planners (IAFP at http://www.iafp.ca). A studio recording of the presentation is embedded.
For the first time, actuary Promod Sharma (https://ca.linkedin.com/in/promod) publicly shares his approach to measuring and managing financial risks which can be transferred with insurance or pensions.
The case study mentioned was provided to symposium attendees. You can follow the presentation without seeing the case study.
Question an Actuary at http://www.taxevity.com/qana
Adverse selection and moral hazard in the finance and supply of health careThe Economics Network
From a course by Fiona Carmichael of Birmingham Business School, University of Birmingham. The course puts economics concepts in context for Business Management undergraduates. In this lecture, concepts from economics are applied to the provision of healthcare. This is a selection from the hundreds of teaching and learning materials available from the Economics Network site at economicsnetwork.ac.uk
The document discusses personal risk management and outlines four main fields it can be applied to: investments, business, death/disability, and health risks. It also lists factors driving increased acceptance of personal risk management, such as growing health costs and awareness of the importance of client services rather than just sales. Personal risk management may help individuals manage risks to their situation.
- Asymmetric information in insurance markets can lead to adverse selection and moral hazard.
- Adverse selection occurs when one party has more information about risk than the other party, such as high-risk individuals being more likely to purchase insurance. To address this, insurers try to classify policyholders by risk through underwriting.
- Moral hazard refers to when insured parties have less incentive to prevent losses since insurance will cover costs. For example, car insurance could make reckless driving more likely. Insurers try to limit moral hazard through deductibles, copays or exclusions.
This module discusses risk management and insurance. It covers topics such as risks and risk management, different types of risks, methods of handling risks including avoiding, controlling, accepting and transferring risks. It also discusses the basic concepts of insurance including risk pooling, law of large numbers, requirements of insurable risks, advantages and disadvantages of insurance. Additionally, it covers personal risk management process, objectives of risk management pre-loss and post-loss, insurance market dynamics and underwriting cycle. Finally, it discusses some key legal principles of insurance contracts such as offer and acceptance, consideration, insurable interest, subrogation and utmost good faith.
The document discusses key concepts related to life insurance underwriting. It defines underwriting as the process by which an insurance company evaluates the risk of a potential client in order to set premium payments and specify coverage. Several factors are considered in life insurance underwriting, including sex, physical condition, medical history, family history, occupation, habits, and marital status. Underwriting is important as it helps prevent high-risk individuals from being insured, decides whether to offer or deny coverage, and sets the premium rate. The document also discusses different types of life insurance like term life, whole life, and endowment insurance.
The document provides an overview of life insurance policies in India. It discusses key terms like life insurance, whole life insurance policies, health insurance, and unit linked insurance plans (ULIPs). It also covers the history and development of life insurance in India, from early village co-operatives to the nationalization of life insurance in 1956 with the formation of LIC. The document outlines some advantages of life insurance like encouraging savings, easy payouts to beneficiaries, and tax benefits. It provides details on various types of policies and covers offered.
Types of insurance can be divided into life insurance and general insurance. Life insurance includes term life insurance, which pays a lump sum if the insured passes away during the term, and permanent life insurance, which builds cash value over time. General insurance covers property and assets and includes fire insurance, marine insurance, and accident insurance. Common life insurance policies are whole life, which pays out upon death and builds cash value, and term life, which only provides coverage for a set period of time.
The document provides information on insurance industry in India and related reforms. It discusses the history and evolution of insurance in India from ancient times to modern era. Some key points discussed include:
- Insurance concepts existed in ancient Indian texts and first insurance companies were established in 1818.
- The insurance sector was nationalized in 1956 and 1973 to promote customer interests.
- Reforms since 1999 have opened the sector to private companies and established the IRDA as regulator.
- Today there are 24 general insurance and 23 life insurance companies operating in a growing market.
This document provides an overview of the life insurance industry and Max New York Life Insurance Company. It discusses the different types of life insurance policies including term life, permanent life, whole life, universal life, and variable life. It then profiles Max New York Life, describing it as a joint venture between an Indian and American company. It outlines Max New York Life's distribution strategy, products, achievements including ISO certification and MDRT membership, vision, mission and focus on social responsibility through donations to organizations helping children.
