Insurance Premiums

The price of insurance depends ultimately on the risk the insurer is taking on on behalf of the customer. Simply put, this will depend on the chance of the insured event occurring, and the likely cost of the outcome. The way insurers calculate this risk, and quantify the amount of the premium, is through the use of what is known as actuarial science. Using certain probability and statistical mathematical models, the insurance company can predict with a fair degree of accuracy, the approximate cost of future claims.

Term Life Insurance Policy For example, supposing a someone wishes to insure their $100,000 home against fire. For argument's sake, lets assume that 1 in a 1000 homes in this area burn down every year. This would mean that just to break even, on the mathematical model, the insurance company would have to charge $100 a year for the premium. What the insurance company will in fact do is charge something more than $100, say $120. This extra $20 will cover the overhead costs of the insurance company's operation. It will also cover an amount for profit of the insurance company. The only other way the insurance company generates profits is by investing all the policy premiums it is paid. That way, all the premiums earn interest, or investment returns, while they are in the possession of the insurance company. While this method represents a significant income for the insurance company, the majority of insurance company's funds do actually come from the payment of premiums.

Spouse and Children's Insurance Rider A rider that may be added to a permanent life insurance policy to provide term insurance coverage on the insured's spouse and children. Standard Premium Rate The premium rate charged for insurance on a member of the standard risk class. Standard Risk Class A risk class made up of individuals whose anticipated likelihood of loss is not significantly higher or lower than average. Most insureds are included in the standard risk class.

Life Insurance It has been argued that those who pay premiums and do not have to make a claim lose out by effectively wasting their unused premium. In this sense, the insurance industry can not be held to produce any net gain for society, and therefore, the huge profits they generate are unwarranted. Defenders of insurance companies however claim that the peace of mind they offer to all their customers is a significant societal benefit which they provide. Simply knowing that you will be compensated if disaster strikes you is worth something to people, even if the disaster never strikes.

smoker, 2503 and we'll connect you with an insurance broker featured on our site. Annual Premium Standard rates are the premiums paid by people who the life insurance company consider to be in average health. Preferred rates are the premiums paid by people who the life insurance company consider to be in exceptional health.

Insurance Life Premium The funds the insurance company holds, from premiums that have not been claimed for payouts, is called its float. Massive profits can be generated from the float alone. While losses are just as possible as gains with all investments, the profits made from insurance company floats, for the five years ending 2003, was $68.4 billion. In the same period, insurance companies paid out $142.3 billion in insurance claims. Some do not believe that the insurance industry will be able to sustain itself for ever on profits generated by the float and so predict large premium rises for the future.

Flat Extra Premium Method A method for rating substandard risks used when the extra risk is considered to be constant. The underwriter assesses a specific extra premium for each $l, 000 of insurance. Contrast with percentage tables method. Flexible Benefit Plan See cafeteria plan. Fraudulent Claim A type of claim that occurs when a claimant intentionally uses false information in an attempt to collect policy proceeds.

Health Insurance Policy Joseph Kenny is the webmaster of the insurance site http://www.insure121.com/ where you will find information, news and links to the leading providers of car insurance in the UK.

Stock Insurance Company An insurance company that is owned by people who buy shares of the company's stock. Contrast with mutual insurance. Substandard Premium Rate The premium rate charged for insurance on an insured person classified as having a greater than average likelihood of loss. This premium rate is higher than a standard premium rate. Substandard Risk Class A risk class made up of people with medical or nonmedical impairments that give them a greater than average likelihood of loss. standard premiums. Members of this risk class are called special class risks.

Health Insurance

Broker (1) A commissioned sales agent who is under contract to and sells the insurance products of more than one insurance company. (2) For a career agent, to submit insurance applications to companies other than the agent’s own company. Bundled Insurance Product A life insurance product in which the mortality, investment, and expense factors used to calculate premium rates and cash values are not identified separately in the policy. Traditional whole life insurance is an example of a bundled insurance product.

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