It's both actually and it's more aptly described as a promise. Quite simply, it's a promise to pay you or your beneficiaries in the event of a loss. You purchase insurance because life has risks.
You might crash your car... a tornado or a fire could cause you to lose your home. Any of these hazards could also take your life as well-- or you could be seriously injured. There is protection available for all of these risks and more in the form of a document or a collection of documents called an insurance policy. An auto insurance policy, for example, will lay out specific risks for which an insurance company will reimburse an insured person for a loss. It will also provide details about what risks are specifically excluded. You agree to make regular payment to the insurance company called "premium". In exchange, the insurance company provides a promise (in writing-- the "policy"), to reimburse you for whatever loss you have experienced.
Insurance is a necessity in a world of uncertainty. There are countless ways to protect yourself against adverse risk and they all involve the basic elements of a standard contract-- offer, acceptance, and consideration. For example, an insurance company will evaluate you as a risk, make an offer to insure you based on your individual underwriting characteristics, you signal your acceptance of their offer and a policy is issued, you pay the company a comparatively small amount of money (consideration) so that they assume the risk of a potentially much larger financial loss. It would be impossible for most Americans to absorb the sudden, accidental loss of their primary residence after it's destroyed by fire for instance. Homeowners insurance, for most average suburbanites costs in the neighborhood of $500-$1,000 per year. The average home in the United States costs $220,500. If you get homeowners insurance in place and your home burns down the next day-- the insurance company will cut you-- and your mortgage company-- a check for the reconstruction costs. It's a bargain that few are reluctant to pay for obvious reasons.
The main types of insurance the average American consumer will need are: Health Insurance, Auto Insurance, Homeowners Insurance, and Life Insurance.
* Health Insurance reimburses the medical facility that treats you or you personally if you're out of pocket for medical expenses. Health insurance costs are high but costs of treatment are much higher. If you're admitted to a hospital for something, even if it turns out to be minor, could cost tens of thousands of dollars. Whine all you want about the cost of health insurance-- but you'll be setting yourself up for a complete breakdown if you don't have it.
* Life insurance , on the other hand, is cheap-- especially if you're young and healthy. For literally pennies a day, consumers of life insurance can secure a promise from an insurer to pay their beneficiaries if they pass away. A 40 year old male can purchase hundreds of thousands of dollars worth of coverage for less than $30 per month under certain circumstances.
* Car insurance can vary widely by state, but it is generally quite affordable. For a small amount of premium, the insurer will reimburse you for the market value of your car, or most importantly, pay the potentially huge costs associated with damages that may result from your negligence behind the wheel.
* Homeowners insurance is similar... it will take care of the cost to rebuild your home, but it will also pay a claimant who is injured on your property if you negligently forgot to shovel the snow from your sidewalk.
Saturday, June 20, 2009
Saturday, May 30, 2009
Insuring Your Investments
Lurking in the back of every investor's mind is the fear that someone will take their money away from them. You may have heard stories about the Great Depression, and the run on bank deposits that forced many financial institutions to close. Younger investors may remember the savings and loan crisis of the 1980s, in which savings institutions were too aggressive in obtaining deposits and making risky loans, forcing many of them to shut down. Numerous small life-insurance companies and other financial institutions have been forced to close due to insolvency.
It's easy to think that events like these could never happen again, especially to big banks like Wells Fargo (NYSE:WFC), large brokerage houses like Merrill Lynch (NYSE: MER), or major insurance companies like Allstate (NYSE:ALL). Yet in order to reassure investors that they can safely entrust their money and assets to financial institutions, regardless of their size, there are a number of different forms of insurance protection that cover various types of financial accounts. Whether you have a bank account, a brokerage account, or a life insurance policy, various organizations stand behind your financial institution in the event of unforeseen problems.
FDIC and bank deposits
As you may be aware, the Federal Deposit Insurance Corporation insures bank depositors for amounts as much as $100,000 in the event that a bank fails. Although certain periods, such as the late 1980s and early 1990s, have been particularly bad in terms of the number of failed banks, at least one bank has failed in nearly every year since the FDIC's insurance fund was established in 1934. The FDIC has paid out tens of billions of dollars to depositors during its 70-year history.
For most depositors, $100,000 is more than enough protection for their bank deposits. However, if you wish to keep more money in FDIC-insured accounts, there are a number of things you can do. First, you can keep accounts at different banks. Each bank will have a separate $100,000 insurance limit, so opening accounts at 10 different banks would allow you to keep $1 million in FDIC-insured accounts. Second, by including different names on certain accounts, you can increase the available insurance on your deposits. For instance, you can have an account solely in your individual name with $100,000, a joint account with someone else with another $100,000, and yet another $100,000 account that includes a pay-on-death provision, which instructs the bank to pay the proceeds to the person you designate on your death. By using a series of different account registrations, you can multiply your $100,000 insurance protection by many times.
SIPC and brokerage accounts
With the advent of in-house brokers appearing inside traditional banks, there's a lot of confusion about different forms of insurance. According to federal regulations, banks have to be extremely clear that products sold by in-house brokers are not insured by the FDIC, and are therefore subject to market risks of loss. While the FDIC provides blanket protection to all bank depositors with accounts at a failed bank, it doesn't provide any protection to brokerage account owners, even if all of their transactions occurred at the bank. And no one protects investors from bad decisions about what investments they buy.
Brokerage accounts have a different form of protection. The Securities Investor Protection Corporation protects brokerage investors when their brokerage firm fails. However, the SIPC protects investors differently than the FDIC does. Since the FDIC deals only with money deposits, while the SIPC must address not only cash balances but also stocks, bonds, and other securities, this distinction is logical.
In general, when a brokerage firm fails, the SIPC asks a court to appoint a trustee to oversee the liquidation of the firm's assets. If the firm's assets cover the legitimate claims of brokerage customers, the SIPC doesn't need to do anything further. However, if the assets are insufficient to meet customer claims, the SIPC reserve fund will cover the deficiency up to $500,000 per customer, with a maximum of $100,000 in cash claims. In most cases, investors will receive any stocks and bonds they own in kind, rather than having to accept their cash value. Although some types of assets, including future contracts, currencies, and limited partnerships, may not be covered by SIPC, most typical investments are covered.
Guaranty funds and insurance companies
When an insurance company fails, policyholders suddenly bear the risk that promises made by the insurance company will not be fulfilled. After a lifetime of paying premiums, this poses a big problem for insurance owners, who may be unable to find replacement coverage with other insurers.
In order to protect consumers, most states have guaranty funds that cover policyholders in the event that their insurance company fails. While each state's laws are somewhat different, most states cover as much as $300,000 in death benefits for life insurance. In addition, if you own annuity contracts, guaranty funds typically cover up to $100,000 in value.
Although all of these organizations provide some protection for investors, it's still best to avoid having to go through the process of dealing with an insolvent financial institution in the first place. Because most institutions issue their own financial information to the public, you can look on your own to make sure your bank, brokerage firm, or insurance company has the stability and resources to stand behind its assurances to you. Nevertheless, it's comforting to know that even if the worst happens, your assets will still be protected.
Small Business Insurances
 Small Business Insurances It can be difficult to determine which kind of insurance you need for your small business. Different types of insurance have confusingly similar names; your state, town, or county may have its own insurance requirements; and many industries have coverage specific to them. Insurance is one of the most neglected small business responsibilities. Not having the appropriate insurance for your small business is a mistake because a disaster can shut down your company permanently, or at least wreak havoc on your assets. | |
If you're having difficulty determining which kind of insurance your business should have, you might want to check with the following agencies:
- The county or city clerk
- A local chapter of your industry association
- The state insurance office
Business Insurance Info
Every Business success is dependent on the employee potentials and the hard work put in by the total strength of the organization. However strong your business is it could be wiped out within a few hours if proper precautions are not maintained. An Insurance policy can save your business from colliding when any disaster strikes. Getting any Business insured is a prime concern these days when politically nothing seems to be stable any longer. The political upheavals cause disruptions in the smallest of enterprise affecting businesses in general.
BOAT INSURANCES
BOAT INSURANCES
Boat insurance programs are normally designed to cover boats up to 26' in overall length. If the size of your vessel is greater than 26 feet, it's generally considered a "yacht", and therefore qualifies for yacht insurance.
Boat insurance provides physical damage coverage to repair your boat if it's accidentally damaged or destroyed by a covered peril such as collision, fire, theft, windstorm, lightning or vandalism. This coverage is broad, and provides coverage for the boat, including its machinery and auxiliary equipment, outboard motors, boat trailer and personal property.
A Boat Insurance policy can provide physical damage coverage on an Actual Cash Value (ACV) or an Agreed Amount Value basis. Both types of boat insurance policies offer important coverages for your boat but there are significant differences.
Actual Cash Value policies pay for Replacement Costs less depreciation at the time of the loss. In the event of a total loss, used boat pricing guides and other resources are used to determine the approximate market value of your vessel. A partial loss is settled by taking the total coast of the repair less a percentage for depreciation.
Agreed Amount Value policies mean you and the insurance company have agreed on the value of your vessel and in the event of a total loss you will be paid that amount. Agreed Amount Value policies also replace old items for new in the event of a partial loss without any deduction for depreciation. Most Agreed Amount Value policies require actual cash value on certain damaged property such as sails, protective covers, batteries, dinghies, trailers and aged outboard motors, lower drive units or outdrives.
Physical Damage coverage is usually subject to a deductible. The boat and motor usually have the same deductible with additional deductibles for the trailer and personal effects. The deductible is the amount you are willing to pay in case of a loss. The higher the deductible, the lower your insurance premium. Boat policy deductibles are usually calculated as a percentage of your coverage (1%, 2%, 3% of the vessel value) or can be on flat amounts of $250 or $500.