Term Life InsuranceLife and Health Insurance FIN 3660Chapte.docxmehek4
Term Life Insurance
Life and Health Insurance FIN 3660
Chapter 5
Outline
Needs Met by Life Insurance
Personal Needs
Business Needs
Term Life Insurance
Characteristics of Term Life Insurance Products
Plans of Term Life Insurance Coverage
Features of Term Life Insurance Policies
2
Needs Met by Life Insurance
Personal Needs
Most common personal needs that life insurance can meet are:
Dependents’ support
Estate planning
Paying debts and final expenses
3
Dependents Support
Life insurance can provide funds to support the family members of a deceased loved one until they obtain new methods of support or until they adjust to living on a lower income.
The proceeds can also be used to supplement the family’s income.
In many jurisdictions, the beneficiary of a lump sum of money after the death of a loved one is usually not taxed on the money they receive.
4
Estate Planning
Estate- the accumulated assets an individual owns when he/she dies.
Will- a legal document that directs how the individual’s property is to be distributed after his death.
The executor is the person who is a personal representative of the person who has died with a valid will. (administrator if they person died without a valid will)
Estate Plan- considers the amount of assets and debts that he/she is likely to have when he/she dies and how best to preserve those assets so that they can be distributed as she desires.
Life insurance is an important part of the estate plan.
Can leave home to one child and life insurance policy to the other.
5
Debts and Final Expenses
A person’s death generally does not extinguish his/her debts.
In some cases the deceased estate isn’t large enough to pay his/her debts and final expenses.
If a life insurance policy is included in the estate plan, the proceeds can help pay those remaining debts.
6
Business needs
Two reasons for a business to purchase life insurance:
To provide funds to ensure that the business continues in the event of the death of an owner, partner, or other key person.
To provide benefits for its employees.
7
Business Continuation Insurance
An insurance plan designed to enable a business owner(s) to provide for the business’ continued operation if the owner or a key person dies.
Key Person Life Insurance- individual life insurance that a business purchases on the life of a key person.
The business owner is the beneficiary of the insurance policy if the person dies.
Buy-Sell Agreement- an agreement in which one party agrees to purchase the financial interest that a second party has in a business following the second party’s death and the second party agrees to direct his estate to sell his interest in the business to the purchasing party.
8
Characteristics of Term Life Insurance Products
Provides a death benefit only is the insured dies during the period specified in the policy.
The length of the policy term varies considerably from one policy to another.
Another common type of term life insurance cover the insured un ...
Types of Life Insurance Policies Available in IndiaMyMoneyMantra
Life Insurance policy- Different types of life insurance Plans explained like Risk, Benefits of Term Plan, Whole life Plan, Endowment Plan, ULIP Plans, Money Back Policy, Child Policy & Annuity Plan available in India.
There are four main parties that make up the insurance market: buyers, sellers, intermediaries, and regulators. The buyers are individuals, businesses, organizations, and governments seeking insurance coverage. The sellers are insurance companies and reinsurance companies that provide insurance policies. Intermediaries such as agents and brokers facilitate business between buyers and sellers. Regulators like the Nigeria Insurance Association and Nigerian Council of Registered Insurance Brokers oversee the industry.
Life insurance provides a death benefit to beneficiaries in the event of the policyholder's death. It is economically justified when the policyholder has dependents relying on their income. There are several types of life insurance policies, including whole life, term life, variable universal life, universal life, and group life, which differ in premium structures and cash value growth.
Life Insurance is a form of risk management primarily used to transfer the risk of uncertain loss.
It provides compensation for financial loss only not profit.
Life insurance is a protection against the RISK of financial loss that would result from the premature death of an insured. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured. The death benefit is paid by a life insurer in consideration of premium payments made by the insured.
Project report on tata aig life insurance company.saurabhmahour
The document provides a table of contents for chapters in a book or document on insurance. Chapter 1 introduces concepts of insurance including definitions, types of life insurance, functions and importance. It also discusses the regulatory authority for insurance in India. Chapter 2 introduces the Indian insurance industry, provides a brief history and discusses milestones. It outlines the major players in the industry before and after reforms. The summary provides a high-level overview of the topics covered in the first two chapters.
