Participating Policy

Participating Policy

A life insurance policy under which the company agrees to distribute to policyowners the part of its surplus that its Board of Directors determines is not needed at the end of the business year. How do you profit of your life insurance policy depends the use you make of your parts.
The most common options are the following:

Increased Insured Capital You can use the annual shareholdings as dividend to increase your capital at no costs. This option, the most common, is called released insurance subsidy. It also increases the value of future redemption. Shareholdings can also be used to purchase a Life Insurance for one year. Additional Protection: You can get an additional protection by combining predetermined paid-up insurance amount option to purchase an insurance for one year. Your shares, which increase over time can be used to replace term life insurance by released insurance so the extra protection becomes permanent. It is a good way to get whole life insurance at reduced cost. Reduced premiums Your shares of participating life insurance can be use to reduce your annual premiums payment. Payment in cash You can, of course, cash out your participating shares. Left in File You can also leave your shares in filing. The insurer will pay interest or placed in a growth fund, as separate shares. In the second event, the return is not guaranteed. The shares left in file may be withdrawn at any time. When you die, unlike the surrender value, the share value is part of the payable insured sum to your beneficiary or succession. Notice that the interest earned on investments left in deposit is subject to income tax. Self Financing Contract This formula uses both concepts of premiums reduction and bonus paid-up insurance. Typically, after bonuses were paid for a number of years (between 10 and 15 years, for example), the futures stakes are used to pay portion of the premium. Remember shares of participating life insurance are not guaranteed. The beginning of self-financing contract depend on the level of your shares. This formula could require that the policy owner declare the accumulated holdings income that exceeded the paid premiums. Contact your agent for more information.

How to gey a loan on your Life Insurance.

Advance Payment Contract

The value of your permanent life insurance policy may be very high if you keep your policy for a long time. It's a funds that can be used as we have just seen, to maintain your police force if you fail to pay a premium or you can also use it to get a loan.
You can borrow an amount equivalent to the redemption value of your policy, or near this value, according to the provisions included in your contract.
Then you can pay it back on one shot or more. At your death, the unpaid balance, increased by the interest is deducted from the insured capital. You must pay interest because, when calculating the premium, the insurer considered that it would invest the funds that you borrow and loosing the interest on his side.
Advance payment contract is even more practical: because there is no creditworthiness investigation and the usual disadvantages of it. Simply contact your agent or your life insurance company closest branch. (If you have designated an irrevocable beneficiary, you will need to get his signature.) The advance may be completely or partially taxable. Learn about the tax implications from your insurer.

Life Insurance Premiums

Premiums: when and How to pay?

Generally, Canadians and Americans pay their life insurance premiums monthly by direct debits into their bank account. The premiums payment may also be paid annually, semi-annually or quarterly.
You can also concentrate premium payments over a certain number of years. Your premiums will be then a little higher, but your policy will then be free of any charge. This is the case for example, if you want your permanent life insurance policy to be fully paid at age 65 so you will no longer have to pay any premiums after retirement.

WHAT IF I CAN NOT PAY THE PREMIUMS ANYMORE?

You have a 30 days grace period after the due payment date. If the premium is not paid at the expiration of this period, your life insurance is broken with complete revocation of all the benefit. If death occurs during the 30 days grace period, the principal sum is paid after deduction of the suffering premiums.
But if you choose, a redemption value life insurance police then it can help you keep your life insurance valid even after your police fell for revocation. You may re-enacted your life insurance within two following years, if you pays the suffering premiums, increased interest, and submit medical evidence to justify the non payment period.

WHAT HAPPEN IF MY BENEFICIARY DIES BEFORE ME

The beneficiary is the person indicated in the life insurance police to receive with your death the amount of the insurance. You can designated a beneficiary (your spouse for example), or you can leave the money to a trust? If you choose to leave the money to your having right, the money will be fixed with expenses of homologation at the time of the payment of succession. If you choose a trust, you must take care to inform a tax adviser.
If you indicate a beneficiary, the money does not enter in your succession, but is directly versed to the person or the organization that you indicated. The beneficiary does not have homologation expenses to pay.

PROTECTION AGAINST CREDITORS

Depending of who is the designated beneficiary, the assured capital can be or not under the shelter of the creditors. Provincial and States insurances laws stipulate that if the beneficiary is a spouse, a child, a small-child, the father or the mother, the assured capital can be seized by creditor. Within Quebec, the beneficiary must be related to the police holder. In the other provinces, it must be related with the policy-holder. In US it depend on wich states. This provision applies to the adoptive children in the majority of provinces, but not with an ex-conjoint, except if this one were indicated profit irrevocable.

