Insurance Companies And Pension Funds

Insurance Companies and Pension Funds

Insurance Companies
Insurance companies assume the risk of their

clients in return for a fee, called the Premium.
Most people purchase insurance because they are risk-averse-they would rather pay a certainty equivalent (the premium) than accept a gamble
What is Insurance?
A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.

Types of Insurance
Insurance is classified by which type of undesirable event is covered:
 Life Insurance
 Health Insurance
 Property and Casualty Insurance

Life Insurance
Life insurance policies comes in many forms.

Some of the typical policies include:
Term Life: the insured is covered while the policy is in effect, usually 10-20 years.
Whole Life: similar to term life, but allows the policyholder to borrow against the policies cash value. When the term of policy expires, the insured can get the cash value of the policy.

Life Insurance
Life insurance policies come in many forms.
Some of the typical policies include:
 Universal Life: includes both a term life portion and a savings portion.
 Annuities: pay a benefit to insured until death, to cover retirement years.

Life Insurance:
Company Assets and Liabilities

Life insurance companies derive funds from

two sources: o They receive premiums that must be used to payout future claims when the insured dies. o They receive premiums paid into pension funds managed by the life insurance company. Health Insurance
A type of insurance coverage that pays for

medical and surgical expenses that are incurred by the insured. Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly. Health insurance is often included in employer benefit packages as a means of enticing quality employees.

Property and