Insurance is a system to alleviate financial losses by transferring risk of loss from one entity to another. Loss has several meanings including: Loss in electronics is the ratio of the system output to system input In electronics, loss is the ratio of system output to system input. ... This article is about the concept of risk. ...

The entity that is transferring the risk — which may be an individual or association of any type, including a government or government agency — is called the "insured". The entity accepting the risk is called the "insurer". The agreement between the two by which the risk is transferred is called the "policy": this is a legal contract that sets out exactly the terms and conditions of the coverage. The fee paid by the insured to the insurer for assuming the risk is called the "premium". This is usually determined by the insurer to fund estimated future claims paid, administrative costs, and profit. A government is an organization that has the power to make and enforce laws for a certain territory. ... An agency is a department of a local or national government responsible for the oversight and administration of a specific function, such as a customs agency or a space agency. ... A contract is any legally-enforceable promise or set of promises made by one party to another. ... One pays a fee as renumeration for services, especially the honorarium paid to a doctor, lawyer or member of a learned profession. ... Organisational use In some organisational analyses, administration can refer to the bureaucratic or operational performance of mundane office tasks, usually internally oriented. ... Profit is defined as the residual value gained from business operations. ...

For example, let us assume that a couple buys a home costing $100,000. Knowing that the loss of their home would bring them financial ruin, they acquire insurance coverage in the form of a homeowner's policy. That policy will pay them the cost of replacing or repairing their home in the event of a catastrophe. The insurance company charges them a premium of $1,000 a year. Risk of loss has been transferred from the homeowners to the insurance company. Houses in Fishpool Street, St Albans, England For other meanings of the word house, see House (disambiguation). ... The dollar is the name of the official currency in several countries, dependencies and other regions (see list below), including the US dollar, the worlds most widely circulated currency (see list below). ...

The insurer uses actuarial science to quantify the risk they have assumed. Actuarial science uses mathematics, particularly statistics and probability, which can be applied to many covered risks to approximate future claims with reasonable accuracy. Actuarial science is concerned with the application of mathematical and statistical methods to finance and insurance, particularly where this relates to the assessment of risks in the long term. ... Mathematics, often abbreviated maths in Commonwealth English and math in American English, is the study of abstraction. ... For Wikipedia statistics, see m:Statistics Statistics is the science and practice of developing human knowledge through the use of empirical data expressed in quantitative form. ... The word probability derives from the Latin probare (to prove, or to test). ...

For example, many individual people purchase homeowner's insurance policies and they each pay a premium to an insurance company. If a covered loss occurs, the insurer pays the claim. For some insureds, the insurance benefits they receive will greatly exceed the money they have paid to the insurer. Others may never make a claim. When averaged out over all the policies sold, the total of claims paid out should be less than the total of premiums paid to the insurer, with the difference being costs and profit.

Insurance companies also earn investment profits. These are generated by investing premiums received until they are needed to pay claims. This money is called the "float". The insurer may make profits or losses from the value change in the float as well as interest or dividend on the float. In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, at the result of float. Investment is a term with several closely related meanings in finance and economics. ... In finance, interest has three general definitions. ... A dividend is the distribution of profits to a companys shareholders. ... The United States of America — also referred to as the United States, the U.S.A., the U.S., America, the States, or (archaically) Columbia—is a federal republic of 50 states located primarily in central North America (with the exception of two states: Alaska and Hawaii). ... This page deals with property as ownership rights. ... A casualty is a victim of an accident, injury or trauma. ...