IRREVOCABLE BENEFICIARY RECIPIENT

You can designate a beneficiary recipient or a trust on a purely irrevocable basis. That means that as the holder of the police, you can't change or revoke the beneficiary recipient without consentment. The assured capital is protected from your creditors and it do not enter into your succession. In Quebec, the spouse is considered like an irrevocable recipient but, in the event of divorce, it loses automatically this statute.

CHARITABLE ORGANIZATIONS DONATION

You can use life insurance for making charitable organizations donations. At your death, the sum you dedicated to is paid to the organization that you designate. In that case premiums may be income taxable deductive if the charity organization is approved by the Customs Agency and Revenue Agency Canada or other state or federal government agency.

Last Wills, Testament and Life Insurance

Last Wills and Testament

It should be noticed that a new recipient designation will not cancel one insurance policy designation made before, except if the will mentions specifically the insurance policy (even in this case, the irrevocable beneficiary recipient keeps all its rights).
Jurisprudence bring back the case of a man who indicated on testament his new wife sole legatee of his succession. But he had not modified life insurance policy designation in favor of his new wife. The preceding life insurance policy beneficiary, in this case his ex-wife, claimed against the last wills and testament. The court has decided that assured capital will return to the preceding wife.

Divorce and Life Insurance

In the event of divorce if you receive an alimony make sure that the payments are assured.
There are two ways of proceeding:

You can specify in the due form agreement that your ex-spouse must take a life insurance on its head and designate you as beneficiary recipient. To ensure that the recipient designation will not change without your assent, require that your ex-spouse names you irrevocable beneficiary. You can take a life insurance on the head of your ex-conjoint. You name yourself as the beneficiary and pay the premiums. Nobody can then organizing the cancellation of the policy and you control completely the situation.

Life Insurance Beneficiary

The beneficiary is the person indicated in the life insurance police to receive with your death the amount of the insurance. You can designated a beneficiary (your spouse for example), or you can leave the money to a trust? If you choose to leave the money to your having right, the money will be fixed with expenses of homologation at the time of the payment of succession. If you choose a trust, you must take care to inform a tax adviser.
If you indicate a beneficiary, the money does not enter in your succession, but is directly versed to the person or the organization that you indicated. The beneficiary does not have homologation expenses to pay.

PROTECTION AGAINST CREDITORS

Depending of who is the designated beneficiary, the assured capital can be or not under the shelter of the creditors. Provincial and States insurances laws stipulate that if the beneficiary is a spouse, a child, a small-child, the father or the mother, the assured capital can be seized by creditor. Within Quebec, the beneficiary must be related to the police holder. In the other provinces, it must be related with the policy-holder. In US it depend on wich states. This provision applies to the adoptive children in the majority of provinces, but not with an ex-conjoint, except if this one were indicated profit irrevocable.

IRREVOCABLE BENEFICIARY RECIPIENT

You can designate a beneficiary recipient or a trust on a purely irrevocable basis. That means that as the holder of the police, you can't change or revoke the beneficiary recipient without consentment. The assured capital is protected from your creditors and it do not enter into your succession. In Quebec, the spouse is considered like an irrevocable recipient but, in the event of divorce, it loses automatically this statute.

Collective Life Insurance

If you are paid, this life insurance form can be offered to you by your employer or your trade union.
In General, it is about one temporary insurance (in theory up to 65 years) covering a group people under a contract collective term. A certificate is given to you attesting your coverage. When it is an important group, it often arrive that no justification of assurability, medical or other, is required.
The insurance group is one of the capital element of your total coverage. But the protection of which you profit can end as soon as you do not being part of the group anymore. Check if the mode allows you to transform your insurance in individual insurance if you leave the group, or if the collective cover ends for any other reason.

Group Insurance Price and Cost

If it's easy to fix the price of one manufactured good according to materials cost and production expenses, it's different for a life insurance policy, which differs even from dwelling or car insurance policy since it can remain in strength during 50 years or more. Insurance companies can in any way of knowing their costs exactly, theirs incomes of placement or theirs future technical results. In consequence, they make long-term projections which rest on statistics or actuarial data, with the mortality tables assistance, the death rates with the various groups of population age. They also melting their estimates with expenditure regards, interest rate and futures death rate. These calculations are carried out by actuaries who receive actuarial mathematics training applied to the life insurance. Equitable Tarrifing Before approving your proposal, the insurance company must evaluate the degree of risk you represent. It is obvious that the risk grows with age and deterioration of your health. The pooling of similar risks makes it possible to obtain an equitable tariffing. The statistics data are joined together in order to divide the individuals by “categories of risk”. The insurance price - the premium - translated the risk evaluation. More the risk is weak for a category data, plus the premium is weak. To evaluate the risk, the insurer takes many factors into account: the age, the sex, the medical antecedents and the state of health. Thus, in average woman pay lower premiums than men. Indeed, the statistics clearly show than men. Same for nonsmokers who pay lower premium rates.