A good boat insurance policy should also offer Personal Effects coverage to provide protection for those items not intended for the normal operation of your boat, such as portable TVs, cellular or portable phones, stereos, radios and cameras.
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Boat Liability
The Liability section of the policy provides protection if you are legally responsible for damages to property or injury to someone other than yourself or a family member. Boat Insurance liability provides protection if you are sued as a result of hitting another boat, or if someone is hurt onboard your vessel because of your negligence. This coverage is usually offered in increments of $100,000 up to $1 million.
Medical Payments
The Medical Payments section of the policy provides protection for reasonable medical, ambulance and hospital costs should someone be injured while in, upon, boarding or leaving your boat.
Uninsured Boat Owners Coverage
The Uninsured Boat Owners section of the policy provides coverage for injuries caused by an accident that you are entitled to recover from the owner or operator of an uninsured boat or "hit-and-run" boat.
Commercial Towing and Assistance enables you to be reimbursed for the reasonable costs incurred when you break down at sea and need a commercial tow to port.
These are some of the basic coverages you should look for when purchasing boat insurance. As a market leader in the boat insurance industry, United Marine Underwriters offers broad coverages at great rates for virtually any type of vessel.
Flood insurance claims rising
But only 1 percent of Indiana households have flood coverage, state agency says
The state’s two largest homeowner insurance companies have begun fielding thousands of claims for property damage from the weekend storms.
Indiana Farm Bureau Insurance, the state’s second-largest underwriter of home insurance, saw claims nearly double during the day Monday, jumping from 507 to 931, the company said.
“We will absolutely ramp up to take care of the situation,” said Rick Nelson, a spokesman for Farm Bureau, which closed its Martinsville office because of flooding.
State Farm Insurance, the biggest home insurer in Indiana, with policies covering one of every four houses, had received 2,300 homeowner claims from Friday’s and Saturday’s storms by midday Monday.
“We expect the numbers to rise throughout the week,” said State Farm spokeswoman Missy Lundberg. State Farm has a mobile claims office in Edinburgh and was setting up a second unit Monday.
Even as the number of claims mounts, many homeowners with the most severe damage from flooding may not be covered for flooding. Only 1 percent, or 28,000, of the state’s 2.3 million households were covered by flood insurance, according to the Indiana Department of Insurance.
A separate insurance policy is required for flood insurance because the typical homeowner insurance policy doesn’t cover damage from flooding.
“I didn’t know that,” said George Lambert, 82, who was cleaning up the one-story home he and his wife Betty own on Columbus’ northside. His homeowner insurance company told him his policy doesn’t cover damage from a flood.
“I argued with ‘em a little bit,” Lambert said. “I’m telling them it’s not flood damage. It’s the storm that done it.”
Flooding sent 4 feet of water from nearby Haw Creek surging through every room, destroying furniture, appliances, clothes and other possessions.
Federal disaster loans carrying a low interest rate are available for those without flood coverage.
The federal government through the Federal Emergency Management Agency is the sole insurer for flooding in the nation.
Greg Caveny, who with his wife is opening a salon in downtown Franklin, is one of the financially fortunate victims of flooding that wracked the Johnson County city. His bankers required him to buy a flood policy.
“I’m lucky,” he said of his flood insurance. “I didn’t think I needed it.” Caveny and his wife bought their building two months ago and had just tiled part of it when the floods hit. The water damaged much of the building.
Injury Claims
There are two types of Injury minor injury and major injury. Because of injuries, people face loss and pain. If a person injures by a minor or major accident then it is difficult for a common person to compensate loss at the time. Each problem has a solution and solution of this problem is the . Insurance companies compensate loss after filing a claim. Claim is an important step in an insurance if someone who injures by an accident and wants payment of the policy then he has to claim to the insurance company that he is a rightful person. Claim is the written official request to the insurance company.
If a person losses his leg or arm by a major accident or injures by a minor accident he has a right to claim to the insurance company for the payment of the policy. If accident is happened in someone's life and because of this he injures or faces major injury such as head injury, back injury or losses his arm, leg, thumb etc. he has a right to file a claim.
Whenever a person files a claim, the insurance company helps him to meet his medical expenses. If a person injures seriously in an accident and faces disability then insurance company compensate loss and helps him to meet his monthly expenses. If a person, slips then also file a claim.
If you slips or trip unfortunately, and your wrist or foot injures and if think that you are a rightful person then you can claim to the insurance company for the amount and the insurance company compensates loss and meet your medical expenses.
If a worker works on an organization, faces an accident, and injures so he has a right to file a claim to the insurance company and has a right to receive the payment of policy. It is the responsibility of the owner to make a claim. Then the insurance company helps him to meet the medical expenses. Either he has a major injury or minor, the insurance company compensates losses. The insurance company compensates Losses of road accident. If any person injures by any sort of accident the insurance company compensates losses.
Road accident is very common for us .If a person faces major injury because of road accident and is not in condition to claim by self such as head injury then his family can claim to the insurance company and after filing a claim insurance company meets his medical expenses. If a person faces disability because of serious accident then he or his family can claim to the insurance company and the insurance company financially supports them.
If any person injures then claim is the most important thing whenever he files a claim then he receives his payment. Claim is in a written form and it is a notification or request. After injury either it is major or minor he has a right to claim, after filing a claim the insurance company compensates losses and helps to meet his medical expenses and meets his monthly expenses according to the insurance rules and regulation if he faces disability. On the other hand, the insurance company financially supports to the family because it is not easy for a common family to compensate loss at the time. The insurance company solves this problem. If someone not sure that he is, a rightful or not then he can contact those officers who can guide him.
If a person losses his leg or arm by a major accident or injures by a minor accident he has a right to claim to the insurance company for the payment of the policy. If accident is happened in someone's life and because of this he injures or faces major injury such as head injury, back injury or losses his arm, leg, thumb etc. he has a right to file a claim.
Whenever a person files a claim, the insurance company helps him to meet his medical expenses. If a person injures seriously in an accident and faces disability then insurance company compensate loss and helps him to meet his monthly expenses. If a person, slips then also file a claim.
If you slips or trip unfortunately, and your wrist or foot injures and if think that you are a rightful person then you can claim to the insurance company for the amount and the insurance company compensates loss and meet your medical expenses.
If a worker works on an organization, faces an accident, and injures so he has a right to file a claim to the insurance company and has a right to receive the payment of policy. It is the responsibility of the owner to make a claim. Then the insurance company helps him to meet the medical expenses. Either he has a major injury or minor, the insurance company compensates losses. The insurance company compensates Losses of road accident. If any person injures by any sort of accident the insurance company compensates losses.
Road accident is very common for us .If a person faces major injury because of road accident and is not in condition to claim by self such as head injury then his family can claim to the insurance company and after filing a claim insurance company meets his medical expenses. If a person faces disability because of serious accident then he or his family can claim to the insurance company and the insurance company financially supports them.
If any person injures then claim is the most important thing whenever he files a claim then he receives his payment. Claim is in a written form and it is a notification or request. After injury either it is major or minor he has a right to claim, after filing a claim the insurance company compensates losses and helps to meet his medical expenses and meets his monthly expenses according to the insurance rules and regulation if he faces disability. On the other hand, the insurance company financially supports to the family because it is not easy for a common family to compensate loss at the time. The insurance company solves this problem. If someone not sure that he is, a rightful or not then he can contact those officers who can guide him.
Which Type of Flood Insurance Do I Need?
Contents coverage covers furniture and other
personal possessions except for money, valuable papers, etc.
Renters can buy contents coverage, even if the owner does not buy structural coverage on the building.
There is no coverage for things outside the house, like the driveway and landscaping.
Why Do I Need Flood Insurance?
the floodplain. Since flooding is not covered by standard property insurance, additional insurance is required for property located within the floodplain (Zone A or AE on the FIRM map). Please note that flood insurance can be purchased for ANY property, but is only required for properties with federally backed mortgages located
within the floodplain.
Guidance Note Concentration Risk Capital Charge for Lenders Mortgage Insurers
1. This Guidance Note applies to a Lenders Mortgage Insurer (LMI) meaning a general insurer (as defined in the Insurance Act 1973) that has written or reinsured, or proposes to write or re insure, policies of lenders mortgage
insurance. For these purposes lenders mortgage insurance has its ordinary commercial meaning and includes insurance under a policy which protects a lender from losses in the event of borrower default on a loan secured by
mortgage over residential and/or other property. This Guidance Note outlines the methodology for the calculation of the Maximum Event Retention (MER), and the applicable Concentration Risk Capital Charge, for an LMI that uses the
Prescribed Method to determine its Minimum Capital Requirement (MCR).
2. An LMI must also meet the requirements of Guidance Note GGN 110.5
Concentration Risk Capital Charge. Should there be any inconsistency between this Guidance Note and GGN 110.5, the requirements in this Guidance Note take precedence.
Definitions
3. The MER is the largest loss to which an insurer will be exposed (taking into account the probability of that loss) due to a concentration of policies, after netting out any reinsurance recoveries. The MER must include an allowance for the cost of one reinstatement premium for the insurer’s catastrophe reinsurance
4. Probable Maximum Loss (PML) is the largest loss to which an insurer will be exposed (within the realms of possibility) due to a concentration of policies, without any allowance for reinsurance recoveries. For the purpose of this Guidance Note, the PML is assumed to arise from a catastrophic event that is
expected to re-occur, on average, once in every 250 years.