Some people consider insurance a type of wager or bet that executes over the policy period. The insurance company bets that you or your property will not suffer a loss while you put money on the opposite outcome. The difference in the fees paid to the insurance company versus the amount for which they can be held liable if an accident happens is roughly analogous to the odds one might expect when betting on a racehorse (for example, 10 to 1). For this reason, a number of religious groups including the Amish avoid insurance and instead depend on support provided by their communities when disasters strike. In closed, supportive communities where others will actually step in to rebuild lost property, this arrangement can work. Most societies could not effectively support this type of system and the system will not work for large risks. Gambling (or betting) is any behavior involving the risk of money or valuables on the outcome of a game, contest, or other event in which the outcome of that activity is partially or totally dependent upon chance. ... Alternate meanings: Accident (fallacy), Accident (philosophy), Accident (movie), Accident, Maryland An accident is something going wrong. ... Horse-racing is an equestrian sporting activity which has been practiced over the centuries; the chariot races of Roman times were an early example, as was the contest of the steeds of the god Odin and the giant Hrungnir in Norse mythology. ... Religion, a term sometimes used interchangeably with faith, is commonly defined as belief concerning the supernatural, sacred, or divine, and the moral codes, practices and institutions associated with such belief. ... The Amish are a denomination of Anabaptists related to the Mennonites, most of whom are noted for their avoidance of modern devices such as automobiles and electricity. ... Community is a set of people (or agents in a more abstract sense) with some shared element. ... A disaster is a natural or man-made event that negatively affects life, property, livelihood or industry often resulting in permanent changes to human societies, ecosystems and environment. ... A society is a group of people living or working together. ...

History of insurance

Insurance has been an institution of human society for thousands of years, having been practiced by Babylonian traders as long ago as the 2nd millennium BCE. Eventually it was given legal mention in the Code of Hammurabi, and practiced by early Mediterranean sailing merchants. The Greeks and Romans had "benevolent societies" which acted to care for the families and funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed. In America, Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire. Babylonia was an ancient state in Iraq), combining the territories of Sumer and Akkad. ... (3rd millennium BC – 2nd millennium BC – 1st millennium BC – other millennia) Events Second dynasty of Babylon First Bantu migrations from west Africa The Cushites drive the original inhabitants from Ethiopia, and establish trade relations with Egypt. ... An inscription of the Code of Hamurabi The Code of Hammurabi, created ca. ... The Mediterranean Sea is an intercontinental sea positioned between Europe to the north, Africa to the south and Asia to the east, covering an approximate area of 2. ... Merchants function as professional traders, dealing in commodities that they do not produce themselves. ... Ancient Greece is the term used to describe the Greek-speaking world in ancient times. ... History - Ancient history - Ancient Rome This is a List of Ancient Rome-related topics, that aims to include aspects of both the Ancient Roman Republic and Roman Empire. ... This article is about the domestic group. ... Underwater funeral in Twenty Thousand Leagues Under the Sea A funeral is a ceremony marking a persons death. ... Death is either the cessation of life in a living organism or the state of the organism after that event. ... A guild is an association of persons of the same trade or pursuits, formed to protect mutual interests and maintain standards of morality or conduct. ... The Middle Ages formed the middle period in a traditional schematic division of European history into three ages: the classical civilization of Antiquity, the Middle Ages, and modern times, beginning with the Renaissance. ... The first page of the Talmud, in the standard Vilna edition. ... In accounting, a good describes a physical product capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer. ... By Region: Italian Renaissance Northern Renaissance -French Renaissance -German Renaissance -English Renaissance The Renaissance was an influential cultural movement which brought about a period of scientific revolution and artistic transformation, at the dawn of modern European history. ... World map showing location of Europe A satellite composite image of Europe Europe is geologically and geographically a peninsula, forming the westernmost part of Eurasia. ... Franklin, an engraving from a painting by Duplessis Dr. Benjamin Franklin ( January 17, 1706 – April 17, 1790) was an American printer, journalist, publisher, author, philanthropist, abolitionist, public servant, scientist, librarian, diplomat, and inventor. ... FIRE can stand for Foundation for Individual Rights in Education Fully Integrated Robotised Engine, an engine from Fiat. ...

In the United States, the insurance industry is highly regulated, primarily by the states, who operate both individually and in concert through a national insurance commissioner's organization. In the context of government and public services regulation (as a process) is the control of something by rules, as opposed to its prohibition. ... A U.S. state is any one of the 50 states which have membership of the federation known as the United States of America (USA or U.S.). The separate state governments and the U.S. federal government share sovereignty. ... A Commissioner is one of various classes of persons who holds an office by virtue of a commission in the normally from the head of state, particularly of a state in the Commonwealth of Nations. ...