Permanent Life Insurance

You will be covered by an permanent life insurance if you subscribe one whole life insurance, an universal life insurance or a contract with capital variable. All these formulas cover your life during, in condition that the police is maintained into force.

Principal characteristics of permanent insurance policies

Levelled premiums: Majority of permanent insurance policy envisage payment of premiums who remain the same ones for all the length of the contract time, even if risk grows with the age. This is why, the first years, the premiums are higher than the risk you represent. Then the mathematics provisions form, invested, allow, last years, to face the higher risk that you represent because of your age.

Surrender value: Of these provisions the surrender value results, that you can use if you wish to borrow on your police or to box if you want to repurchase your contract. (In general, the repurchase value is not added to the capital poured with your death.)

Options of not-forfeiture contract: They are various possibilities which are offered to a police holder which ceases pouring its premiums. They make it possible to maintain the insurance police in force or to touch the surrender value with cash.

Life Insurance with participation: The holder of this kind of police take part in the financial results of the insurer. "Participations" (in benefit) are versed annually to the holders. The premiums are calculated according to a careful expenses estimate and future payments, as well as interests and other placement incomes. When the results are better than the forecasts, it create a surplus, which allows company to pour participations to the concerned holders. The participations is based on an estimate of the future results, like the costs and the incomes and they are not guaranteed. The participations can be boxed, left in deposit, used to reduce the premiums or affected to subscription of an additional protection.

Life Insurance without participation: Holders of this kind of police do not take part for the benefits of insurance company and do not receive any participations.

Various types of permanent insurance: Although all insurance policies, permanent life aim to provide coverage your life during, the guarantees of which they are matched can vary and influences premiums.

Whole life: It is the traditional police who fully guarantees the premiums to be paid, the death capital and the repurchase value.

Life Insurance Police related to the interest rates: Contrary to the whole life insurance policies, which is based on hypothetical interest rates to very long term, these police hold count current interest rates, which can be readjusted regularly. The holder of police can profit higher coverage for lower premium, but on the other hand agrees to share certain risks with the insurer. Premium could indeed increase following a fall in the interest rates, or being reduced if it opposite occurred. Most popular police related to interest rate, and that offering more flexibility, is the universal life insurance policy. It comprises two elements: the life insurance and placement account. You decide the EC what you want to do of these two elements, and can increase or to write-off your premiums or your death capital, taking into account some limits. Incomes generated by the account of placement are not necessarily without guaranteed; all depends on the nature of the selected placements. Usually, contracts known as evolutionary premium and it guarantee death benefit for one determined period and envisage modification of premium or of the death benefit at the end of this period, according to market trends.

Contract with variable capital: The premium is generally guaranteed, but the surrender value varies according to the output of placement funds or another index. The death capital can be guaranteed, or fluctuate according to the output of melt, subject to a minimal guarantee.

Meaning of Life Insurance

The concept of insurance goes back to the time of the Romans, but it is only at the XVIIIe century that it took precise forms. It primarily consists in distributing the financier risk between a great number of people who cotisent with a common case. It is a way to minimize the costs in the event of unexpected reverse.

Life insurance makes it possible to protect your survivors or the people with your load against serious financial problems. Life insurance policy is a contract between you and an insurance company which guarantees, to your death, the full payment of the assured capital. Calculate your payment, life insurance calculator. In the meantime protect your family with life insurance.

- Which capital to subscribe ?

- How to calculate the amount of insurance life you need?

One generally estimates that the capital necessary must represent between five and seven times your net income. But to evaluate your own situation, it will be necessary for you to carry out an analysis financial needs. That will give you an idea of the capital which your survivors will need after your death. It will be taken into account the goods they will have then, the debts which they will have to settle, and the incomes of which the family will continue to need. Every qualified life insurance agent can also help you to make a more complete analysis of your financial needs.

It is important to revise your needs of insurance regularly and being able to change according to your family and professional circumstances. Attention also on the inflation, which could decrease the value of your insurance.

- You need life insurance ?

Some elements of cogitation...

- If you share your life with somebody, what is your contribution in the household budget ?

- If you die prematurely, how will take out there your survivors, especially your children with load?

- Other persons depends on you financially : parents, grandparents, brother or sister?

