Essence of Insurance
Sharing losses and, in the process, the substitution of a certain, small "loss" called the premium for an uncertain, large loss called the premium for an uncertain large loss
Econ. Def of Insurance
financial intermediation function by which individuals exposed to a specified contingency each contribute to a pool from which covered events suffered by participating individuals are paid.
Legal Def. of Insurance
an agreement, the insurance policy or insurance contract, by which one party, the policy owner, pays a stipulated consideration called the premium to the other party called the insurer, in return for which the insurer agrees to pay a defined amt. of money or provide a defined service if a covered event occurs during the policy term.
Life Insurance Covers:
death, living a certain amt of time(endowments, annuities, and pensions)
Called disability and long-term care insurance
Whole Life Insurance
life insurance policy that provides coverage for the whole of the insured's life
Term policies promise to pay benefits only if insured dies during the policy term
Pays benefits if insured dies during the policy term and also pays benefits if the insured survives the policy term.
Contract that promises to pay the insured, or annuitant, a periodic (usually monthly) payment starting at a specified age, such as 65. If payments cease on the annuitant's death, we call the contract a life annuity
any form of insurance whose payment is contingent on the insured incurring additional expenses or losing income because of incapacity or loss of good health
Disability Income Insurance
payment provoked because physical or mental incapacity prevents the insured from being able to work.
Long-term care insurance
incapacity prohibits the insured's activities of daily living
Typically purchased by employers for the benefit of their employees