The document discusses different types of life and health insurance. It describes key types of life insurance including term insurance, whole life insurance, endowment insurance, and annuity contracts. It also outlines types of health insurance such as disability income insurance and medical expense insurance, including hospitalization expense contracts, surgical contracts, regular medical contracts, and major medical contracts. The document provides details on benefits, premium structures, and exclusions for different insurance policies.
Questions for Review and Discussion 1. What is risk management an.pdfAJAYTRADERSKOTA
Questions for Review and Discussion 1. What is risk management and what is the purpose of
insurance? 2. What are the contractual elements of an insurance agreement? 3. Why is insurable
interest so important? 4. What are the differences among types of life insurance? 5. How does
insurable interest differ with life insurance and property insurance? 6. What is a coinsurance
clause: 7. What coverage is given by fire, marine, homeowner\'s, renter\'s, and flood insurance?
8. What differences exist among the of automobile insurance? 9. What benefits are included in
health insurance policies? What are the steps in applying for, obtaining, and maintaining an
insurance policy?
Solution
1)Risk Management : Risk management involves the practice of understanding potential risks of
future, analyzing in details and taking accurate steps to minimise it.
Purpose of insurance :
Damage to, or the loss of, physical assets
Illness,Sudden Death of key members
Compensation claims against the business
Business interruption caused by external events such as terrorism
Volatility and cash flow pressures following an incident
2) Conractual Eleements of Insurance agreement :
Offer? ,Acceptance , Intention of legal consequences ,Consideration
3)Insurable Interset -
The insurable interest requires at the time the policy purchasing People can sell life insurance
policy in a \"life settlement\" transaction. Life settlement means the sale, assignment, transfer, or
bequest of the death benefit or ownership of a life insurance policy by the owner of the policy.
Owner of the policy collects cash and the life settlement company becomes the new owner and
beneficiary of the policy and is responsible for the payment of all future premiums. Upon the
death of the insured, the death benefit is paid to the life settlement company.
4) Differences among type of Life insurance :
Term insurance : the most basic form of life insurance
Endowment plans:maturity benefit
Unit linked insurance plans (ULIP): Pay out the sum assured on death/maturity
Whole life policy:Policy covers a policyholder over his life
Money back policy:periodic payments over the policy term
5) Insurable interest from Life insurance & proprety insurnace :
Insurable interest exists when an insured person derives a financial or other kind of benefit from
the continuous existence of the insured object
Life Insurnace Insurable interest refers to the right of property to be insured. It may also mean
the interest of a beneficiary of a life insurance policy to prove need for the proceeds.
Property insurance : People have an insurable interest in their property up to the value of the
property, but not more.
6) CoInsurance Clause :
Coinsurance in insurance, is the splitting or spreading of risk among multiple parties.
A co-sharing agreement between the insured and the insurer under a health insurance policy
which provides that the insured will cover a set percentage of the covered costs after the
deductible has been paid. Similar to.
This document provides an introduction to life insurance. It discusses what life insurance is, who should buy it, and the different types available. It also covers additional uses of life insurance beyond providing for dependents. The key components of how life insurance works are the death benefit, which is paid out to beneficiaries when the insured dies, and the premiums paid by the policyholder. Permanent life insurance also includes a cash value component. The document provides numerous examples and details on different types of policies and circumstances where life insurance is appropriate.
The document provides an overview of various life insurance products and concepts in India. It discusses key terms like insurance, life insurance, types of life insurance policies including whole life, term, and endowment plans. It also covers principles of insurance like insurable interest, utmost good faith, and indemnity. Finally, it summarizes popular individual and group insurance products offered by major Indian and global life insurance companies.
The document provides an overview of insurance and summarizes key types of life insurance policies. It discusses the history of insurance beginning in ancient times and its evolution over centuries. It then defines what a life insurance policy is and its basic purpose of providing financial protection to families. The major types of life insurance policies covered are term insurance, whole life, endowment, money back, and ULIPs (unit-linked insurance plans). Each type is concisely described in 1-2 sentences.