5. Loans, as referred to in this Guidance Note, are loans secured by an insured mortgage over residential and/or other property.
6. Sum insured is the original exposure amount for an LMI as stated in the original mortgage insurance policy. Further information on sum insured is provided in paragraph 29.
7. Loan-to-Valuation Ratio (LVR) is the ratio of the amount of the loan to the value of the secured residential property, as at the date of origination of the loan. The inclusion of a First Home Owners Grant (FHOG) in the deposit for a
mortgaged property will not otherwise increase the LVR of a loan. Further information on LVR is provided in paragraph 29.
8. Age is the length of time from the date of origination of the loan to the date of calculation. Further information on age is provided in paragraph 29.
9. Loan type refers to whether the loan is a standard, non-standard or commercial loan. Further information on loan types is provided in paragraphs 23 to 28.
10. Coverage type refers to whether the insurance provided is for 100 per cent of the loan amount, or is top-up cover (less than 100 per cent of the loan amount insured), or is coverage in respect of a pool of loans (pool mortgage insurance).
11. Premiums Liabilities, as referred to in this Guidance Note, relate to future claim payments arising from future events insured under existing policies, gross
of expected reinsurance recoveries and valued at a 75 per centlevel of sufficiency.
12. Outstanding Claims Provision (OCP), as referred to in this Guidance Note, relates to all claims incurred prior to the calculation date, whether or not they have been reported to the insurer, gross of expected reinsurance recoveries and valued at a 75 per cent level of sufficiency.
Background
13. Although an LMI may not be exposed to the possibility of large losses due to natural perils, such as those faced by most other general insurers, it will be exposed to large losses resulting from a severe economic and/or property downturn.
14. Most natural peril catastrophes are localised and occur at a particular point in time. In contrast, an economic and/or property downturn can be a prolonged, nationwide event, which may have an impact over several years. APRA considers that a three-year downturn is appropriate for determining the MER of
an LMI.
MER model for LMIs
15. The MER model for LMIs assumes a three-year economic and/or property downturn. The modelled losses must be allocated in the proportion of 25 per cent to year one, 50 per cent to year two and 25 per cent to year three, of the downturn. These losses are in addition to future claim payments provisioned for
as Premiums Liabilities.
16. An LMI’s MER is calculated by:
(a) working out the PML (which will comprise the total of all the amounts
worked out by applying paragraphs 17 to 22);
(b) deducting the amount of allowable reinsurance, worked out in accordance with paragraphs 30 to 37 and Attachment 2, from the PML;
(c) adding an allowance of five per cent of the PML for claims handling expenses; and
(d) adding the cost of one full reinstatement of reinsurance cover (if applicable).
17. Where an LMI has written one or more policies covering standard or nonstandard loans (other than by way of a policy of pool mortgage insurance, or by way of a policy of top-up cover), its PML will include an amount calculated by:
(a) multiplying the sum insured under each such policy by the appropriate Probability of Default (PD), Loss-Given-Default (LGD) and seasoning
factors set out in Attachment 1; and then
(b) adding together the amounts calculated for each policy under subparagraph (a) to produce a total.
18. Where an LMI has written one or more policies of top-up cover in respect of standard or non-standard loans, its PML will include an amount calculated by:
(a) multiplying the sum insured under each such policy by:
(i) the appropriate PD factor set out in Attachment 1; and
(ii) the appropriate LGD factor set out in Attachment 1, adjusted to reflect the proportion of insurance in place by dividing the LGD percentage by the percentage of top-up cover (see the Example
below), up to a maximum of 100 per cent; and
(iii) the appropriate seasoning factor set out in Attachment 1; and then
(b) adding together the amounts calculated for each policy under
subparagraph (a) to produce a total.
Example: 30 per cent top-up cover for a loan with an LVR of 65 per cent is subject to an LGD of 67 per cent (= 20 per cent divided by 30 per cent).
19. Where an LMI has written one or more policies of pool mortgage insurance covering standard and non-standard loans, its PML will include an amount calculated by:
(a) multiplying the total sum insured under each such policy by the appropriate PD, LGD and seasoning factors (as set out below); and then
(b) adding together the amounts calculated for each policy under subparagraph (a) to produce a total.
For the purposes of subparagraph (a), the PD and seasoning factors are the factors set out in Attachment 1 that correspond to the weighted-average LVR and weighted-average age of the pool, and the LGD is 100 per cent.
20. Where an LMI has written one or more policies covering commercial loans, its PML will include an amount calculated by:
(a) multiplying the sum insured under each such policy by a factor of eight
per cent (irrespective of the LVR and age of the loan); and then
(b) adding together the amounts calculated for each policy under subparagraph (a) to produce a total.
21. Where a policy has characteristics of more than one coverage type, or the insured loan or loans have characteristics of more than one loan type, then the relevant exposure must be recognised in the category which produces the
highest PML for that exposure. If neither paragraph 17, 18, 19 or 20 readily applies to the policy or the loan type, APRA may determine, by instrument in writing, a formula for the calculation of the PML in relation to that exposure.
22. In calculating the PML in accordance with paragraphs 17 to
21, the LMI MER
model assumes a constant sum insured over the three-year scenario. This recognises that, although the sum insured may decrease as a result of the expiration of existing policies, this may be offset by the LMI writing new business over the three-year scenario. However, for an LMI no longer writing
new business (i.e. in run-off), the sum insured is expected to decrease over the three-year scenario. Accordingly, it may be appropriate for an LMI in run-off to adjust its PML downwards in years two and three of the scenario for the purpose of calculating its MER. The methodology for adjusting an LMI’s PML
must be approved by APRA by an instrument in writing.
Criteria for standard loans, non-standard loans and commercial loans
23. Loans predominantly secured by residential property are generally classified as standard or non-standard. For the purpose of the LMI MER model, a standard loan must meet the following criteria:
(a) The LMI or lender has formally verified the borrower’s income and employment; and
(b) the borrower passes standard credit checks and income requirements as documented in the LMI or lender’s underwriting or credit policies and procedures.
24. Loans to borrowers with non-saved deposits (e.g. borrowers with deposits partially generated under the FHOG scheme), are to be classified as standard loans, except where the loans do not otherwise meet the criteria in paragraph 23.
25. Loans which are predominantly secured by registered mortgage over residential property, but do not meet the criteria set out in paragraph 23, are to be classified as non-standard loans.
26. APRA may also, by instrument in writing, direct an LMI to classify a loan as a non-standard loan where it considers the PD factors for standard loans do not reflect the inherent risk of the loan.
27. All loans which are not predominantly secured by registered mortgage over residential property must be classified as commercial loans.
28. APRA may, by instrument in writing, direct an LMI to reclassify:
(a) a particular standard or non-standard loan; or
(b) each standard or non-standard loan of a particular kind
as a commercial loan. APRA may do so if it is satisfied that the PML that would otherwise apply to the loan would not reflect the inherent risk relating to the loan or related mortgage.
Criteria for sum insured, LVR and age
29. Despite paragraphs 6, 7 and 8, APRA may, by instrument in writing, direct an LMI to assume that the sum insured, LVR or age of:
(a) a particular standard or non-standard loan; or
(b) each standard or non-standard loan of a particular kind
is the sum insured, LVR or age specified in APRA’s direction, or is the sum
insured, LVR or age worked out by applying instructions contained in APRA’s direction. APRA may do so if it is satisfied, having regard to the nature of the loan, that working out the sum insured, LVR or age by applying paragraph 6, 7 or 8 would produce a result that fails to reflect the risks relating to the loan.
Note: For example, APRA may give such a direction in relation to a reverse mortgage (where the amount outstanding increases over the life of the loan).
Reinsurance
30. Reinsurance arrangements must be in place for at least a full year in advance and fully documented to be recognised in the MER calculation. For example, where an LMI has 2 ½ years of reinsurance cover remaining, it can only recognise reinsurance in the first two years of the three-year scenario for the
purpose of the MER model.
31. APRA recognises that, as Premiums Liabilities are apportioned over the term of the loan, a proportion of an LMI’s Premiums Liabilities will be recognised as claim payments in the same period as the modelled downturn. Accordingly, for the purpose of calculating available reinsurance for the MER calculation, an LMI with aggregate excess-of-loss or stop-loss reinsurance may assume an appropriate proportion of Premiums Liabilities as being incurred in addition to its PML (refer paragraphs 32 to 34 and Attachment 2).
32. For an LMI with a quota share reinsurance arrangement, the level of Premiums Liabilities will not impact the amount of available reinsurance for the MER calculation (refer Attachment)
33. An LMI with aggregate excess-of-loss or stop-loss reinsurance on a claims year basis1 may assume claim payments of up to a maximum of 60 per cent of reported Premiums Liabilities as at the MER calculation date, in determining the amount of available reinsurance for the MER calculation2. maximum of 15 per cent of Premiums Liabilities may be allocated to year one, 30 per cent to year two and 15 per cent to year three, of the modelled downturn.
34. An LMI with reinsurance on an underwriting year basis3 may:
(a) determine PML for individual underwriting years by applying the model separately to the sum insured in each underwriting year or allocating total PML (over the three-year scenario) back to each underwriting year in the same proportion as the sum insured for those years;
(b) recognise claims that have already been paid, 90 per cent of OCP and 90 per cent of Premiums Liabilities in calculating the amount of available reinsurance for the MER calculation; and
(c) allocate OCP and Premiums Liabilities to each underwriting year in accordance with a methodology outlined in the LMI’s REMS (refer paragraph 39).
35. An LMI with reinsurance arrangements which are not detailed in paragraphs 32 to 34 must seek APRA’s approval (which APRA may provide by instrument in writing) of the methodology proposed for the calculation of available reinsurance.