- If your house is mortgaged, do you want that the balance of the loan mortage holder is refunded with your death?

- If you have children, do you want to put money on side so that they can continue their studies after your death?

- Do you wish to leave money to other members of your family or at certain organizations?

- Could it play a role within the framework of transmission of a commercial or agricultural company by succession ?

- Could it be useful to pay the tax on the goods transmitted to descendants with your life insurance ?

Advantages of the various insurance policy types

Although multitude types and names of insurance policy can disconcert, they summarize all to two principal forms of insurance life: permanent and temporary. In general, needs with long term should be covered by a permanent insurance, and them short-term needs by one temporary insurance. Often, better formula lies in one combination of the two types. What is a temporary need ? It can be a question, for example, of to refund a loan mortage holder, of to guarantee an income continuous as long as them children are young, or to cover commercial engagements. And permanent needs? It can be the sums necessary to pay the funerary expenses, to round the income of a survivor, to cover the tax to be paid on the profits in capital at the time of death (especially if family goods are transmitted to descendants), or still to provide for the needs of the children who, often because of a disability, remain with load all their life.

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Intro To Insurance: Health Insurance

Health insurance is a type of insurance that pays for medical expenses in exchange for premiums. The way it works is that you pay your monthly or annual premium and the insurance policy contracts healthcare providers and hospitals to provide benefits to its members at a discounted rate. This is how hospitals and healthcare providers get listed in your insurance provider booklet. They have agreed to provide you with healthcare at the specified cost. These costs include medical exams, drugs and treatments referred to as "covered services" in your insurance policy.  (To learn more, read Find Secure And Affordable Post-Work Health Insurance.)

As with any type of insurance, there are exclusions and limitations. To know what these are, you have to read your policy to find out what is covered and what is not. If you elect to have a medical procedure done that is not covered by your insurance, you will have to pay for that service out of pocket.

The range of coverage for expenses varies depending on the type of plan, as will the restrictions. You can purchase the insurance directly from the insurance company through an agent or through an independent broker but most people get their insurance coverage through employer-sponsored programs.  (For more on this, read How To Choose A Healthcare Plan.)

Additional Costs
Aside from premiums, there are other costs associated with your health insurance coverage. Let's explore what these are and how you would calculate them.

Premiums: This is the amount that you pay for coverage.

Deductible: The amount that you pay out of pocket. Like any other type of insurance, the deductible can range in amount depending on how much you would like to pay out of pocket. Generally, the higher the deductible, the lower the premiums.

Co-insurance: The percentage of covered expenses paid by the medical plan. The co-insurance amount is per family per calendar year. For example, in a co-insurance arrangement, there can be an 80/20 split between the insured and the insurance carrier in which the insured pays 20% of the cost of care up to the deductible, but below the out-of-pocket limit set forth by the policy. This is typically associated with coverage provided by a PPO.

Co-payment:  Sometimes referred to "co-pay", this is a set cap amount that you will pay each time you receive medical services. This is typically associated with coverage through an HMO (which will also be discussed a little later). For example, every time you visit your doctor, you may have to pay $20 as a co-payment. These payments usually do not contribute toward out-of-pocket policy maximums. The co-payment and the coinsurance are not one in the same. (For related reading, see 20 Ways To Save On Medical Bills.)

Stop-Loss Limit: The cumulative dollar amount of covered expenses in excess of the deductible after which the coinsurance payment stops and the insurer pays 100% of covered expenses. The purpose of to the stop-loss limit is to limit the out-of-pocket costs for the insured individual. The "out-of-pocket max" is the maximum out-of-pocket expense you will incur before your insurance carrier pays 100% of covered services. At this point, all you will have to pay is your premiums.

What's important to remember for out-of-pocket expenses is that not all expenses go toward meeting the out-of-pocket max. Co-payments and premiums do not apply to the out-of-pocket expense maximum. Your deductible and coinsurance do apply toward this amount. It's worth noting that this may not be a standard feature with every policy.

Let's look at an example to clarify what is meant.

Let's say your health insurance plan has the following features:

    * Deductible: $500
    * Coinsurance: 80/20 (you pay the 20%)
    * Out of Pocket Max: $5,000

Now, let's say that you go to the hospital and incur $7,500 worth of medical expenses. How much do you have to pay? Let's do the math.

Let's start by subtracting your deductible from the total expense amount:


$7,500 - $500 = $7,000

Remember that you have to pay the deductible before the insurance kicks in.

Now you have to pay 20% of the $7,000, which would be:

$7,000 x 0.20 = $1,400

All in all, you will have to pay $1,900 out of pocket ($500 deductible + $1,400 of coinsurance).