This document summarizes Amit Das's six-week industry training project report on the insurance industry and Birla Sun Life Insurance. The report discusses the history of insurance, provides an introduction to different types of insurance policies, and explains how insurance works through risk pooling and premium payments. It also introduces Birla Sun Life Insurance, including key leadership, competitors, and a SWOT analysis. The report details Birla Sun Life's sales procedures and various insurance products and plans offered. The summary concludes with Amit Das gaining insight into the insurance world and comprehensive insurance options currently available in the market through the training experience.
The document summarizes Amit Das's six-week industry training project at Birla Sun Life Insurance. It includes an introduction to the insurance industry, an overview of the training experience, and appendices that provide details of the project scope, bonafide certificate, and acknowledgements. The training provided insight into the insurance world and covered various Birla Sun Life insurance plans and their features. It concluded with the author gaining knowledge of the insurance sales procedure and pioneering features of Birla Sun Life Insurance.
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After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
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Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
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Life Insurance
1. Polytechnic University of the Philippines
College of Accountancy and Finance
DEPARTMENT OF BANKING AND FINANCE
Sta. Mesa, Manila
L I F E
I N S U R A N
C E
GROUP 4
Banaag, Gener John
Cabalo, Chloe May
Lomboy, Imee Ruth
Malate, Gerald
Reyes, Jefferson
3. OUTLINED REPORT
I.
II.
III.
IV.
V.
Definition of Life Insurance
Parties involved in Life Insurance
Services of Life Insurance
Life Insurance Terminologies
Types of Life Insurance
A. According to Nature
1. Permanent
a.
Whole Life
(i) Ordinary
(ii) Limited Pay
b. Endowment
(i) Regular
(ii) Limited Pay
2. Temporary or Term Insurance
B. According to Coverage
1. Individual Insurance
2. Group Insurance
3. Industrial Insurance
4. Social Insurance
5. Health Insurance
C. Annuities
VI. Premiums
VII. Riders
A. Definition of a Rider
B. Types of Riders
1. Waiver of Premium
2. Accidental Death Benefit
3. Term Insurance Rider
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4. LIFE INSURANCE DEFINED.
1. Life insurance is insurance on human lives and insurance appertaining thereto or
connected therewith. (Sec. 179, Insurance Code)
2. A mutual agreement by which a party agrees to pay a given sum on the happening of a
particular event contingent on the duration of human life, in consideration of the
payment of a smaller sum immediately, or in periodical payments by the other party.
(44 C.J.S. 484)
3. It is a contract where by a party, for a consideration called the premium agrees to pay
another a certain sum of money in the event of the insured’s death from any cause not
excepted in the contract, or upon surviving a specified period of time or otherwise
contingent on the continuance or cessation of life.
PARTIES INVOLVED.
1. Policyowner. The one who has the power to name and change the beneficiary, to assign
the policy, cash it for its surrender value, or use it as a collateral in obtaining a loan; and
the obligation to pay the premiums. He is also the one who owns the policy and also the
person whose life is insured.
2. Insured. The person whose life is the subject of the policy, also known as the cestui que
vie.
3. Beneficiary. The person named to received the life insurance proceeds upon the death
of the insured.
4. Insurer. The party who assumes or accepts the risk of loss and undertakes for a
consideration to indemnify the insured or to pay him a certail sum on the happening of
a specified contingency or event.
SERVICES OF LIFE INSURANCE.
1. Actual Death. It represents the so-called “casket death”.
2. Living Death. It represents permanent disability
3. Retirement Death. It represents living beyond the period of earning capacity.
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5. PREMATURE DEATH
DISABILITY
BENEFIT
Family
Protection
Death
Benefit
Guranteed
Savings
Cash
Values
Retirement
Income
THREATS
BASIC SERVICES OF LIFE INSURANCE
SERVICE
Maturity
Benefit
OLD AGE
LIFE INSURANCE TERMINOLOGIES.
1. Policy. The written contract between the insured and the insurance company.
2. Face Amount. The amount payable to the beneficiary upon the death of the insured or
the policyowner or insured upon surviving the protection period in the form of maturity
benefit.
3. Premium. Money that must be regularly paid to the insurance company to keep the
insurance policy in force.