36. The amount of allowable reinsurance to be deducted from the PML in determining the MER is limited to a maximum of 60 per cent of the PML, irrespective of the amount available under paragraphs 30 to 35.
37. Examples of determining allowable reinsurance for the arrangements outlined in this section are provided in Attachment 2.
Reinsurance Management Strategy (REMS)
38. An LMI must outline in its REMS all assumptions that have been made in the determination of its MER (as might particularly be the case for LMIs in runoff),
the methodology used in calculating its allowable reinsurance and how allowable reinsurance is applied to its PML in determining its MER.
1 This includes both claims made reinsurance, which relates to all claims made in a particular year on policies written in previous years as well as the current year, and claims incurred reinsurance, which relates to all claims incurred in a particular year.
2 Technical provisions in excess of a 75 per cent level of sufficiency should not be recognised.
3 Underwriting year reinsurance relates to claims on all policies written in a particular year, irrespective of when claims are made or incurred.
39. An LMI with reinsurance on an underwriting year basis must detail in its REMS the reasoning and methodology it has adopted in allocating OCP and Premiums Liabilities to individual underwriting years (refer paragraph 34).
Transitional arrangements
40. This Guidance Note will apply on commencement to all LMIs. Where an LMI’s capital base does not adequately cover its MCR and any additional capital requirements imposed by APRA, as a result of the requirements in this Guidance Note, then the LMI may apply to APRA for a determination (by way of an instrument in writing) allowing the LMI a transitional period during
which:
(a) the LMI will be required to undertake the calculations and modelling required by this Guidance Note but will not be required to hold some or all of the capital which it would otherwise be required to hold because of the application of this Guidance Note (read with Prudential Standard GPS 110 Capital Adequacy for General Insurers); and
(b) the LMI will be required to take such steps and meet such interim requirements as are specified in APRA’s determination approving the transitional period to ensure that the LMI satisfies the capital requirements of this Guidance Note (read with GPS 110) by the end of the transitional
period.
APRA may make a determination in the terms sought in the LMI’s application, or make a determination on such terms as APRA considers appropriate, or decline to make a determination granting the LMI transitional relief.
Note: During the transitional period the LMI will be required to ignore any transitional relief under paragraph 40, and assume that it is required to hold capital in accordance with this Guidance Note, for the purposes of reporting to APRA under reporting standards made under section 13 of the Financial Sector (Collection of Data) Act 2001.
41. An application under paragraph 40 must be supported by a capital management plan demonstrating how the LMI will meet its capital requirements before the expiry of the requested transitional period. APRA will consider the capital management plan and any other relevant circumstances in determining the
LMI’s eligibility for transitional arrangement and, if granted, the length of the transitional period. The maximum transitional period that APRA will grant to an LMI is two years from the commencement date of this Guidance Note.
ATTACHMENT 1
The aggregate PD and LGD factors by LVR, over the three-year scenario, for standard loans are:
LVR PD factor LGD factor
Greater than 100% 14.0% 40%
95.01 – 100% 8.0% 40%
90.01 – 95% 5.0% 40%
85.01 – 90% 3.2% 30%
80.01 – 85% 1.6% 30%
70.01 – 80% 1.2% 30%
60.01 – 70% 0.8% 20%
Less than 60.01% 0.6% 20%
The aggregate PD and LGD factors by LVR, over the three-year scenario, for nonstandard
loans are:
LVR PD factor LGD factor
Greater than 100% 21.0% 40%
95.01 – 100% 12.0% 40%
90.01 – 95% 7.5% 40%
85.01 – 90% 4.8% 30%
80.01 – 85% 2.4% 30%
70.01 – 80% 1.8% 30%
60.01 – 70% 1.2% 20%
Less than 60.01% 0.9% 20%
The seasoning factors by age are:
Age of loan Seasoning factor
Less than 3 years 100%
3 years to less than 5 years 75%
5 years to less than 10 years 25%
10 years or more 5%
ATTACHMENT 2
A. MER calculation for an LMI with quota share reinsurance (as described in
paragraph 32)
Assume that:
- aggregate PML over three years (using the model) is $100;
- claims handling expenses are $5, i.e. 5 per cent of PML; and
- there are no reinstatement costs.
If an LMI cedes 70 per cent of risk through a quota share reinsurance arrangement, available reinsurance is $70 (i.e. 70 per cent of the PML).
However, the amount of available reinsurance ($70) breaches the limit of 60 per cent of the PML ($60) outlined in paragraph 36. Hence, only $60 can be recognised as allowable reinsurance in the MER calculation.
The MER for the LMI is:
MER = PML – allowable reinsurance + claims handling expenses +
reinstatement costs
= $100 - $60 + $5 + $0
= $45
B. MER calculation for an LMI with aggregate excess-of-loss or stop-loss
reinsurance on a claims year basis (as described in paragraph 33)
Assume that:
- aggregate PML over three years (using the model) is $100;
- Premiums Liabilities are $100;
- claims handling expenses are $5, i.e. 5 per cent of PML; and
- there are no reinstatement costs
If an LMI has aggregate excess-of-loss reinsurance on a claims year basis, where the lower limit of reinsurance (retention) for each year is $45 and the upper limit is $90, available reinsurance is determined by:
(a) allocating aggregate PML ($100) in the proportion of 25 per cent in years one and three of the downturn and 50 per cent in year two;
(b) distributing 60 per cent of Premiums Liabilities ($60) across the three-year scenario in the same proportion as PML;
(c) determining total losses as the sum of PML and 60 per cent of Premiums Liabilities; and
(d) calculating available reinsurance in each year using total losses, given the LMI’s lower limit ($45) and upper limit ($90) of reinsurance.
Year of
downturn
PML 60 per cent of
Premiums
Liabilities
Total losses Available
reinsurance
(a) (b) (c) (d)
Year 1 $25 $15 $40 $0
Year 2 $50 $30 $80 $35
Year 3 $25 $15 $40 $0
Total $100 $60 $160 $35
The amount of available reinsurance ($35) does not breach the limit of 60 per cent of the PML ($60), hence allowable reinsurance is $35.
The MER for the LMI is:
MER = PML – allowable reinsurance + claims handling expenses +
reinstatement costs
= $100 - $35 + $5 + $0
= $70
C. MER calculation for an LMI with aggregate excess-of-loss or stop-loss reinsurance
on an underwriting year basis (as described in paragraph 34)
Assume that:
- aggregate PML over three years (using the model) is $100;
- Premiums Liabilities are $100 and OCP is $20;
- claims paid over the period 2001 to 2004 is $12;
- claims handling expenses are $5, i.e. 5 per cent of PML;
- there are no reinstatement costs; and
- the LMI has only been writing lenders mortgage insurance since 2001 (and has therefore only been reinsuring in respect of that insurance since then).
If an LMI has aggregate excess-of-loss reinsurance on an underwriting year basis, where the lower limit of reinsurance (retention) for each underwriting year is $45 and the upper
limit is $90, available reinsurance is determined by:
(a) allocating aggregate PML to each underwriting year in the same proportion as sum insured for those years, e.g. the PML in 2001 ($10) is 10 per cent of the total PML ($100). Alternatively, the MER model may be applied separately to each
underwriting year;
(b) allocating claims paid ($12), 90 per cent of Premiums Liabilities ($90) and 90 per cent of OCP ($18) to individual underwriting years using a methodology that is
documented in the LMI’s REMS;
(c) determining total losses as the sum of PML, claims paid, 90 per cent of OCP and 90 per cent of Premiums Liabilities in each underwriting year; and
(d) calculating available reinsurance in each underwriting year using total losses, given the LMI’s lower limit ($45) and upper limit ($90) of reinsurance.
The Many Benefits of Critical Illness Insurance
Everyone has insurance, but not all people have thought of getting critical illness insurance. This is of course, quite understandable, because no one wants to think about being down with a serious illness. Nevertheless, critical illness insurance is necessary for total protection. You will surely be called as someone who is ready if you get to have critical illness insurance for yourself.
Some statistics that may convince you to get critical illness insurance includes the fact that heart attack, which is a form of critical illness, strikes more than seventy thousand individuals each year. After heart attacks come strokes, which claims more than fifty thousand individuals each year. And finally, the ‘Big C’ or cancer gets into the bodies of people every week – at an estimate of two thousand eight hundred and sixty five, at that.
The great thing about critical illness insurance is that it has benefits to prepare not just you but your family as well. You can get up to twenty five thousand dollars in a lump sum benefit thanks to critical illness insurance. As this is paid to you, you can spend your critical illness insurance money any which way you please. You may use the critical illness insurance to pay for some medical expenses which you have to shoulder yourself.
You can space out the critical illness insurance money over the span of your expected lifetime and devote it to permanent medication which you might need. Or you can even choose to travel or refinance your home. Yet another great thing about critical illness insurance is that you will be required to fill out a medical questionnaire. If you are between the ages of eighteen and sixty, you may already be eligible for the basic life check. All that is required of you to get critical illness insurance is a solid declaration that you are in the pink of health.
You also get the best solution services from the best doctors around. Having critical illness insurance means you get excellent recovery management service. This is good because you know that not only do you have money, but you are taken care of. People monitor you and you have your medical records evaluated by the best people. Only those people who have critical illness insurance will have access to the best world class specialists. Additionally, a return of premium is also offered as an option for you. IF you want critical illness insurance and purchase a basic check, you have the benefit of having your premiums reimbursed back to you on your seventy fifth birthday. This is around twenty five thousand dollars’ worth of critical illness insurance that you can claim and spend for whatever you want.