Types of insurance

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

• Automobile insurance, also known as auto insurance, car insurance and in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the vehicle itself.
• Casualty insurance insures against accidents, not necessarily tied to any specific property.
• Credit insurance pays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death.
• Financial loss insurance protects individuals and companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover failure of a creditor to pay money it owes to the insured. Fidelity bonds and surety bonds are included in this category.
• Health insurance covers medical bills incurred because of sickness or accidents.
• Liability insurance covers legal claims against the insured. For example, a doctor may purchase insurance to cover any legal claims against him if he were to be convicted of a mistake in treating a patient.
• Life insurance provides a benefit to a decedent's family or other designated beneficiary, to replace loss of the insured's income and provide for burial and other final expenses.
  • Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance.
• Political risk insurance can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.
• Property insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance.
• Terrorism insurance
• Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records done at the time of a real estate transaction.
• Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expense incurred due to a job-related injury.

A single policy may cover risks in one or more of the above categories. For example, car insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from say, causing an accident). A homeowner's insurance policy in the US typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner's property. Auto insurance is insurance consumers can purchase for cars, trucks, and other vehicles. ... The United Kingdom of Great Britain and Northern Ireland is a country in western Europe, and member of the Commonwealth of Nations, the G8, the European Union, and NATO. Usually known simply as the United Kingdom, the UK, or (inaccurately) as Great Britain or Britain, the UK has four constituent... In the most general sense, a liability is anything that is a hinderance, or puts one at a disadvantage. ... Device driver vehicle driver (driving) JDBC driver - a software that allows applications to connect to a database a kind of sail on a sailboat (driver (sail)) The golf club usually used for the first shot on a par 4 or 5 hole. ... Fatale is also the title of a comic book published in the mid-1990s by Broadway Comics. ... Vehicles are non-living means of transport. ... Casualty insurance is a broad category of insurance that includes almost any coverage that is not related to life, health, or property. ... Credit Insurance is an insurance policy associated with a specific loan or line of credit which pays back some or all of any monies owed should certain things happen to the borrower, such as death, disability, or unemployment. ... A loan is a type of debt. ... Unemployment rates in the United States. ... The term disability, as it is applied to humans, refers to any condition that impedes the completion of daily tasks using traditional methods. ... Death is either the cessation of life in a living organism or the state of the organism after that event. ... Historically, the term business referred to activities or interests. ... Sales, or the activity of selling, forms an integral part of commercial activity. ... A factory (previously manufactory) is a large industrial building where goods or products are manufactured. ... A creditor is a party (e. ... Moneys is an agreement within a community, to use something as a medium of exchange, which acts as an intermediary market good. ... A suretyship bond is a contractual agreement between three parties: (i) the principal, (ii) the obligee, and (iii) the surety. ... Health Insurance is a type of insurance whereby the insurer pays the medical costs of the insured if the insured becomes sick due to covered causes, or due to accidents. ... See drugs, medication, and pharmacology for substances that are used to treat patients. ... A disease is any abnormal condition of the body or mind that causes discomfort, dysfunction, or distress to the person affected or those in contact with the person. ... Doctor means teacher in Latin. ... A patient is the name given to any person who is ill or injured and is being treated by, or in need of treatment by, a physician or other medical professional. ... Life insurance policies, including pensions and life annuity policies, provide payments depending on the life or the death of a particular person or persons. ... Income, generally defined, is the money that is received as a result of the normal business activities of an individual or a business. ... By other animals Humans are not the only species to bury their dead. ... The term annuity, in current use in the insurance industry, refers to two very different types of legal contracts with very different purposes. ... A pension (also known as superannuation) is a retirement plan intended to provide a person with a secure income for life. ... Retirement is the status of a worker who has stopped working. ... Political risk insurance can be taken out by businesses, of any size, having operations in countries in which there is a risk that revolution or other political conditions will result in a loss. ... This article describes a type of political entity. ... A revolution is a relatively sudden and absolutely drastic change. ... Politics is the process and method of decision-making for groups of human beings. ... Theft (also known as stealing) is, in general, the wrongful taking of someone elses property without that persons willful consent. ... Composite satellite image showing the progress of a hurricane weather system approaching the east coast of America Weather comprises all the various phenomena that occur in the atmosphere of a planet. ... Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. ... Home insurance, or homeowners insurance, is an insurance policy that combines insurance on the home, its contents, and, often, the other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home. ... Boiler insurance is a type of property insurance that pays accidental losses to machinery and equipment. ... Terrorism insurance is insurance purchased by property owners to cover their potential losses and liabilities that might occur due to terrorist activities. ... A policy of Title insurance is a contract of indemnity between the insurance company and the owner of an interest in real property. ... Real property is a type of property differentiated from personal property. ... Introduction A mortgage is a device used to create a lien on real estate by contract. ... In law, lien is the broadest term for any sort of charge or encumbrance against an item of property that secures the payment of a debt or performance of some other obligation. ... Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. ... Workers compensation programs and laws exist to protect employees who are injured while on the job. ... A wage is the amount of money paid for some specified quantity of labour. ...