4. Protection period (Until age 100). Number of years that a proposed insured is covered
under the policy contract.
5. Policy Effectivity Date. Date the protection period starts.
6. Paying Period. Number of years insured will pay premiums.
7. Mortality Table. Table shows the average life expectancy.
8. Actuary. Person who sets the premium rates and develop life insurance products.
9. Cash Surrender Value. The amount that an insured, in case of default, after the
payment of at least three full annual premiums, is entitled to receive if he surrenders
the policy and releases his claims upon it.
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6. LIFE INSURANCE CONTRACTS
There are FOUR basic classification of life insurance contracts issued by life insurance
companies: Whole-life, Endowment, Term and Annuities. For the purpose of simplicity, life
insurance contracts are classified into different categories.
ACCORDING TO NATURE:
Permanent Life Insurance Contracts
An umbrella term for life insurance plans that do not expire (unlike term life insurance) and
combine a death benefit with a savings portion. This savings portion can build a cash value against which the policy owner can borrow funds, or in some instances, the owner can
withdraw the cash value to help meet future goals, such as paying for a child's college
education. The two main types of permanent life insurance are whole and endowment life
insurance policies.
Whole-life Insurance Contracts
Whole-life insurance provides for the payment of the face value upon the death of the insured,
regardless of when it may occur. Whole-life protection may be purchased under either of the
two principal types of contracts, the chief difference between the two being the method of
payment thereof. One is known as Ordinary; and the other, Limited-pay life policy.
Ordinary Life Policy
It is one under the terms of which the insured is required to pay a certain fixed premium
annually or at a more frequent intervals throughout his entire life and the beneficiary is entitled
to receive payment under the policy only after the death of the insured. Many insurance
companies consider this policy paid-up when the insured reaches the age of 100. Thus, the
ultimate payment of the insurance proceeds is as certain as death itself.
Limited-pay Life Policy
The only difference between ordinary life policy and Limited-pay life policy, is that, limited-pay
is required to pay the premiums during a limited period of years, usually ten, fifteen, or twenty.
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7. When the specified number of premium payments have been made, the insurance is fully paid
for. Protection period, however, covers throughout his life.
Endowment Insurance Contracts
Endowment policy is one under the terms of which the insurer binds himself to pay a fixed sum
to the insured if he survives for a specified period. Whereas policies payable only in the event of
death are taken out chiefly for the benefit of others, endowment policies usually revert to the
insured if he survives the endowmnent period. There are two types of endowment contract:
Regular, and Limited-pay policies.
Regular Endowment Policy
Unlike the Ordinary life policy, Regular Endowment policies “protects” the insured for a limited
period or age. After such time the insured survives on the endowment period, he will be
entitled the full face amount at the end of its term.
Limited-pay Endowment Policy
It is one under the terms of which the endowment premiums are payable only during a limited
period of years, usually shorter than the endowment period. When premium payments have
been made, the insurance is fully paid for until the end of its term. When the insured survives,
he will be entitles the full face amount.
Term Insurance Contracts
A term policy may be defined as a contract which furnishes life insurance protection for a
limited number of years, the face value of the policy being payable only if death occurs during
the stipulated term, and nothing being paid in case of survival. Such policies may be issued for a
period as short as one year or may be provide protection up to age 65.
ACCORDING TO COVERAGE:
Individual Insurance Contracts
Individual Insurance is issued on the basis of individual application and involves a seperate
policycontract for each purchase (Sec. 227)
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8. Many individuals and their financial planners consider life insurance as the cornerstone of their
financial plan. While the main purpose of life insurance is to help take care of your family in the
event of your death, policies can also serve other purposes including:
1.
providing funds to pay final expenses
2.
creating an inheritance for your heirs
3.
making charitable contributions in the event of your death
4.
creating a source of tax-deferred savings
Example:
Sunlife Financial offers 15
products on Individual life
Insurance. One of these is:
SUN Safer Life - 5 Year
Renewable and Convertible
Term (NEW) is a 5-year term
life insurance product that provides maximum protection at a cost that fits your budget. With
its convertibility and automatic renewability features, you can enjoy the benefit of keeping
yourself and your loved ones’ future secured for a longer period.
