Insurance Loans24: SCIENTIFIC PRINCIPLES

SCIENTIFIC PRINCIPLES OF LIFE INSURANCE

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Insurance  have been able to keep their promise
because  life insurance  is based on sound scientific  principles. These include<br />
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 1)  Shared risk: Members of our  earliest societies understood the
benefits  of pooling  their resources talent and also risk .
Whether  hunting for food or
defending  against common enemies  people found that sharing the risk among the
group minimized the risk to the individual. This is how the workers  guilds of the middle ages attempted  to protect families of members  against another common enemy: financial
hardship caused by death. Members  would
contribute  small amounts  each years  into a common widows and orphans fund. Though
the system was flawed it did provide basic protection for families  of members who died during the year. This
idea was still used as late as the Nineteenth Century  in this country by immigrant groups: it later
became the basis for the hundreds of fraternal 
life insurance  companies still
flourishing  today as well as  for association group insurance plan
including  those offered by the American
Academy of family physicians. </div>
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2) The La
of the large numbers: The principles of shared risk only works when the law of
large numbers is also applied, Under this scientific  principles the larger the group, the less
impact the death of one member has on the group as a whole. A group with just
ten, a hundred even a thousands members would not works. The base would  be too fragile  to susceptible 
to mortality blips due to situations and events that lead to
unexpected  deaths such as a  flu epidemic 
or earthquake that look of thousands of lives in a  certain geography  location. This is one reason groups and
individual today transfer the risk to insurance companies in effect forming new
groups consisting of  hundreds of
thousands  very often millions of
members.<br />
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3)  Predictable Mortality: A third principle
of  life insurance   is predictable mortality. It is not possible
to tell when a given individual will die. but du to more than a century of
tracking and recording data about health life style and mortality trends,
insures can projects life expectancies. This data  is recorded in mortality tables. A mortality
table is a chart summarizing the life span of a large number of people.
Specifically it projects (a) the number of death that will occur per 1,000
individual  at a given age and  (b) the life expectancy of an individual at
any age. The 1980 commissioner’s standard ordinary mortality table 1980 (SO) is
the official mortality table in use the by all insurances today, It charts a
representative sample of 10 million lives and 
follows them to age 100 when for insurance purpose the last person is
presumed to have died.  Once  the insurance company  can reasonably  predict how many people of a given age will
die in a given year, it can project mortality experience. Subsequently the
insurer can then project costs and premium 
rates. For instances  as life
expectancy  has climbed dramatically in this century the cost of  life insurance  has decreased.<br />
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4) 
Invested Assets: When the insurance company receives premium, that money
is not just put into  a vault. It is
invested. It may be years before a claim is made against the police. So, the
impact of investment experience can be significant. The projected return is
factored into premium and other costs. At the same time a percentage of assets
is set aside in company  reserves to
reduce the impact of unexpected events.  </div>
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 5) Fair and accurate risk selection: A 
life insurance  contract is an
aleatory contract. It is  based on the
possibility  of a chance occurrence and
in all likelihood, one side will benefit more than the other. However  for 
life insurance  to work, the
insurer needs to recover as many variables as possible. This brings  up to the final principle  of insurance, which is fair and accurate risk
assessment. Especially  with the
individual insurance policies, coverage is issued based on the assumption of
reasonable risk. This means insuring people who are  generally in good  health at the time of application. This
is also why medical exams  and blood
samples are sometimes required. Once 
insured policy owners are protected if they become ill. That is the
reasonable risk the company  assumes that
a certain percentage of insured will die prematurely. However  were the company to issue policies on
seriously ill application   life
insurance  would becomes
prohibitively  expensive.</div>
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SCIENTIFIC PRINCIPLES OF LIFE INSURANCE

Insurance have been able to keep their promise because life insurance is based on sound scientific principles. These include 1)...

LIFE INSURANCE Vs NON- LIFE INSURANCE

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 The following are the differences between  life insurance  and other forms  insurance 
such as a  fire marine  and miscellaneous insurance.  1) Happening of event: The event insured
against in  life insurance  is a certain event, the only uncertainty
being the time when the event will occur. But in case of fire and marine   insurance  
the events insured against may or may not take place at all or may tale
place wholly or partly. Thus in  life
insurance , every policy will become a claim sooner or  later but it is not so in other insurances.<br />
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 2)  Partial Loss:  Life insurance  is a contract 
to pay an absolute amount on the maturity of the policy and there is no
possibility of partial losses but the other insurance are indemnity contracts
where only the actual  amount of loss
will be payable irrespective of the assured sum.  3) Risk assessment: Risk classification is
generally more simple in  life
insurance  chan in the  others forms of insurance. Here all the lives
are divided into three groups: Standard sub-standard and  uninsurable. But of property insurance.  the classification is more complex e.g. in
marine insurance. the risk may be divided according to the type of vessel.
voyage, season  etc. So is the case of
fire and other insurance.<br />
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 4)  Period: 
In most forms of insurance the policy is taken for one years of even for
a shorter period  but in life contracts
the insurance is taken for very long period.  </div>
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5) Premium: In  life
insurance  the premium are charged
generally on level premium plan which means that the premium charged in the
initial years of the policy are higher than the actual cost of insurance but in
fire and marine insurance contract , the premiums are just sufficient to cover
the actual cost of insurance  it contains
both the investments and protection elements but in  the fire or marine contracts there
exists  the protection  element only.</div>
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 6)  Insurable Interest: In  life insurance  the insured 
must have the insurable interest when the policy is taken. but in marine
insurance  he must  have it when the loss aries. In  life insurance  the insurable interest must be present at
both the times, when the policy is taken and when it becomes a claim. </div>
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  7) 
Higher hazard: In  life
insurance   the hazard increases from
year to year. This happens in fire and marine insurances also but there the
subject  matter may be kept in good
condition  by  repair or the 
replacement or worst  parts: but
in  life insurance  the chances of death go on increasing with
increased age whatever precautions  may
be taken by one about one’s health. In spite of the higher hazard  from year to year, the same premium rate is
charged in life contracts.  </div>
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8) Procedure:
Medical examination  is required 
before a  life insurance  is granted whereas survey is made for before
a property is insured. </div>
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 9) Amount: Life
insurance  can be taken for any amount
depending  upon the premium paying
capacity of the insured. But  in other
insurances policies can be taken up to the value of the property </div>
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 10) Transfer: A  life police 
can be  transferred either by
assignment or by nomination. But in other insurance the financial  interest can be transferred only by
assignment with the prior permission  of
the insurer.  </div>
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11)  Surrender: A life policy 
can be surrender  by the insured
before its maturity. But in other insurances, it cannot be done. </div>
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12)  Claim: 
The claim money in  life
insurance  is an agreed amount as the
insured sum which is fixed in advance by the insurer as well as the insured.
Claim money in other insurances  arises
only in  case of <o:p></o:p></div>
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loss due to risk.<b><o:p></o:p></b></div>
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LIFE INSURANCE Vs NON- LIFE INSURANCE

The following are the differences between life insurance and other forms insurance such as a fire marine and miscellaneous insuranc...

Insurance Loans24

SCIENTIFIC PRINCIPLES OF LIFE INSURANCE

LIFE INSURANCE Vs NON- LIFE INSURANCE

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