The coverage that you also get for your critical illness insurance is also very much renewable up until your seventy fifth birthday. This is also done even if there are some changes in your health and well being. You are surely going to be in good hands if you find yourself being taken care of by critical illness insurance. It is always wise to start early, so you should try to look into this right now.
Some statistics that may convince you to get critical illness insurance includes the fact that heart attack, which is a form of critical illness, strikes more than seventy thousand individuals each year. After heart attacks come strokes, which claims more than fifty thousand individuals each year. And finally, the ‘Big C’ or cancer gets into the bodies of people every week – at an estimate of two thousand eight hundred and sixty five, at that.
The great thing about critical illness insurance is that it has benefits to prepare not just you but your family as well. You can get up to twenty five thousand dollars in a lump sum benefit thanks to critical illness insurance. As this is paid to you, you can spend your critical illness insurance money any which way you please. You may use the critical illness insurance to pay for some medical expenses which you have to shoulder yourself.
You can space out the critical illness insurance money over the span of your expected lifetime and devote it to permanent medication which you might need. Or you can even choose to travel or refinance your home. Yet another great thing about critical illness insurance is that you will be required to fill out a medical questionnaire. If you are between the ages of eighteen and sixty, you may already be eligible for the basic life check. All that is required of you to get critical illness insurance is a solid declaration that you are in the pink of health.
You also get the best solution services from the best doctors around. Having critical illness insurance means you get excellent recovery management service. This is good because you know that not only do you have money, but you are taken care of. People monitor you and you have your medical records evaluated by the best people. Only those people who have critical illness insurance will have access to the best world class specialists. Additionally, a return of premium is also offered as an option for you. IF you want critical illness insurance and purchase a basic check, you have the benefit of having your premiums reimbursed back to you on your seventy fifth birthday. This is around twenty five thousand dollars’ worth of critical illness insurance that you can claim and spend for whatever you want.
The coverage that you also get for your critical illness insurance is also very much renewable up until your seventy fifth birthday. This is also done even if there are some changes in your health and well being. You are surely going to be in good hands if you find yourself being taken care of by critical illness insurance. It is always wise to start early, so you should try to look into this right now.
Insurance Benefits
The policy holder buys the insurance to hedge against the future perceived losses by paying a regular amount to he insurance company known as the Premium. Insurance companies ensure financial reimbursement of the insured losses to the policy holders or his/her beneficiary. This is the most coveted Insurance Benefits.
But with time, more and more insurance companies have cropped up and consequently the competition among them has increased. Every company is trying to woo all the customers into its fold and in a way offering more and more innovative Insurance Benefits to the consumers.
* Affordability of Insurance
The foremost insurance benefit in todays world is the low insurance rate and premium one has to pay. While choosing a insurance policy, every customer looks at this rate first and then to the other associated benefits. The lesser the insurance rate, the more affordable the insurance becomes. Thus, among all the insurance benefits, low insurance rate and premium is the most coveted one.
e* Accessibility Of Insuranc
The easy accessibility of a insurance is the next most coveted Insurance Benefits that the customers look for. The online access to insurance companies and their policies has made them more lucrative to the customers. Now-a-days, customers can search, compare and select their insurance coverage through the click of a mouse from their own residence. This has been observed that through online services, the insurance companies have been able to reach more number of customers and consequently their customer base has also mopped up significantly.
* Some of the other Insurance Benefits are :-
o Basic benefits of the insurance policy. That is, the person enrolling for the policy is entitled to receive the financial compensation in case of actual occurrence of the loss/hazard/damage.
o Optional Insurance Benefits are also given by the companies to their policy holders in order to entice them to access their insurance package. These optional benefits include
+ health and dental insurance of the family, life insurance of the spouse and the child,
+ accidental death policy for the policy holder in addition to the actual insurance for which he/she has enrolled for,
+ long term and short term insurance plans against disability of the policy holder
+ unit linked insurance schemes meant for appreciation of the accumulated capital during the life span of the same, managed by an experienced and well-learned fund manager
o Pre-tax insurance benefits
These benefits are an added advantage to the insurance holders because they help them in saving a large portion of their tax payment. When the tax-payment gets curtailed then consequently their disposable income increases leading to more enjoyment out of a secured life.
Insurance For Weddings
Wedding functions these days extend beyond the traditional routine of 7 pheras & sit down dinners. Glamourous sets, glamourous functions, theme parites are on the desire list of the bride & groom.With wedding sets akin to the one's in films, artist to perform, the concept of insuring weddings is constantly gaining ground with wedding planners.
Typically weddings can be insured against the possiblity of cancellation or postponment to a later date, due to force majore circumstances, viz. fire @ venue, flood earthquake. The coverage is also extended to cover possiblity of cancellation due to accident to bride / grrom or their immediate family members .
Cost Factors like 1.) Venue Rental 2.) Advances to catrers & decorators 3.) Artist cost 4.) Travel & hotel booking 5.) Re-printing of invitation cards 6.) Money & Jewellery Insurance 7.) Liability covers are the expenses which one should look to cover.
One must always look to start the cover few days befor your wedding event. Typically the cost would vary between 0.4 % - 1% of your wedding budget, depending pon the covers opted.
Factors to consider while purchasing insurance
* The reliability of the insurance company. Does it treat people fairly? Does it pay claims promptly? Does it have staff to answer your questions and resolve problems?
* Deductible amount. Most insurance policies require you to cover part of your health expenses yourself (your part is called the "deductible"), before the company pays anything. Under some plans the deductible is annual, and you pay only once each year if you use the insurance. Under other plans, you pay the deductible every time you have an illness or injury. In choosing insurance, you should think carefully about how much you could afford to pay out of your own pocket each time you are sick or injured and weight the deductible against the premium before you decide.
* Co-insurance or copayment. Usually, even after you have paid the deductible, an insurance plan pays only a percentage of your medical expenses. The plan might pay 80 percent, for example; the remaining 20 percent, for which you are responsible, is called the coinsurance or copayment. For example, if you are injured and incurred $3,000 in medical expenses, a plan with a $500 deductible and 20 percent copayment would cover $2,000 (80 percent of $2,500).
* Fixed benefits or specific limits. Some policies state specific dollar limits on what they will pay for particular services. Other policies pay "usual" or "reasonable and customary" charges, which means the insurer pays what is usually charged in the local area. Be very careful in evaluating policies with specific dollar limits; for serious illnesses, the limit might be far too low and you might have large medical bills not covered by your insurance.
* Lifetime/per-occurrence maximums. Many insurance policies limit the amount they will pay for any single individual's medical bills or for any specific illness or injury. Exchange visitors must have insurance with a maximum of no lower than $50,000 for each specific illness or injury, which may be enough for most conditions. Major illnesses, however, can cost several times that amount.
* Benefit period. Some insurance policies limit the amount of time they will go on paying for each illness or injury. In that case, after the benefit period for a condition has expired, you must pay the full cost of continuing treatment of the illness, even if you are still insured by the company. A plan with a long benefit period provides the best coverage.
* Plan Exclusions. Most insurance policies exclude coverage for certain conditions. The J regulations require that if a particular activity is a part of your exchange visitor program, your insurance must cover injuries resulting from your participation in that activity. Read the list of exclusions carefully so that you understand exactly what is not covered by the plan.
* Pre-existing Conditions. Many insurance policies do not cover pre-existing conditions. If you arrive with a condition that will need medical attention, verify the pre-existing aspect of the plan that you are reviewing.
What is Landlord Insurance?
Landlord insurance is an insurance policy that protects the landlord’s investment. The most obvious part of the investment is the building that is being rented to generate income. However the losses that can be caused by a lawsuit or the loss of income from a tenant can be protected by purchasing a policy that will cover those losses.
There are basically two different types of policies a landlord can buy. The first is a peril policy. A named peril policy will only cover a loss if it is specifically stated in the policy as a covered peril. If loss due to a power outage outside the building is not listed, it is not covered. The second type of policy is a comprehensive policy or open peril policy which will cover a loss unless it is specifically excluded from being covered. That means if you suffer a loss and the policy does not say it is excluded, then it is covered. It is a more comprehensive and easier to manage policy, but usually costs more money to have.
Most policies offer coverage for the building. That would include damages caused by fire, smoke, wind, lightning, hail, explosion, fire department charges, emergency removal of property, damage from vehicle, damage from an aircraft, and riot or civil commotion. Some policies will limit coverage’s to either interior or exterior, not both. You must evaluate carefully.
Endorsements are coverage’s that are added to the policy in addition to the basic coverage’s for an extra premium or charge. Some important endorsements include:
Landlord liability, medical payments, personal liability, flood, earthquake, loss assessment, vandalism, and business property. If your policy does not list these coverage’s on the declarations page, chances are you are self insuring. In other words, you have no coverage.
Landlord liability is probably the second most important coverage after the building. Landlord liability protects the landlord from lawsuits arising from damages to the tenant or other person who is injured on the property. Injury does not necessarily have to be physical; it can be emotional such as libel, slander, and discrimination. Liability coverage will usually cover legal expenses and damages if awarded. This protects the landlord from having to pay the injured party should they win in court. It will count as a claim which could make it more difficult to get favorable rates for several years.
Most landlord policies cover the building on either a replacement cost or actual cash value policy. Replacement cost coverage will not take into account depreciation when paying on a claim which makes it the more expensive option. If a building is now worth $65,000 because it is old, a replacement policy will pay to build the same building at whatever that would cost today. An actual cash value pays the amount the building or property is worth, minus depreciation. That means you may have to pay out of pocket to have a similar home rebuilt. Changes in code also has to be considered such as updating a fuse box, that will probably have to be added to the policy and will cover an additional 10% of the building coverage amount.