Group Life Insurance Contracts
A Life insurance plan providing coverage on the lives of a group of people under one master
contract/policy.
It is a type of insurance coverage offered to a group of people. This coverage will provide a
benefit to the beneficiaries if the covered individual dies during the defined covered period. As
with other types of group benefits, group term life insurance is generally cheaper than
comparable individual policy coverage. For this reason, group term life insurance is often a key
component in employee benefit packages.
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9. Example:
On the other hand, PhilAm Life provides life
insurance protection anytime, anywhere and
against any cause of death* with Group Yearly
Renewable Term (GYRT) Life Insurance:
Customizable Benefits
With the array of benefits available, you can tailor-fit your plan depending on your needs or
budget. Group Classic is also available in US Dollar. With Group Classic, you can now avail of
customizable benefits that work hard for your people.
* Except for suicide during the first year of coverage
Industrial Life Insurance Contracts
otherwise called:
1.
Burial Policies
2.
Small Death Benefit Policies
3.
Street Insurance
If so, be informed, Industrial life is a small-face-amount policy that was sold to consumers as a
way to cover burial expenses. Customers often referred to these types of policies as street,
burial or debit insurance. Agents sold these policies door-to-door, collected weekly or monthly
premiums and signed a debit card as a receipt of money collected.
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10. Example:
At the turn of the 20th century, Prudential Life of
America and other large insurers reaped the bulk of
their profits from industrial life insurance, or insurance
sold by solicitors house-to-house in poor urban areas.
For their insurance, industrial workers paid double what
others paid for ordinary life insurance, and due to high
lapse rates, as few as 1 in 12 policies reached maturity
Social Life Insurance
Social insurance is any government-sponsored program with the following four characteristics:
the benefits, eligibility requirements and other aspects of the program are defined by statute;
explicit provision is made to account for the income and expenses (often through a trust fund);
it is funded by taxes or premiums paid by (or on behalf of) participants (although additional
sources of funding may be provided as well); and the program serves a defined population, and
participation is either compulsory or the program is subsidized heavily enough that most
eligible individuals choose to participate.
EXAMPLES:
and
Health Insurance Contracts
Health insurance is insurance against the risk of incurring medical expenses among individuals.
By estimating the overall risk of health care and health system expenses, among a targeted
group, an insurer can develop a routine finance structure, such as a monthly premium or
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11. payroll tax, to ensure that money is available to pay for the health care benefits specified in the
insurance agreement. The benefit is administered by a central organization such as a
government agency, private business, or not-for-profit entity. According to the Health
Insurance Association of America, health insurance is defined as "coverage that provides for the
payments of benefits as a result of sickness or injury. Includes insurance for losses from
accident, medical expense, disability, or accidental death and dismemberment".
Types of Health Insurance
PhilHealth
PhilHealth, the national health insurance program, provides sustainable, affordable and
continuing social health insurance for Filipinos of any age at an affordable rate of about $4 per
month, as of June 2010. This program ensures hospitalization discounts for contributing
members at any accredited hospital in the Philippines.
There are three kinds of PhilHealth membership available: employed membership, individually
paying membership and lifetime membership. Filipinos who are regularly employed pay less
than individually paying (self-employed and freelance) members because employers provide
monthly co-payments for their employees, as required by Philippine law. A lifetime member
doesn't have to pay the monthly contribution, since this kind of membership requires paying a
lump-sum amount to cover the lifetime membership.
Private Health Insurance
A private or public health insurance in the Philippine setting is a term more popularly used for
insuring a person from critical illness and hospitalization. Since a separate health insurance
generally works independently from an HMO plan, a basic health insurance policy covers
hospital expenses as a supplement to HMO coverage.
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12. Private health insurance companies cover health expenses for individuals, families and groups.
Plans are either paid in full by freelance or self-employed members or partially paid or acquired
for free by regular employees. An individual plan may be upgraded to a family plan to extend
coverage to family members. Group insurance is designed for groups of three or more persons.
Like with a family plan, it can offer customized coverage with premium discounts.
Health Maintenance Organization
HMO is the common managed care plan in the Philippines while a health insurance plan works
separately for emergency cases and hospitalization. While there are available packages offered
by health insurance companies for additional coverage, the affordability of HMO plans are
more amenable to Filipinos with average income, especially those who are of considerably
healthy age.