Potential sources of risk that may give rise to claims are known as "perils". Examples of perils might be fire, theft, earthquake, hurricane and many other potential risks. An insurance policy will set out in details which perils are covered by the policy and which are not. Global earthquake epicenters, 1963–1998 An earthquake is a trembling or a shaking movement of the Earths surface. ... This article is about weather phenomena. ...

Types of insurance companies

Insurance companies may be classified as

• Life insurance companies, who sell life insurance, annuities and pensions products.
• Non-life or general insurance companies, who sell other types of insurance.

In most countries, life and non-life insurers are subject to different regulations, tax and accounting rules. The main reason for the distinction between the two types of company is that life business is very long term in nature — coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year. A tax is an involuntary fee paid by individuals or businesses to a government. ... Accountancy (British English) or accounting (American English) is the process of maintaining, auditing, and processing financial information for business purposes. ... This is a list of decades which have articles with more information about them. ...

Insurance companies are also often classified as either mutual or stock companies. This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders, while stockholders, (who may or may not own policies) own stock insurance companies. Mutual describes a form of business enterprise which is owned by those who do business with it. ...

Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. Reinsurance refers to the situations where insurance companies insure against losses they may incur. ...

There are also companies known as insurance consultants. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies.

Similar to an insurance consultant, an insurance broker also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.

Life insurance and saving

Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed. See life insurance. Cash usually refers to money in the form of currency, such as bills or coins. ... A financial endowment consists of funds or property donated to an institution, individual, or group as a source of income. ... Liquidation refers to a business whose assets are converted to money in order to pay off debt. ... Wealth usually refers to money and property. ... Life insurance policies, including pensions and life annuity policies, provide payments depending on the life or the death of a particular person or persons. ...

In many countries, such as the US and the UK, tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death. Tax law is the codified system of laws that describes government levies on economic transactions, commonly called taxes. ... Save might refer to: Save (sport) - to stop a goal or maintain the lead To save a document in computer file management (see also Saving a webpage) The River Save (Zimbabwe), Zimbabwe The River Save (Hungary), Hungary -- joins the Danube just above Belgrade. ...

Criticisms of the insurance industry

Insurance insulates too much

By creating a "security blanket" for its insureds, an insurance company may inadvertently find that its insureds may not be as risk-averse as they should be (since the insured assumes the risk belongs to the insurer). To reduce their own financial exposure, insurance companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in some kind of behavior that grossly magnifies their risk of loss or liability.

For example, liability insurance providers do not provide coverage for liability arising from intentional torts committed by the insured. Even if a provider was irrational enough to try to provide such coverage, it is against the public policy of most countries to allow such insurance to exist, and thus it is usually illegal. In the common law, a tort is a civil wrong for which the law provides a remedy. ...

Lack of knowledge of policyholders

Insurance policies can be complex and some policyholders may not understand all the fees, regulation and coverages included in a policy. As a result, people could buy policies at unfavorable terms. In response to these issues, governments often make detailed regulations that set down minimum standards for policies and govern how they may be advertised and sold. Generally speaking, advertising is the paid promotion of goods, services, companies and ideas by an identified sponsor. ...