Increasing deductibles are one of the easiest ways to reduce premiums without having to give up on important coverage’s. Deductibles are a way of self insuring for a portion of the claim. If a claim amount is $10,000 and you have a deductible of $1,000, you pay the first $1,000 and the company pays the rest if it is covered. Deductibles range from $100 to 5% of the coverage A amount, or the building coverage. The decision is simple, the higher the deductible then the lower the premium will be.
Landlord policies do not cover renters. The renter should be required to purchase their own insurance policy. Renters insurance covers their property and can also cover the landlord if they caused a loss such as a fire to the building or someone being injured due to the tenant’s negligence. Anyone can sue anyone for anything. Having a renter purchase a policy and include you as an additional insured can protect you from having a claim paid by your policy when the tenant was at fault. That is call subrogating.
Vacant properties are a very difficult situation to deal with from a landlord position and from the insurance company’s position. A vacant property does not provide income and it also stands to be at risk for things like vandalism, negligence, basic deterioration. A vacant home is a property that is used for showing to potential buyers or renters. It can not be intended to be demolished, under repair, restoration, or remodeling.
A vacant home under renovation is not considered the same as a vacant property. Few companies will insure a home that is vacant and currently being remodeled or “fixed up”. Fix up work includes painting, wood repair, installing new carpet, installing curtains, etc. A vacancy warranty clause states that a home is not undergoing renovation and will cause an insurance company to deny the claim unless they are insured under a vacant renovation policy.
Vacant homes are also limited by the amount of time they can be vacant. Policies will differ from 3 months to indefinite. Most companies will allow a home to be vacant for 6 or 12 months (depending on the company) and will not insure the property if it has been vacant for longer than 12 months. Usually a vacant home will have to be for sale and be a secondary property to qualify for coverage. Few companies specialize in vacant homes and will insure them indefinitely as long as the warranty clause (home is in a condition that is can be shown to potential buyers or renters) is being honored.
Building coverage amounts also affect eligibility for coverage. Some companies will not insure a vacant home over $250,000 while some will not consider the property unless it is worth $250,000. Limits are also to be considered as some stop at $1,000,000 while others will insure the property to the highest limit needed.
Another option to consider when looking to insure your rental home is that some companies will allow you to add the property to your existing home owners insurance policy. That has advantages and disadvantages. The advantages are a multi-policy discount and having one agent or company to deal with. The disadvantages are limited coverage depending on the company and a claim will count against your homeowner’s insurance policy. Any claim will raise your rates and could make it difficult to purchase insurance at all.
There are basically two different types of policies a landlord can buy. The first is a peril policy. A named peril policy will only cover a loss if it is specifically stated in the policy as a covered peril. If loss due to a power outage outside the building is not listed, it is not covered. The second type of policy is a comprehensive policy or open peril policy which will cover a loss unless it is specifically excluded from being covered. That means if you suffer a loss and the policy does not say it is excluded, then it is covered. It is a more comprehensive and easier to manage policy, but usually costs more money to have.
Most policies offer coverage for the building. That would include damages caused by fire, smoke, wind, lightning, hail, explosion, fire department charges, emergency removal of property, damage from vehicle, damage from an aircraft, and riot or civil commotion. Some policies will limit coverage’s to either interior or exterior, not both. You must evaluate carefully.
Endorsements are coverage’s that are added to the policy in addition to the basic coverage’s for an extra premium or charge. Some important endorsements include:
Landlord liability, medical payments, personal liability, flood, earthquake, loss assessment, vandalism, and business property. If your policy does not list these coverage’s on the declarations page, chances are you are self insuring. In other words, you have no coverage.
Landlord liability is probably the second most important coverage after the building. Landlord liability protects the landlord from lawsuits arising from damages to the tenant or other person who is injured on the property. Injury does not necessarily have to be physical; it can be emotional such as libel, slander, and discrimination. Liability coverage will usually cover legal expenses and damages if awarded. This protects the landlord from having to pay the injured party should they win in court. It will count as a claim which could make it more difficult to get favorable rates for several years.
Most landlord policies cover the building on either a replacement cost or actual cash value policy. Replacement cost coverage will not take into account depreciation when paying on a claim which makes it the more expensive option. If a building is now worth $65,000 because it is old, a replacement policy will pay to build the same building at whatever that would cost today. An actual cash value pays the amount the building or property is worth, minus depreciation. That means you may have to pay out of pocket to have a similar home rebuilt. Changes in code also has to be considered such as updating a fuse box, that will probably have to be added to the policy and will cover an additional 10% of the building coverage amount.
Increasing deductibles are one of the easiest ways to reduce premiums without having to give up on important coverage’s. Deductibles are a way of self insuring for a portion of the claim. If a claim amount is $10,000 and you have a deductible of $1,000, you pay the first $1,000 and the company pays the rest if it is covered. Deductibles range from $100 to 5% of the coverage A amount, or the building coverage. The decision is simple, the higher the deductible then the lower the premium will be.
Landlord policies do not cover renters. The renter should be required to purchase their own insurance policy. Renters insurance covers their property and can also cover the landlord if they caused a loss such as a fire to the building or someone being injured due to the tenant’s negligence. Anyone can sue anyone for anything. Having a renter purchase a policy and include you as an additional insured can protect you from having a claim paid by your policy when the tenant was at fault. That is call subrogating.
Vacant properties are a very difficult situation to deal with from a landlord position and from the insurance company’s position. A vacant property does not provide income and it also stands to be at risk for things like vandalism, negligence, basic deterioration. A vacant home is a property that is used for showing to potential buyers or renters. It can not be intended to be demolished, under repair, restoration, or remodeling.
A vacant home under renovation is not considered the same as a vacant property. Few companies will insure a home that is vacant and currently being remodeled or “fixed up”. Fix up work includes painting, wood repair, installing new carpet, installing curtains, etc. A vacancy warranty clause states that a home is not undergoing renovation and will cause an insurance company to deny the claim unless they are insured under a vacant renovation policy.
Vacant homes are also limited by the amount of time they can be vacant. Policies will differ from 3 months to indefinite. Most companies will allow a home to be vacant for 6 or 12 months (depending on the company) and will not insure the property if it has been vacant for longer than 12 months. Usually a vacant home will have to be for sale and be a secondary property to qualify for coverage. Few companies specialize in vacant homes and will insure them indefinitely as long as the warranty clause (home is in a condition that is can be shown to potential buyers or renters) is being honored.
Building coverage amounts also affect eligibility for coverage. Some companies will not insure a vacant home over $250,000 while some will not consider the property unless it is worth $250,000. Limits are also to be considered as some stop at $1,000,000 while others will insure the property to the highest limit needed.
Another option to consider when looking to insure your rental home is that some companies will allow you to add the property to your existing home owners insurance policy. That has advantages and disadvantages. The advantages are a multi-policy discount and having one agent or company to deal with. The disadvantages are limited coverage depending on the company and a claim will count against your homeowner’s insurance policy. Any claim will raise your rates and could make it difficult to purchase insurance at all.
Law and Defenation of Insurance
Law of Insurance
"The law of insurance is contained in the insurance ordinance, 2000. it extends to the whole of Pakistan. The Securities and Exchange Commission of Pakistan will implement this law"
Definition of Insurance
Insurance is a means to spread the loss caused by particular risk, over a number of people against some amount called premium.
Insurance creates a fund under which many persons contribute some money called the premium, out of which one party undertakes, against premium, to pay to the other party a certain amount on the happening of a certain event.
A contract of insurance is a conditional contract. The general principles of the law of contract apply to it. It is a valid contract. It comes into existence by the offer in the form of proposal and its acceptance. The object of the contract must not be immoral or illegal.
1. Insurer
The Party which promises to pay a certain sum of money to the other party is called the insurer (insurance company).
2. Insured
The party to whom certain sum of money is paid is called the insured (policy-holder).
3. Policy
The document containing the terms and conditions of the contract of insurance is called a policy.
4. Premium
The consideration, which the insured has to pay to the insurer for the protection given to him is called premium.
5. Policy Amount
The amount for which a policy is issued is known as policy amount.
6. Subject Matter
The thing or property insured is called the subject matter of Insurance.
Mortgage life insurance lead
In countries like United States etc, there are many people that buy their homes by way of mortgage loans. Normally, lending institutions would provide about 75% of the value of home as mortgage loan whereas 25% of the home purchase price is to be provided by the homebuyer. In case, a person requires more than 75% of home purchase price as loan, lending institutions require him to get an active life insurance policy. With life insurance policy, a person can buy new house by making down payment as less as 5%. Thus, life insurance policy becomes more desirable in such cases from the borrowers prospective also. Leads pertaining to this type of life insurance policy are called as mortgage life insurance leads.
Almost all the insurance companies have deployed insurance agents to collect as many mortgage life insurance leads so that these can easily be converted into active life insurance policies. These leads play a very important role as it allows life insurance companies to know about the people that are interested in taking these policies and insurance companies can negotiate accordingly. If seen with the lenders point of view, it is also correct to obtain the life insurance policy so that in future, if any untoward incident happens with the person resulting in his death, the outstanding loan amount can easily be recovered from the life insurance company. Mortgage life insurance leads are all about the prospective buyers of homes that have to get their lives insured. It is their requirement, not their wish. In some cases, lenders have contacts with different life insurance companies so that all the needs of a person can be fulfilled at a single point. In such cases, it is advised that a person must compare the quotes of a particular life insurance company with other similar companies. While doing so, a person may save some amount towards the premium payable to the life insurance company.