You will have to continue paying out of pocket until your total out-of-pocket expenses reach the $5,000 max set in your policy. At that point, you will no longer pay the coinsurance or deductible.

With out-of-pocket expenses, co-payments, coinsurance and premiums why get insurance at all? The answer is simple: while these costs certainly do put a pinch in your wallet, their costs are not nearly as painful as those from a long-term illness or emergency.

Types of Plans

Indemnity Plan
An indemnity plan, sometimes called a fee-for-service plan, is a type of insurance that reimburses you according to a schedule for medical expenses, regardless of who provides the service. These plans cover things such as:

    * Hospital stays
    * Surgical expenses
    * Major medical coverage

Under these plans, the insurer pays a specific amount per day for a specific number of days. The amount paid can be calculated either as a percentage (80/20) or for actual expenses.

Health Maintenance Organizations (HMO)
The HMO is the most common type of insurance policy people own and the one most frequently provided by employers. HMOs provide a wide range of comprehensive healthcare services to a group of subscribers in return for a fixed periodic payment. With this type of coverage, you select a primary care physician that acts as the gatekeeper for you to receive virtually all the medical care required during a year. The gatekeeper concept is the health insurer's attempt to control the cost and quality of care by coordinating health services with other providers. Specifically, your primary care physician is responsible for determining what care is required and when a patient should be referred to a specialist.

These policies tend to be the least expensive form of health insurance, but they do come with annoying restrictions. Aside from having a gatekeeper, you can only select doctors and hospitals approved in the insurance carrier's network. This becomes a problem if you already have a great relationship with a doctor who is not in the network. If you use a non-network provider, your HMO will not cover the costs unless it's for an emergency. Other than this, most preventive care services are covered.

Preferred Provider Organization (PPO)
PPOs are a group of healthcare providers that contract with an insurance company, third-party administrators, or others (like employers) to provide medical care services at a reduced fee. There are two major differences between HMOs and PPOs in that:

   1. The healthcare providers in the PPO are generally paid on a fee-for-service basis as their services are needed, much like a traditional doctor's visit.
   2. You are not required to use the PPO's healthcare providers or facilities - you can go outside the network. That said, going outside the network usually means paying a higher co-payment or deductible.

Point of Service (POS)
A point of service plan is a hybrid plan that combines aspects of an HMO, PPO and indemnity plan. This type of plan is more flexible in that it allows you to decide at the time you need services to elect to use the POS plan's physician to arrange in-network care (HMO feature), or to go outside the network or hospital and pay a higher portion of the cost.

Property And Casualty Insurance

Property and casualty insurance is insurance that protects against property losses to your business, home or car and/or against legal liability that may result from injury or damage to the property of others. This type of insurance can protect a person or a business with an interest in the insured physical property against losses. Let's examine some of the things to look for in the different types of property/casualty insurance. (For background reading, see Do You Need Casualty Insurance?)

Auto Insurance

    * Coverage: An auto insurance policy typically covers you and your spouse, relatives who live in your home and other licensed drivers to whom you give permission to drive your car. The policy is "package protection", which provides coverage for both bodily injury and property damage liability as well as physical damage to your vehicle. This damage can include both that caused by the collision and damage cause by things "other than collision", such as flood, fire, wind, hail, etc. (For more insight, read Shopping For Car Insurance.)

    * Common Types of Coverage: Auto insurance typically covers personal injury (PIP), medical payments, uninsured motorist, underinsured motorist, auto rental, emergency road assistance and other damages to your car not caused by a collision such as flood, fire and vandalism. Other coverage is available, too.

    * Deductible: The deductible is the amount that you will pay out of pocket when you file a claim. Typically, the higher the deductible, the lower your premiums.

    * Insurance Rates: How much you pay will depends on many factors, including your driving record, the value of your vehicle, where you drive, how much you drive, your marital status, your desired coverage, your age, sex and even your credit history. (For tips on reducing your rates, see 12 Car Insurance Cost Cutters.)


Homeowners Insurance
Our homes and their contents are our greatest assets. That is why it is so imperative that we protect their value. Homeowners insurance helps us achieve that goal. Let's break down the different concepts that encompass this area. (For background reading, see Beginners' Guide To Homeowners Insurance.)

    * Coverage: Homeowners insurance typically covers the dwelling (the structure), personal property and contents, and some forms of personal liability. The policy may cover direct and consequential loss resulting from damage to the property itself, loss or damage to personal property, and liability for unintentional acts arising out of the non-business, non-automobile activities of the insured and members of that insured's household.