An HMO plan is usually acquired for free through employment. However, freelancers and nonworking individuals can also avail themselves of individual and family HMO accounts to cover
basic medical expenses for preventive and outpatient care, medical treatment and
hospitalization. Unlike in the United States, the Philippines only offers HMO plans and not
preferred provider organization (PPO) plans. There are also health discount cards offered by
specific groups, mostly medical and diagnostics clinics, to also supplement HMO and health
insurance coverage. Those who can't afford an HMO plan usually avail of such health discount
cards to help them ease the burden of medical expenses.
International Health Insurance
An international health insurance is designed for individuals, families and groups intending to
be covered while outside the Philippines. This type of health insurance plan protects a member
for a few months to one year. There are insurance companies that can provide straight
coverage for up to three years. International health insurance for Filipinos generally provides
two options for coverage: worldwide and worldwide except the United States. Including a U.S.
coverage requires a higher premium as the cost of medical expenses in this country is much
higher than in other parts of the world. Also, when including preventive services and outpatient
care instead of just the basic hospitalization coverage, the premium becomes higher as well.
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13. Expatriate Health Insurance
Expatriate health insurance is designed for a non-Filipino intending to maintain health
insurance coverage while staying in the Philippines. This type of plan insures a legally residing
foreigner of his medical expenses in the country. It is generally a renewable type of plan
suitable for individuals of all ages, nationalities and occupations.
Annuities (Life Insurance)
An annuity is an insurance product that pays out income, and can be used as part of a
retirement strategy. Annuities are a popular choice for investors who want to receive a steady
income stream in retirement.
Here's how an annuity works: you make an investment in the annuity, and it then makes
payments to you on a future date or series of dates. The income you receive from an annuity
can be doled out monthly, quarterly, annually or even in a lump sum payment.
The size of your payments is determined by a variety of factors, including the length of your
payment period.
You can opt to receive payments for the rest of your life, or for a set number of years. How
much you receive depends on whether you opt for a guaranteed payout (fixed annuity) or a
payout stream determined by the performance of your annuity's underlying investments
(variable annuity).
While annuities can be useful retirement planning tools, they can also be a lousy investment
choice for certain people because of their notoriously high expenses. Financial planners and
insurance salesmen will frequently try to steer seniors or other people in various stages toward
retirement into annuities. Anyone who considers an annuity should research it thoroughly first,
before deciding whether it's an appropriate investment for someone in their situation.
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14. Types of Annuities
There are two basic types of annuities: deferred and immediate.
With a deferred annuity, your money is invested for a period of time until you are ready to
begin taking withdrawals, typically in retirement.
If you opt for an immediate annuity you begin to receive payments soon after you make your
initial investment. For example, you might consider purchasing an immediate annuity as you
approach retirement age.
The deferred annuity accumulates money while the immediate annuity pays out. Deferred
annuities can also be converted into immediate annuities when the owner wants to start
collecting payments.
Within these two categories, annuities can also be either fixedor variable depending on
whether the payout is a fixed sum, tied to the performance of the overall market or group of
investments, or a combination of the two.
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15. Mathematics for Life Insurances
Premiums
Some means of scientifically measuring risk is necessary if insurance is to be priced properly.
This measurement of risk lies at the foundation of any system of insurance and is made possible
through the application of the laws of probability.
Three probability laws are used in life and health insurance:
•
The law of certainty
•
The law of simple probability
•
The law compound probability
The three laws may be stated as follows:
•
Certainty may be express by unity, or 1.
•
Simple probability, or the probability or chance that an event will occur, may
be expressed by a fraction, which may take a value from 0 to 1.
•
Compound probability, or the chance that two independent events will
occur, is the product of the separate probabilities that the events, taken
separately, will occur.
DISTRIBUTION OF LIFE INSURANCE CLAIMS
According to the law of large numbers, if the number of insureds is large enough, the actual
claims will most likely show only small relative deviation from the expected claims. Using the
probability theory, one can calculate the probabilities of various deviations from the expected
claims, depending on the number of insureds.
