Economically Feasible Cost
To be insurable, the chance of loss must be small. The cost of an insurance policy consists of the pure premium, or amount actually needed to make loss payments, and the expense portion. If the chance of loss approaches 100%, the cost of the policy will exceed the amount that the insurance company is obligated to pay under the contract.
For example, it would be possible for a life insurance company to issue a $1,000 policy on a man 99 years of age. The net premium alone, however, would be about $980, to which would have to be added an amount for expenses which would bring the premium total to more than the amount of insurance. To make life insurance rates (http://www.equote.com/li/termlifeinsurance-quote.html) attractive, the premium has to be far less than the face of the policy.
Chance of Loss Must Be Calculable
Some probabilities of loss can be determined by logic alone—for example, the probabilities involved in the flip of a coin. Others must be determined empirically, that is, by a tabulation of past experience with a projection of that experience into the future.
All types of insurance probabilities are determined on an empirical basis. There are some chances of loss, however, which cannot be determined either by logic or from past experience. Unemployment is an example. Unemployment occurs with such a degree of irregularity that, as yet, no one has succeeded in working out a method of determining its future incidence.
This is one reason why unemployment insurance is not sold by private insurance carriers. If there are no available statistics on chance of loss, it is impossible to predict losses, in spite of a large number of exposures.
Unlikely to Produce Loss to Majority Simultaneously
No insurance company can afford to insure a type of loss which is likely to happen to any great percentage of those exposed to it. True, life insurance companies insure their policyholders against death even though it is well established that every one of them will die eventually.
The life insurance company is really insuring its policyholders against premature death. Its rates and reserve accumulations are fixed in such a way that it can pay claims as the claims mature without causing financial hardship to the company.
If all the policyholders of a life insurance company (http://www.equote.com/info/life-insurance-info.html) should die prematurely, this company would be just as bankrupt as would a fire insurance company whose policyholders all lost their houses by fire.
Unemployment runs aground on this last barrier, too. Those individuals whose jobs were secure could never be sold unemployment insurance. Prospective customers would be drawn solely from those who felt their employment situations to be insecure.
When a business recession occurred, hosts of the insureds would lose their jobs at the same time. It would be equivalent to a life insurance company having a large percentage of its insureds die at the same time.
Insurance is an arrangement whereby the unfortunate few who lose are indemnified by the fortunate many who escape loss. Particularly those whose financial well being depends on it, which is often the case with the families of term life insurance policyholders. If the many, however, suffer the loss, then the few will prove inadequate to indemnify them properly, except at an uneconomic premium.
In order to guard against catastrophic losses, fire insurance companies, for example, seek a wide distribution of exposures and set up underwriting standards which prohibit the concentrations of business in small sections of a city. They also put a clause in their policies excluding losses due to wars, thus relieving them of the danger of catastrophic losses resulting from atomic warfare.
Sarah Martin is a freelance marketing writer based out of San Diego, CA. She specializes in business, finance, and term life insurance. For free life insurance rates, please visit http://www.equote.com/.
Filed under Finances by on Nov 29th, 2008. Comment. 
Life insurances are a type of insurance that gives monetary benefits to the beneficiary of the person insured once he is already dead. One of the types of life insurances is the term life insurance which is known as the least expensive form of life insurance. This became a popular choice for many people as it can give the person his needed insurance without paying too much. Thus, the need for protection of an individual is reached while keeping the minimum amount paid for the insurance.
At the start of the insurance, your term life insurance can be the most inexpensive one that you can get. Once you have paid for your insurance, it will not have accumulated cash value. However, you can have a ready amount usable in times that you may need it. However, as time goes on, the amount may increase. What you must do when selecting a term life insurance is to consider the long term set up and check if it would fit your budget. Also check on different offers that the other companies may have so that you will have a choice on which type of term life insurance would be best for you.
There are many people that prefer the term life insurance since it can provide their family their safety needs without getting too much of the bulk in their family budget. The saved money from the family budget can now be used in other investments that are needed by the family.
Since there are many companies that can offer an individual a term life insurance, you will not have a hard time searching for the one that you can avail. A person will simply have to undergo the usual physical check up before the insurance starts and it will continue as long as the insurance premium is paid. You may find different companies that also have different kinds of offers to you. You will have to select one that can meet your needs but you will need to carefully evaluate the terms of the term life insurance so that you can assess if it really is the deal that you need.