    * Types of Insurance: Are you ready to decipher the codes? There are six standard forms of homeowners insurance containing personal property coverage. (For more insight, see 9 Things You Need To Know About Homeowners Insurance.)

   1. HO 00 02 (Homeowners 2, Broad Form): This form of insurance provides broad form coverage on your dwelling and other structures and insures against loss of use. To be specific, the broad form of coverage insures against windstorm, hail, aircraft, riot, vandalism, vehicles, volcanic, explosion, smoke, fire, lightening and theft , plus rupture of a system, artificially generated electricity, falling objects and freezing of plumbing.

   2. HO 00 03 (Homeowners 3, Special Form): This "special form" insurance offers coverage for more causes of loss than the HO 00 02. 

   3. HO 00 04 (Homewoners 4, Contents Broad Form):  This is a renter's policy. Even if you don't own your home, you should consider having this type of insurance. Your landlord's insurance will not cover damage to your personal property or liability against you. Think about how much it will cost to replace all of your furniture, clothing etc. If you feel this isn't a loss you could bear, consider buying this type of insurance. (To learn more, read Insurance 101 For Renters.)

   4. HO 00 05 (Homeowners 5, Comprehensive Form): This type of policy essentially combines the HO 00 03 form with the HO 00 05 endorsement into one comprehensive form to provide open perils coverage on personal property in addition to the dwelling, other structures and loss of use. The HO 00 05 rider can only be combined with an HO 00 03 policy.

   5. HO 00 06 (Homeowners 6, Unit Owners Form) : This is a condominium policy. This type of policy is different from a homeowners insurance policy in that it is designed for individuals who live in a unit structure owned and insured by a condo association, townhouse association cooperative, homeowner's association, planned community or other similar type of organization. The insurance the association provides only covers the outside dwelling, not the contents of your unit, so it's important to consider purchasing this type of insurance to protect against personal property losses and liability. (For more on condos, read Does Condo Life Suit You?)

   6. HO 00 08 (Homeowners 8, Modified Coverage Form): This form of insurance settles losses on an actual cash value basis and is usually only used to cover older structures where the cost of replacement far exceeds the value of the structure. This type of insurance is offered when insurers are not willing to offer HO 00 02, 03 or 05 coverage because there may be an incentive to intentionally destroy the structure.

Now let's take a look at what is usually not covered under these types of insurance. These are known as "exclusions", but you may be able to get coverage in these areas with a rider or umbrella policy. Your individual policy may exclude more items than listed below, so consult with your agent.

   1. Ordinance or Law: If the dwelling does not comply with local building codes, the insurer will not be liable for the cost of construction to bring the structure up to code.

   2. Earth Movements: This includes two distinct types of earth movements, including shifting earth (landslides) in the foundation of a home and earthquakes. These may be considered two separate coverage areas, so being covered for one may not mean being covered for the other.

   3. Water Damage: This includes flood, water backing up in sewers or drains, water seeping through basement walls etc.

   4. Neglect: This excludes losses resulting from direct or indirect neglect and failure to use reasonable means to protect property.

   5. War: Damage caused by any type of war or nuclear weapons attack.

   6. Nuclear Hazard: This defined as any nuclear reaction, radiation, or radioactive contamination, (whether controlled or uncontrolled). Any loss caused by nuclear hazard as it is defined will not be considered loss caused by fire, explosion, or smoke, even if these perils are specifically named in your policy.

   7. Intentional Loss: Any damage intentionally done to one's own property is excluded for obvious reasons.


As with any type of insurance, it is critical that you read the insurance policy so that you know exactly what it will cover. The amount of coverage you should consider should be based on the replacement cost value of your home or property. Replacement costs on one's dwelling provides that if, at the time of loss, the amount of insurance covers at least 80% of the replacement cost of the dwelling, the loss will be paid on a replacement cost basis. Keep in mind that this still leaves the homeowner on the hook for the remaining 20% in the event of a total loss.

Oftentimes, the bank or institution holding your mortgage will require that you maintain a specific amount of coverage. However, even if your home is paid off, you should still consider having the appropriate amount of insurance protection, which might include coverage for physical damage as well as liability protection for the owners.

Other Considerations
Depending on where you live and given the unpredictability of nature, specifically the weather, you should consider other types of insurance to protect your property. For example:

Flood Insurance
Flood insurance is becoming more and more popular as places that normally would not experience floods are suddenly finding themselves suffering losses as a result of extreme weather. To the surprise of many of these homeowners, their regular homeowners insurance policy did not cover against flood. This is a separate type of coverage that you will have to purchase if you consider flood to be a risk for your business or property.