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16. APPLICATION OF THE LAWS OF PROBABILITIES TO MORTALITY
QX =DX/LX
x- age
l – number of living at age x
d – number of dying during the age x
q – probability of an individual dying during the age x
p – probability of an individual at age x surviving one year
UMDERLYING PRICIPLES
INTEREST
In insurance term it is defined as the price paid for the use of money.
FOR ACCUMULATED VALUES:
S2 = A(1+i)2
Remember:
Every insurance company both life and non-life as well as suretyship, they have their own
Commissioners Standard Ordinary mortality table, that’s why you can notice that every
insurance company have their own amount of premiums and benefits.
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17. Riders
Riders are an important and integral part of insurance policies. A policy rider in an insurance
policy represents a provision or modification to an existing insurance policy that provides
additional coverage to an insurance policy. Riders on the insurance contract provide additional
protection against risk.
Types of Riders
Waiver of premium
For an upfront charge, most insurance companies will incorporate a waiver of premium into a
policy. The waiver is usually associated with life insurance policies, and requires the
policyholder to be disabled for a specified amount of time, such as being incapacitated for six
months. To have a waiver of premium, some companies may also place other requirements on
the policyholder, such as being healthy and below a certain age.
Things you need to know:
1. You must be under age 55 and accepted on standard rates.
2. If you are not in work before the onset of incapacity, your premiums are waived after 26
weeks if you are unable to perform three of the following specified work tasks ever
again:
•
•
•
•
•
•
Group IV
Walking - The ability to walk more than 200 meters on a level service
Climbing - the ability to climb up a flight of 12 stairs and down again, using the
handrail if needed.
Lifting - the ability to pick up an object weighing 2kg at table height and hold for
60 seconds before replacing the object on the table.
Bending - the ability to bend or kneel to touch the floor and straighten up again
Getting in and out of a car - the ability to get into a standard saloon car, and get
out again.
Writing - the manual dexterity to write legibly using a pen or pencil, or type
using a desktop computer keyboard.
Page 17
18. 3. The insurance company will continue to waive premiums until one of the following
occurs:
• you're fit to return to work;
• your policy ends; or
• you no longer fulfill our definition of incapacity.
Accidental Death Benefit
Sometimes, when you apply for life insurance Legal & General are unable to give you an
immediate decision and may need to write to you or your doctor for more information. During
this time it's important that you still have some protection so Legal & General provide you with
Accidental Death Benefit at no extra cost whilst they process your application. They provide this
cover without the need for any underwriting – giving you some peace of mind that you’re
covered in case of accidental death.
Things you need to know:
• The maximum payment would be the amount of cover you applied for (across all
applications) or £300,000, whichever is lower.
• The cover will start when Legal & General receives a completed application form
that you submit online or over the telephone.
• Cover will last for 90 days or until Legal & General accept, postpone or decline
your application or you notify them that you no longer wish to proceed,
whichever is earliest.
• Accidental death benefit pays out a cash sum if you die within 90 days of an
accident. In this instance our definition of an accident is where a bodily injury is
sustained, caused by accidental, violent, external and visible means, which solely
and independently of any other cause results in death.
• Legal & General don't provide this benefit if you have told them that your
application is to replace an existing policy of theirs, as long as you remain
covered under the existing policy.
• The benefit won't pay out if the cause of death is directly or indirectly caused by
any of the following:
o self-inflicted injury including intentionally taking your own life or
attempting to do so
o taking part or attempting to take part in a dangerous sport or pastime
o taking part or attempting to take part in an aerial flight other than as a
fare paying passenger on a licensed airline
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19. o committing, attempting or provoking an assault or criminal offence
o war (whether declared or not), riot or civil commotion
o taking alcohol or drugs (unless these drugs were prescribed by a
registered doctor in the United Kingdom)
o accidents that happened before your application
Term Insurance Riders
It is a type of life insurance policy that provides coverage for a certain period of time, or a
specified "term" of years. If the insured dies during the time period specified in the policy and
the policy is active - or in force - then a death benefit will be paid. Term insurance is initially
much less expensive when compared to permanent life insurance. Unlike most types of
permanent insurance, term insurance has no cash value.
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