With the term life insurance, you will be protected by the insurance for a certain period of time. Thus, it only covers a number of years and after which, renewal may be done. This kind of life insurance is desired by many individuals primarily because it provides security at a lower rate. But if a person wants to learn how to get more benefits from his insurance, he will have to learn more of the details and terms so that everything will be cleared and it may fall in accordance with the plan. Also, it must be known that the premium may increase for each renewal of the insurance. Thus, there may be a time when the premium of this kind of insurance is no longer the cheapest in the market. Knowing these drawbacks will help you know the things that must be done if you already consider having the insurance for yourself.
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Filed under Finances by on Nov 27th, 2008. Comment.
Equally important in providing life insurance to working people at low cost has been the increasing trend to write ordinary instead of industrial insurance on their lives. An important step in this direction was taken by the Metropolitan Life Insurance Company in 1925 when it began to issue monthly premium ordinary insurance at practically the same rates as for its corresponding quarterly premium policies.
The holders of these monthly ordinary life insurance policies (http://www.equote.com/li/life-insurance.html) receive the same broad agency service that is rendered the weekly industrial policyholders. Thus, ordinary insurance especially adapted to their circumstances was placed within the reach of many wage earners. Moreover, industrial policyholders have a privilege of converting their insurance into ordinary when circumstances warrant the conversion.
As a result of the revisions in underwriting practices and the emphasis on lower cost forms of insurance, the composition of the company’s business has undergone a marked change in recent years. At the end of 1930 there was $6,400,000,000 of weekly premium business in force in the Metropolitan. By the end of 1942 this total had increased only slightly to $6,500,000,000. At the same time the monthly industrial business much more than tripled, increasing from $396,000,000 to nearly $1,400,000,000.
Similarly, in that time monthly ordinary insurance rose from $986,000,000 to $3,250,000,000. Group insurance increased from $2,703,000,000 to $5,350,000,000. Thus, of the insurance particularly designed for wage earners and their families, 61% was on the weekly premium plan at the end of 1930, as compared with less than 40% at the end of 1941.
In addition to the insurance companies, other socially minded organizations endeavored to furnish lower cost life insurance. But weekly premium and monthly premium industrial insurance continue to be the types that best meet the circumstances of large numbers of wage earners. Perhaps the best known of these outside efforts was the plan of Savings Bank Life insurance in operation in three states.
This insurance was on sale in a number of banks at the request of qualified purchasers. However, the total amount of such insurance was extremely small in comparison with the industrial insurance issued by the life insurance companies. It is, moreover, doubtful that a large proportion of the insurance issued by the banks was on the lives of persons for whom industrial insurance was designed.
These efforts have not resulted in the supplanting of industrial insurance, because cheaper insurance can only be furnished by eliminating the broad services of the agent—services which experience has indicated are necessary for the majority of working men’s families.
One of the valuable services rendered by the agent is to revise the family insurance program as circumstances require. Families frequently begin their program with industrial, and as their economic conditions change they are able to purchase ordinary or even no exam term life insurance (http://www.equote.com/li/termlifeinsurance.html). Sometimes it is to their interest to convert the industrial to ordinary insurance; but if the industrial insurance has been outstanding for a number of years it is often desirable to retain this form because of advantages accruing through the age of the policies.
Thus, as time goes on, many families own both types of policies. Industrial insurance is the educator, which gives their children, as they grow up, a sense of insurance values. This development of the family program and the graduation of individuals from one type of insurance to another are reflected in the fact that almost one fourth of Metropolitan ordinary policyholders also carried Metropolitan industrial insurance and about one in every five of group policyholders also owned Metropolitan ordinary or industrial policies. In many families the breadwinner owned ordinary or group insurance, while smaller amounts of industrial insurance are maintained on the dependent members.
Sarah Martin is a freelance marketing writer based out of San Diego, CA. She specializes in finance, business, and life insurance policies. For no exam term life insurance quotes, please visit http://www.equote.com/.
Filed under Finances by on Nov 25th, 2008. Comment.
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