Many individuals purchase policies through an insurance broker. The broker can counsel the policyholder on which coverage to purchase and limitations of the policy. A broker generally holds contracts with many insurers which allows the broker to "shop" the market for the best rates and coverage possible. Chichicastenango, Guatemala traditional market Market stall in internally displaced persons camp in Kitgum, northern Uganda Mercado dos Lavradores, Funchal (Madeira Islands) A market is a mechanism which allows people to trade, normally governed by the theory of supply and demand. ...

Redlining

Redlining was originally denial of insurance to any area because of the area.

Risk determines premium. Evaluation of risk by the insurer considers every available, quantifiable factor, including location, credit scores, gender, occupation, marital status, and education level. However, some people consider all or some of these factors to be "unfair" and sometimes make claims such as 'racism' about insurers' determination of premiums. So, for political reasons, governments may limit the factors that may be used. A credit score is a numerical index which represents an estimate of an individuals financial creditworthiness. ... Gender is the perceived masculinity or femininity of a person or characteristic. ... Occupation may refer to: the principal activity (job or calling) that earns money for a person (see profession, business) the periods of time following a nations territory invasion by controlling enemy troops (see belligerent occupation) any activity that occupies an important portion of a persons attention (see fan... A persons marital status describes their relationship with a significant other. ... Education encompasses teaching and learning specific skills, and also something less tangible but more profound: the imparting of knowledge, good judgement and wisdom. ... An African-American drinks out of a water fountain marked for colored in 1939 at a street car terminal in Oklahoma City. ... A government is an organization that has the power to make and enforce laws for a certain territory. ...

A refutation to this is that the job of an insurance underwriter is to properly categorize a given risk as to the likelihood that the loss will occur. Any factor that causes a greater likelihood of loss should in theory, be charged a higher rate. This is a basic principle of insurance and must be followed for insurance companies or groups to operate properly, even for non-profit organizations. Thus, discrimination of potential insureds by legitimate factors is central to insurance. Therefore the only thing that can be considered legitimately "unfair" are practices that discriminate against a given group without actual factors that show that the group is a higher risk. So, eliminating real factors discriminates against other insureds by forcing them to bear part of the cost of the disallowed perceived factors. A non-profit organization (often called non-profit org or simply non-profit or not-for-profit) can be seen as an organization that doesnt have a goal to make a profit. ... To discriminate is to make a distinction. ...

Health insurance

Health insurance, that is coverage for individuals to protect them against medical costs, is a highly charged and emotional issue in the United States. In theory, it should work as any other insurance policy but the skyrocketing cost of health coverage has polarized the issue. Please see health insurance for a discussion of this category. Health Insurance is a type of insurance whereby the insurer pays the medical costs of the insured if the insured becomes sick due to covered causes, or due to accidents. ...

Glossary

Glossary of terms, a guide to reading insurance industry financial statements and reports

• Combined ratio — (Incurred losses + incurred underwriting expenses) ÷ earned premiums — (or) loss ratio + expense ratio + dividend ratio. It is calculated by dividing the sum of incurred losses and expenses by earned premium. A lower number is better.

Quotes

April 2005 - (Hearsay quote) Hank Greenberg told his board of directors that "you can't even spell 'insurance'" ([1]  (http://editor.slate.msn.com/default.aspx/id/2116167/nav/ais/)). Henry Benjamin Hank Greenberg (January 1, 1911 - September 4, 1986), nicknamed Hammerin Hank, was an American player in Major League Baseball. ...

See also

• False insurance claims
• Financial services (industry belonging)

Insurance fraud or false insurance claims are insurance claims filed with the intent to defraud an insurance company. ... Financial services is a term used to refer to the services provided by the finance industry. ...

Lists

• List of insurance topics
• List of finance topics
• List of U.S. insurance companies

What follows is a list of over 250 Wikipedia articles on finance topics. ... What follows is a list of over 250 Wikipedia articles on finance topics. ... This is a list of insurance companies in the United States. ...

External links

• Insurance industry statistics in the U.S. [2]  (http://www.iii.org/media/facts/statsbyissue/industry/)