Related aspects
There are many related aspects of mortgage life insurance leads that need to be understood completely. Life insurance agents play a very important role in getting the mortgage life insurance leads and converting them to active policies. They closely observe the real estate market and find information about all the people that sincerely wish to buy a home. In most of cases, a person would like to provide as low down payment as he can. This desire is cashed out by the life insurance agents. Insurance company agents also keep proper liaison with the lending institutions so as to get information about all the people that wish to buy home in near future.
In present times, internet has become the greatest source of getting mortgage life insurance leads. Many people that wish to buy home fill in the life insurance application form on no-obligation basis and are able to get the quotes of various life insurance companies in a particular area. These leads are then differentiated as per the location, requirements, and other specifications. There are many online sources that specialize in mortgage life insurance leads generation and send these leads to various insurance companies in a particular area. While doing so, they also prepare a database of mortgage life insurance leads.
This allows agents of life insurance companies to get maximum number of leads and then can approach the prospective homebuyer with all the options available. If observed carefully, online lead generation sources also allow a person in getting the mortgage leads at the lowest quotes. For a prospective buyer, these services are provided free of cost normally. But for insurance companies and their agents, these services are paid ones. Online lead generation sources offer many types of package for the insurance agency as well as insurance companies. One aspect that should be understood here is that mortgage life insurance leads are more genuine that other types of insurance leads as a person has already contacted a lender for getting the amount and is now completing various requirements.
Mortgage life insurance is quite beneficial as it allow the family members of a person to live in same house if he dies without repaying the full outstanding mortgage loan amount. If a person observes the mortgage life insurance quotes, he would find that these are almost equal to the outstanding loan amount at the time of getting the policy. However, the quotes of this type of insurance policy depend upon many factors like the age and income of a person. As said above also, there are many sources, both offline and online, that provide mortgage life insurance leads. All the leads cannot be converted to life insurance policies. The best way to find the most potential lead is to search for those people who have already bought their homes by way of mortgage loans and now require to buy life insurance policy so as to make arrangements for the mortgage claims in case of their death. Finding the source for a mortgage life insurance lead is not a problem. Apart from online sources, there are many offline sources that help a person in getting genuine leads. For example, C.M.I.S is one such source in United States located in Orange in the state of California. It can be approached at 171 South Anita Drive, Suite no. 102. So far the conversation ratio of mortgage leads at this source is concerned; it is from 20-35%.
Excellent Options for Those Seeking Mortgage Life Insurance Policies
Mortgage life Insurance Policy
Mortgage life insurance helps to protects families and their homes.
A growing number of homeowners are realizing the importance of purchasing mortgage life insurance. By having mortgage life insurance in place, the policyholder can take comfort in knowing that the home will be paid off if he or she passes away, which guarantees the remaining family members will still have a place to live.
Although more people are realizing the importance of keeping their families protected with mortgage life insurance, many are uncertain about where they can obtain this insurance or how much they should expect to pay. That’s where MortgageLifeInsurance.biz comes in.
Mortgage Life Insurance was created in order to help homeowners quickly and easily obtain instant quotes from a variety of companies offering mortgage life insurance policies. By working with the experience professionals at Mortgage Life Insurance, homeowners can obtain the lowest possible rates while still dealing with a reputable insurance agency that will be able to pay the benefits if the policyholder were to pass away.
This visiting the Mortgage Life Insurance website can quickly and easily get accurate mortgage life insurance quotes by filling out a simple providing a few simple pieces of information, including the state in which they live, their weight, height and birth date, the amount of coverage they require and the length of time the coverage needs to be in place. After providing this information, site visitors are instantly provided with quotes from several different mortgage life insurance companies. In addition, once visitors have decided upon the provider that best meets their needs, the professionals at Mortgage Life Insurance provide assistance with completing the necessary paperwork.
To learn more about how Mortgage Life Insurance or to obtain quotes from a number of different insurance companies, visit MortgageLifeInsurance.biz.
Texas Renters Insurance Guide A Guide to Purchasing Renters Insurance in Texas
everything because they weren´t insured. A landlord´s insurance usually covers
the building, but not the personal property of residents. If you rent an apartment,
duplex, house, or townhouse, you may need renters insurance to protect your
belongings.
How Texas Renters Insurance Works
Renters insurance is a type of residential property coverage specifically designed
for people who rent homes or apartments. These policies are often called
"tenant policies."
Texas Renters Insurance pays to repair or replace personal property that´s
damaged, destroyed, or stolen.
Limits on this coverage vary by policy, but most provide at least $4,000 worth of
protection. Policies may limit payments for certain kinds of property, however.
Common maximums are $100 for lost cash; $2,500 for personal property
used for business; $500 for valuable papers; and $500 for theft of jewelry,
watches, and furs.
Renters insurance also covers your luggage and other personal items when you
travel for up to 10 percent of the amount of your policy or $1,000, whichever is
greater. Renters Insurance pays living expenses, such as motel costs, if you´re
displaced from your home or apartment.
This "loss of use" coverage is generally limited to 20 percent of a policy´s personal property coverage.
For example, if you have $25,000 in personal property coverage, your loss-ofuse
coverage would be $5,000. You would be paid up to this amount for the
reasonable time required to repair or replace your rented property.
provides liability coverage if you are legally responsible for another person´s
injury or property damage.
If someone is injured in your home and files a lawsuit, a renters policy
automatically provides $25,000 in liability coverage and pays your legal costs.
Extra liability coverage is available for additional premium.
Texas Renters Insurance companies can sell several types of renters policies in
Texas, each with a different level of coverage. Two of the policy forms - the
HO-BT and the HO-CT - are standardized. This means the policy language and
coverages included will be the same, regardless of the company writing the
policy. Companies also may sell alternative policies or modified versions of the
HO-BT and HO-CT if approved in advance by the Commissioner of Insurance.
These policies are not standardized and usually provide varying coverages.
Read your policy carefully to know exactly what coverages are included. In
general, a company will only offer one policy form to customers, but some may
sell more than one.
InveIf a company offers you a policy with less coverage than you´d like, ask if other
policy forms are available.
You also may be able to purchase "endorsements," or special policy add ons that
increase or expand the coverage provided in the base policy. The endorsements
available may vary by company.
Following is a basic description of the two standardized policy forms approved for
sale in Texas:
Renters Policy Forms The Broad Form (HO-BT) covers your personal belongings only for losses
caused by events specified in the policy, such as fire and theft. Losses not
specified are not covered. Most renters buy Broad Form policies.
The Comprehensive Form (HO-CT) is an "all risk" policy that protects your
personal belongings against every type of event, unless specifically excluded by
the policy. HO-CT policies are more expensive than HO-BT policies because
they cover more risks.
Deductible
Most renters policies in Texas have a deductible equal to 1 percent of the total
amount of coverage. A deductible is the amount you must pay out of your own
pocket if you have a claim before the insurance company will pay. For example, if
you have a $25,000 policy with a 1 percent deductible, you would pay the first
$250 of the repair or replacement costs, and the insurer would pay the rest, up to
your policy´s dollar limit. Some companies, however, may require a higher
deductible for theft.
Replacement Cost Coverage vs. Acutal Cash Value
Renters policies normally only pay the "actual cash value" of your property.
This means the insurance company will subtract an amount for depreciation
and wear and tear from the value of your property before paying your claim. As
a result, you probably won´t receive the full amount needed to buy new
replacements for the items you lost.
Replacement cost coverage pays the full cost of replacing your property,
minus your deductible. You can usually add replacement cost coverage to your
policy for additional premium.
If you have replacement cost coverage on your HO-BT or HO-CT, your insurance
company will pay the full replacement cost of your property up to $1,500. For any
remaining property damage that exceeds $1,500, the insurer will pay the actual
cash value first. You must then actually replace or repair the property with an
item of like kind and quality before the insurer will pay the remaining amount of
your claim. Other types of policies may have different procedures for paying
replacement cost coverage. Read your policy or ask your agent how your policy
pays a claim.
Copyright © USIZ Inc.
ntory Lists & Filing A Claim
A complete inventory of your property can be helpful if you ever file a claim.
Include the item, its value, and a serial number if there is one. Keep receipts for
expensive items. Photographs or a videotape of your property can be especially
helpful to document your loss to the insurance company. Keep a copy of the
inventory and any photos or videos of your property in a secure place, such as a
safe deposit box.
Shopping for Texas Renters Insurance
Not everyone needs a renters insurance policy. Dependents temporarily living
away from home, such as college students, may be covered by their parents´ or
guardians´ homeowners policies. You should check with your agent or company
if you have dependents away from home ask if your policy will provide coverage.
Covered dependents´ personal property is covered up to 10 percent of the
personal property limit of the parents´ policy. For example, if the parents have an
insurance policy with a personal property limit of $50,000, their dependents
automatically have $5,000 in coverage while living away from home. Dependents
are covered up to 100 percent of the liability provided by the parents´ or
guardians´ policy for claims involving personal liability and medical payments to
others.
If you decide that you need renters insurance, it pays to shop around. Rates vary
widely, so you should get quotes from several different companies.
Renters Insurance Shopping Tips:
•When comparing prices, be sure you understand the amount of coverage
different policies provide.
•When getting a price quote or applying for insurance, answer questions
truthfully. Wrong information could cause you to get an incorrect price
quote or could lead to a denial or cancellation of coverage.