If you live in a flood-prone area and you have a mortgage, the lender will require you to purchase adequate coverage to insure the property. If you own the property, you can elect to self-insure and not buy insurance, but you have to remember that any damage caused as a result of flooding will be your financial responsibility. The cost of this kind of damage can run from the hundreds to thousands of dollars, so it's worth considering purchasing the insurance to transfer this risk, especially, if you live in a flood zone. If you don't live in a flood-prone area, you may qualify for a discounted rate, which means a lower premium for you.

Windstorm Insurance
Like flood insurance, windstorm insurance is a separate type of coverage that protects your home or business against wind damage. Wind damage may result from items flying and destroying your property as a result of a hurricane, hail, snow, sand or dust.Coverage for windstorm may be limited in states prone to hurricane and tornadoes. If you live in a state like Florida, Louisiana, Texas or the Carolinas, which are frequently barraged by tropical storms or hurricanes, this should be an integral part of your asset protection planning. Consult with your agent or broker for more details on this type of coverage.

Umbrella Liability Policies
Umbrella insurance helps you protect your assets if you are sued. If you are worried that the liability insurance coverage you have through your auto or property policies is still not enough, you can consider adding an umbrella policy. An umbrella policy is basically an additional policy that kicks in when your other insurance policies have reached their limits. The amount of coverage and types of coverage offered by these policies varies, as will their premiums. You can tag on an umbrella policy to your homeowners or auto insurance policy to protect your assets against liability or lawsuits. (For background reading, see Cover Your Company With Liability Insurance and Filling The Gaps In General Liability Insurance.)

Certain exclusions apply, including:

    * Owned or leased aircraft or watercraft
    * Business pursuits
    * Professional services
    * Any act committed by the insured with the intent to cause personal injury or property damage

Umbrella policies are fairly inexpensive to acquire, and coverage ranges from $1 million to $ 5 million or more. You might expect to pay between $200 to $500 for $1 million in coverage. There is no specific "umbrella deductible". Because an umbrella policy is written on top of any auto or personal property coverage you have, the benefit does not kick in until you satisfy the deductible on those policies and have used up the coverage from either the auto or property policy.

Homeowners Tips
Homeowners insurance is a critical component of anyone's risk management planning. There may always be a threat of property loss from fire, theft or bad weather. Having an accurate home inventory of your possessions can make settlement claims a lot easier and faster. Insurance agents suggest that all homeowners keep receipts, descriptions, photos or video of the items they own. Once your list and evidence of ownership is itemized, store this in a safety deposit box or other safe location outside of your home, along with a copy of your policy.

Fundamentals Of Insurance

insurance works by pooling risk.What does this mean? It simply means that a large group of people who want to insure against a particular loss pay their premiums into what we will call the insurance bucket, or pool. Because the number of insured individuals is so large, insurance companies can use statistical analysis to project what their actual losses will be within the given class. They know that not all insured individuals will suffer losses at the same time or at all. This allows the insurance companies to operate profitably and at the same time pay for claims that may arise. For instance, most people have auto insurance but only a few actually get into an accident. You pay for the probability of the loss and for the protection that you will be paid for losses in the event they occur.

Risks
Life is full of risks - some are preventable or can at least be minimized, some are avoidable and some are completely unforeseeable. What's important to know about risk when thinking about insurance is the type of risk, the effect of that risk, the cost of the risk and what you can do to mitigate the risk.  Let's take the example of driving a car. (For more insight on the concept of risk, see Determining Risk And The Risk Pyramid.)

Type of risk: Bodily injury, total loss of vehicle, having to fix your car

The effect: Spending time in the hospital, having to rent a car and having to make car payments for a car that no longer exists

The costs: Can range from small to very large

Mitigating risk: Not driving at all (risk avoidance), becoming a safe driver (you still have to contend with other drivers), or transferring the risk to someone else (insurance)

Let's explore this concept of risk management (or mitigation) principles a little deeper and look at how you may apply them. The basic risk management tools indicate that risks that could bring financial losses and whose severity cannot be reduced should be transferred.  You should also consider the relationship between the cost of risk transfer and the value of transferring that risk.

Risk Control
There are two ways that risks can be controlled. You can avoid the risk altogether, or you can choose to reduce your risk.

Risk Financing
If you decide to retain your risk exposures, then you can either transfer that risk (ie. to an insurance company), or you retain that risk either voluntarily (ie. you identify and accept the risk) or involuntarily (you identify the risk, but no insurance is available).

Risk Sharing
Finally, you may also decide to share risk.  For example, a business owner may decide that while he is willing to assume the risk of a new venture, he may want to share the risk with other owners by incorporating his business.

