CancerTreatmentBooks.com
Information About Cancer and Cancer Treatment

Insurance

Insurance is the business of providing protection against financial aspects
of risk, such as those to property, life and health. The insured makes
payments called "premiums" to an insurer, and in return is able to claim a
payment from the insurer if the insured suffers some kind of loss. For
example, a shipowner could insure a ship, and receive payment if the ship is
damaged or destroyed. In the case of a pension the terms 'risk' and 'loss'
are somewhat inappropriate, they concern the chances of living at future
times and the need for money because of still being alive.

Insurance reduces risk by pooling together a large number of risks. For
example, many individual people purchase health insurance policies. They
each pay a small monthly or yearly premium to the insurance company, and
then when a policy holder gets ill, the insurance company will provide money
to cover medical treatment. For some individuals receiving insurance
benefits, this may total far more money than they have ever paid into the
insurance policy themselves. Others may never make a claim. When averaged
out over all of the people buying policies it evens out. Insurance companies
set their premiums based on their calculated payouts, aiming to take in more
money than they pay out in the long run to cover expenses and make a profit.

Insurance companies also earn investment profits, because they have the use
of the premium money from the time they receive it until the time they need
it to pay claims. When the investments are successful, they may earn large
profits, even if every penny received as premiums is eventually paid out in
claims.

An insurance contract or "policy" will set out in detail the exact
circumstances in which a benefit payment will be made and the amount of the
premiums.

Types of insurance

There are a number of different types of insurance:

   * Property insurance, which provides protection against risks to
     property, such as fire, theft or weather damage. This includes
     specialized forms of insurance such as fire insurance, flood insurance,
     or boiler insurance.
   * Casualty insurance, which insures against accidents, not necessarily
     tied to any specific piece of property.
   * Liability insurance, which covers legal claims against the insured. For
     example, a doctor may purchase insurance to cover any legal claims
     against him if he were to make a mistake in treating a patient.
   * Financial loss insurance, which protects individuals and companies
     against various financial risks. For example, a business might purchase
     cover to protect it from loss of sales if a fire in a factory prevented
     it from carrying out its business for a time. Insurance might also
     cover failure of a creditor to pay money it owes to the insured.
     Fidelity bonds and surety bonds are included in this category.
   * Title insurance, which provides a guarantee on research done on public
     records affecting title to real property, usually in conjunction with a
     search done at the time of a real estate transaction, such as a sale,
     or a mortgage.
   * Health insurance, which covers medical bills.
   * Life insurance, which provides a benefit to a decedent's family or
     other designated beneficiary, usually to make up for their loss of his
     or her income.
   * Annuities, which provide a stream of payments, are generally classified
     as insurance because they are issued by insurance companies and
     regulated as insurance. Annuities and pensions that pay a benefit for
     life are sometimes regarded as insurance against the possibility that a
     retiree will outlive his or her financial resources. In that sense,
     they are the opposite of life insurance.
   * Terrorism insurance
   * Political risk insurance

A single policy may cover risks in one or more of the above categories. For
example, car insurance would typically cover both property risk (covering
the risk of theft or damage to the car) and liability risk (covering legal
claims from say, causing an accident). A homeowner's insurance policy in the
US typically includes property insurance covering damage to the home and the
owner's belongings, liability insurance covering certain legal claims
against the owner, and even a small amount of health insurance for medical
expenses of guests who are injured on the owner's property.

Potential sources of risk that may give rise to claims are known as perils.
Examples or perils might be fire, theft, earthquake, hurricane and many
other potential risks. An insurance policy will set out in detail which
perils are covered by the policy and which are not.

Types of insurance companies

Insurance companies may be classified as

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

In most countries, life and non-life insurers are subject to different
regulations, tax and accounting rules. The main reason for the distinction
between the two types of company is that life business is very long term in
nature - cover for life assurance or a pension can cover risks over many
decades. By contrast, non-life insurance cover usually covers shorter
periods, such as one year.

Companies may sell both life and non life insurance, in which case they are
sometimes known as composite insurance companies.

Reinsurance companies sell insurance cover to other insurance companies.
This helps insurance companies to spread their risks, and protects them from
very large losses. The reinsurance market is dominated by a few very large
companies, with huge reserves.

Life insurance and saving

As well as paying out a sum of money on death, many life insurance contracts
also pay out a sum of money after a given time (in which case it is known as
an endowment policy), and may also pay out a cash value if the policy is
cancelled early. In many countries, such as the US and the UK, tax law
provides that the interest on this cash value is not taxable.

This leads to widespread use of life insurance as a tax-efficient method of
saving as well as protection in the event of early death. Wealthy
individuals buy life insurance policies as a means for avoiding income taxes
and estate taxes.

If the tax benefit exceeds the fees charged by the insurance company for
maintaining the policy, then the policy serves as a life insurance tax
shelter. There is much controversy surrounding this practice, and the
financial industry is deeply divided about whether or not these practices
work as advertised.

Criticisms of the Insurance Industry

Lack of knowledge of Policyholders

Insurance policies can be complex, and a lot of policyholders, especially
poorer ones, do not understand all the fees included in a policy. As a
result, people may buy policies at unfavorable terms. In response to these
issues, governments often make detailed regulations which set down minimum
standards for policies and govern how they may be advertised and sold.

Redlining

Location is one of the variables used to set rates. This is considered
unfair by many. Insurers are also starting to use credit "scores" to set rates.

Health Insurance

Health insurance is one of the most controversial forms of insurance. The
problem is that the insurance company does not know in advance how much it
will be obligated to pay out. For a life insurance policy, the face amount
and conditions for payment are clearcut. For health insurance, there tends
to be disputes over what is covered and what is not covered. By the time you
are sick and in a dispute with your health insurance plan, you are unable to
shop around. Before you are sick, you won't know if the insurance company is
going to deny converage for something you thought was included.

  1. Insurance companies do not normally announce their health insurance
     premiums more than a year in advance. This means that, if you get sick,
     you may find your premiums raised a lot. This defeats the purpose of
     having insurance in the first place.
  2. If insurance companies try to charge different people different amounts
     based on your health, people will feel they are unfairly treated. Some
     states require that insurance companies cover all who apply at the same
     cost; this rule has the effect (called adverse selection) that healthy
     people subsidize sick ones, and thus only really sick people buy
     insurance and the premiums are very expensive.
  3. By the time a claim is made, it is in the best interest of the
     insurance company to use lots of paperwork and bureaucracy to attempt
     to deny the claim. Some percentage of people will give up, leading to
     lower costs for the insurance company.
  4. Health insurance is only available at a reasonable cost through an
     employer-sponsored group plan. This means that unemployed individuals
     and self-employed individuals are at a big disadvantage.
  5. Investigational treatments are generally not covered.

Cancer - List of Famous Cancer Patients - Medical Topics - Medical_Terms - Medicine - Alternative Therapies -