•Also, be sure to consider factors other than cost, such as a company´s
financial strength and its customer service record. Buy only from licensed
companies and agents. You can find out whether agents or companies are
licensed and get information about licensed companies´ finances and their
complaint histories by calling the Texas Department of Insurance
Consumer Help Line or by visiting our website
Why You Need A Travel Insurance
Travel insurance covers a number of possible mishaps that can occur on the road. Peace of mind comes from knowing that if one experiences terrorism, a need for medical attention, emergency evacuation, or bankruptcy of a trip organizer, there will be recourse. Travel should be about wonder and delight, not anxiety and lost funds.
Travel insurance is much more affordable than people think, whether they buy it for one trip or for unlimited annual use. Some of the travel insurance types available include flight accident insurance, trip cancellation insurance, travel medical insurance, and even custom insurance products. Nearly every conceivable mishap can be insured against, to ensure against financial loss.
Travel insurance is much more affordable than people think, whether they buy it for one trip or for unlimited annual use. Some of the travel insurance types available include flight accident insurance, trip cancellation insurance, travel medical insurance, and even custom insurance products. Nearly every conceivable mishap can be insured against, to ensure against financial loss.
Visitors Travel Insurance
Visitors travel insurance is an integral part of today's global economy. Visitor travel insurance ensures that you are safe even outside your country. Visitors travel insurance will prevent financially debilitating circumstances in the event of a medical emergency while traveling overseas. Visitor travel insurance is strongly recommended for all visitors traveling abroad.
Stock Exchange Insurance Pay Off
I found out, after renewing a credit card, that I had been paying for insurance that I wasn't aware of. This insurance would pay benefits in case I died or became disabled. I had the card since 1997 and became disabled in 1998 (Parkinson's). I called a credit card rep and she advised me to put in a claim. She also stated if there were any other balances to transfer, I could transfer them and clear them up also. Could this be true?
Alan
Alan,
Thanks for writing! I'm sorry to hear about your disability.
It's very common that people pay for something on their credit card that they don't even know about. It's usually some type of insurance (as in your case) or a buyer's advantage program, or other membership package. This happens because people agree to sign up for the "free trial" but then forget to cancel after the trial period. This is probably what happened in your case.
Despite having previously paid for insurance that you were unaware of, it's going to work out because you can actually put in a claim. It sounds like they're willing to cancel all your debt with the claim. I don't know the details of the insurance, but that's what I'm getting from your question.
The only thing I'm wondering about is why the credit card rep advised you to transfer your balance to the card and then put in a claim. This doesn't make sense because the bank would be giving you money then expunging the debt.
I guess it's possible that the rep was giving you an "insider tip," but I would still be cautious. Either way, if their transfer rate is better than your other cards, then it's certainly smart to transfer your balances to this card.
To be sure of the details, you must get a copy of the original policy. If you do not have it, ask them to send you a copy. Read it carefully before you do anything. You don't want to be tricked into voiding the possibility of using the insurance to your maximum advantage.
I would do the transfer and put in a claim, as instructed by the rep. If they forgive the debtfantastic! If not, then keep the debt as long as the transfer with them is the best option you have.
Good luck and please let me know what happens!
Regards,
Scott
Alan
Alan,
Thanks for writing! I'm sorry to hear about your disability.
It's very common that people pay for something on their credit card that they don't even know about. It's usually some type of insurance (as in your case) or a buyer's advantage program, or other membership package. This happens because people agree to sign up for the "free trial" but then forget to cancel after the trial period. This is probably what happened in your case.
Despite having previously paid for insurance that you were unaware of, it's going to work out because you can actually put in a claim. It sounds like they're willing to cancel all your debt with the claim. I don't know the details of the insurance, but that's what I'm getting from your question.
The only thing I'm wondering about is why the credit card rep advised you to transfer your balance to the card and then put in a claim. This doesn't make sense because the bank would be giving you money then expunging the debt.
I guess it's possible that the rep was giving you an "insider tip," but I would still be cautious. Either way, if their transfer rate is better than your other cards, then it's certainly smart to transfer your balances to this card.
To be sure of the details, you must get a copy of the original policy. If you do not have it, ask them to send you a copy. Read it carefully before you do anything. You don't want to be tricked into voiding the possibility of using the insurance to your maximum advantage.
I would do the transfer and put in a claim, as instructed by the rep. If they forgive the debtfantastic! If not, then keep the debt as long as the transfer with them is the best option you have.
Good luck and please let me know what happens!
Regards,
Scott
An Unhealthy Individual Insurance Market
Although 45 million Americans are uninsured, only 14.5 million Americans buy insurance on the individual market. This brief explores the problems with the individual market, including the absence of risk pooling and health status discrimination, and ways the individual market could be improved.
Tuesday, May 26, 2009
A Few Things Everyone Should Know About Disability By: Kathy Burns-Millyard
Did you know? One year of disability can wipe out 10 year's worth of savings.
Other interesting things to know about disability:
- 7 out of 10 people between the ages of 35 and 65 become disabled for three months or longer.
- The average length of disability lasting longer than 90-days is 36 Months.
- Most American families have only enough
- In 2000, wage and productivity losses from unintential injuries was $259.8 billion (Statistical Abstract of the US: 2002)
- The maximum
- To be eligible for Social Security disability, your disability must last at least 12 months.
- Social Security Disability will only pay an approved claim after a minimum of 5 months have passed.
So if you suddenly become disabled... how would you pay your bills?
What is disability?
The Random House Webster's Dictionary of American English defines disability as:
"Lack of adequate strength or ability; incapacity; a physical or mental handicap; anything that disables or puts
The Social Security Administration defines disability this way:
"The inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than 12 months." Emphasis Added
Simply put: Disability generally means that you are unable to work. And Social Security Disability means you are unable to work at anything.
Disability can happen at any time, to anyone - regardless of race, religion, gender or profession.
Sometimes people become disabled dur to injuries received in a car accident. And sometimes it's a simple matter of getting hurt while participating in sports, or improving your home in your off hours.
A very common injury that can cause you to become unable to work, is a back injury. And back injuries can happen simply by moving furniture, working in a garden, or fixing a leak in your roof.
Other people become unable to work due to an illness or the onset of a disease: Like diabetes, stroke, or heart attack. And even pregnancy can cause some females to become unable to work: If the pregnancy develops other complications that require the woman
This Can Happen to You Too.
Unfortunately, people often assume that just because they're healthy, they can't become disabled. And that's simply not true. Accidents happen. So being healthy doesn't usually have anything to do with whether you become disabled.
Let's look at some undeniable facts:
- In 2000, wage and productivity losses from unintentional injuries was $259.8 billion (Statistical Abstract of the US: 2002)
- In 1999: 338,000 people were injured in a fall
- In 1999: 141,000 people were injured due to overexertion
- In 1999: 338,000 people experienced sprains and strains
And just a few of the ways these injuries happened included:
- Hand and power saws
- Hammers
-
- Beds
- Tables
- Ladders
- Footwear
- Bicycles
A CPA Talks About Buying Life Insurance By: Stephen Nelson
Not everyone needs life
Life insurance is really meant for your family members or other dependents who rely
on your earnings.
Why You Buy Life Insurance
You buy life insurance so that, if you die, your dependents can live the same kind of
life they live now. Strictly speaking, then, life insurance is only a means of replacing
your earnings in your absence. If you don’t have dependents (say, because you’re
single) or you don’t have earnings (say, because you’re retired), you don’t need life
insurance. Note that children rarely need life insurance because they almost never
have dependents and other people don’t rely on their earnings.
Life Insurance Comes in Two Flavors
If you do need life insurance, you should know that it comes in two basic flavors:
term insurance and cash-value insurance (also called “whole life” insurance).
Ninety-nine times out of 100, what you want is term insurance.
Term Life is Simple to Buy and Understand
premium, and if you die, a lump sum is paid to your beneficiaries. Term life
insurance gets its name because you buy the insurance for a specific term, such as
5, 10, or 15 years (and sometimes longer). At the end of the term, you can renew
your policy or get a different one. The big benefits of term insurance are that it’s
cheap and it’s simple.
Cash Value is Trickier
The other flavor of life insurance is cash-value insurance. Many people are attracted
to cash-value insurance because it supposedly lets them keep some of the
premiums they pay over the years. After all, the reasoning goes, you pay for life
insurance for 20, 30, or 40 years, so you might as well get some of the money back.
With cash-value insurance, some of the premium money is kept in an account that
is yours to keep or borrow against. This sounds great. The only problem is that
cash-value insurance usually isn’t a very good investment, even if you hold the
policy for years and years. And it’s a terrible investment if you keep the policy for
only a year or two. What’s more, to really analyze a cash-value insurance policy, you
need to perform a very sophisticated financial analysis. And this is, in fact, the
major problem with cash-value life insurance.
While perhaps a handful of good cash-value insurance policies are available, many—
perhaps most—are terrible investments. And to tell the good from the bad, you
need a computer and the financial skills to perform something called discounted
cash-flow analysis. If you do think you need cash-value insurance, it probably
makes sense to have a
this financial planner should be a different person from the
you the policy.
What’s the bottom line? Cash-value insurance is much too complex a financial
product for most people to deal with. Note, too, that any
tax-deductible—such as a 401(k), a 401(b), a deductible IRA, a SEP/IRA, or a Keogh
plan—is always a better investment than the investment portion of a cash-value
policy. For these two reasons, I strongly encourage you to simplify your financial
affairs and increase your net worth by sticking with tax-deductible investments.
If you do decide to follow my advice and choose a term life insurance policy, be sure
that your policy is non-cancelable and renewable. You want a policy that cannot be
canceled under any circumstances, including poor health. (You have no way of
knowing what your health will be like ten years from now.) And you want to be able
to renew the policy even if your health deteriorates. (You don’t want to go through a
medical review each time a term is up and you need to renew.)
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