So, back to our driving example.  If you could get rid of the risk altogether, there would be no need for insurance. The only way this might happen in this case would be to avoid driving altogether. Also, if the cost of the loss or the effect of the loss is reasonable to you, then you may not need insurance.

For risks that involve a high severity of loss and a low frequency of loss, then risk transference (ie. insurance) is probably the most appropriate protection technique. Insurance is appropriate if the loss will cause you or your loved ones a significant financial loss or inconvenience. Do keep in mind that in some instances, you are required to purchase insurance (i.e. if operating a motor vehicle). For risks that are of low loss severity but high loss frequency, the most suitable method is either retention or reduction because the cost to transfer (or insure) the risk might be costly. In other words, some damages are so inexpensive that it's worth taking the risk of having to pay for them yourself, rather than forking extra money over to the insurance company each month.

The Risk Management Process
After you have determined that you would like to insure against a loss, the next step is to seek out insurance coverage. Here you have many options available to you but it's always best to shop around. You can go directly to the insurer through an agent, who can bind the policy. The process of binding a policy is simply a written acknowledgement identifying the main components of your insurance contract. It is intended to provide temporary insurance protection to the consumer pending a formal policy being issued by the insurance company. It should be noted that agents work exclusively for the insurance company. There are two types of agents:

   1. Captive Agents: Captive agents represent a single insurance company and are required to only do business with that one company. 
   2. Independent Agent: Independent agents represent multiple companies and work on behalf of the client (not the insurance company) to find the most appropriate policy.

Underwriting
Underwriting is the process of evaluating the risk to be insured. This is done by the insurer when determining how likely it is that the loss will occur, how much the loss could be and then using this information to determine how much you should pay to insure against the risk. The underwriting process will enable the insurer to determine what applicants meet their approval standards. For example, an insurance company might only accept applicants that they estimate will have actual loss experiences that are comparable to the expected loss experience factored into the company's premium fees. Depending on the type of insurance product you are buying, the underwriting process may examine your health records, driving history, insurable interest etc.

The concept of "insurable interest" stems from the idea that insurance is meant to protect and compensate for losses for an individual or individuals who may be adversely affected by a specific loss. Insurance is not meant to be a profit center for the policy's beneficiary. People are considered to have an insurable interest on their lives, the life of their spouses (possibly domestic partners) and dependents.  Business partners may also have an insurable interest on each other and businesses can have an insurable interest in the lives of their employees, especially any key employees.

Insurance Contract
The insurance contract is a legal document that spells out the coverage, features, conditions and limitations of an insurance policy. It is critical that you read the contract and ask questions if you don't understand the coverage. You don't want to pay for the insurance and then find out that what you thought was covered isn't included. (For more insight, read Understand Your Insurance Contract.)

Insurance terminology you should know:

Bound: Once the insurance has been accepted and is in place, it is called "bound". The process of being bound is called the binding process.

Insurer: A person or company that accepts the risk of loss and compensates the insured in the event of loss in exchange for a premium or payment. This is usually an insurance company.

Insured: The person or company transferring the risk of loss to a third party through a contractual agreement (insurance policy). This is the person or entity who will be compensated for loss by an insurer under the terms of the insurance contract.

Insurance Rider/Endorsement: An attachment to an insurance policy that alters the policy's coverage or terms. (To learn more, read Let Life Insurance Riders Drive Your Coverage.)

Insurance Umbrella Policy: When insurance coverage is insufficient, an umbrella policy may be purchased to cover losses above the limit of an underlying policy or policies, such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.

Insurable Interest: In order to insure something or someone, the insured must provide proof that the loss will have a genuine economic impact in the event the loss occurs. Without an insurable interest, insurers will not cover the loss. It is worth noting that for property insurance policies, an insurable interest must exist during the underwriting process and at the time of loss. However, unlike with property insurance, with life insurance, an insurable interest must exist at the time of purchase only.

What is Life Insurance?

Life Insurance is insurance for you and your family's peace of mind. Life insurance is a policy that people buy from a life insurance company, which can be the basis of protection and financial stability after one's death. Its function is to help beneficiaries financially after the owner of the policy dies.

It can also be a form of savings in the long run if you purchase a plan, which offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person's pension plan. A person can make contributions to a pension that is funded by a life insurance company. These are considered private pension arrangements.

In addition, you should also make a list of what you feel needs to be protected in your family's way of life. With a life insurance policy in place, you can:

    * provide security for your family
    * protect your home mortgage
    * take care of your estate planning needs
    * look at other retirement savings/income vehicles