tag:blogger.com,1999:blog-89314394809119398222024-03-08T03:59:51.622-08:00Maker MoneyMaker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.comBlogger53125tag:blogger.com,1999:blog-8931439480911939822.post-18693366992468791362008-01-20T06:02:00.001-08:002008-01-20T06:02:37.725-08:00Economic characteristics<p>Money is generally considered to have the following characteristics, which are summed up in a rhyme found in older economics textbooks and a primer: "Money is a matter of functions four, a medium, a measure, a standard, a store." That is, money functions as a <a href="http://en.wikipedia.org/wiki/Medium_of_exchange" title="Medium of exchange">medium of exchange</a>, a <a href="http://en.wikipedia.org/wiki/Unit_of_account" title="Unit of account">unit of account</a>, and a <a href="http://en.wikipedia.org/wiki/Store_of_value" title="Store of value">store of value</a>.<sup id="_ref-1" class="reference"><a href="http://en.wikipedia.org/wiki/Money#_note-1" title="">[2]</a></sup><sup id="_ref-krugman_0" class="reference"><a href="http://en.wikipedia.org/wiki/Money#_note-krugman" title="">[3]</a></sup><sup id="_ref-greco_0" class="reference"><a href="http://en.wikipedia.org/wiki/Money#_note-greco" title="">[4]</a></sup></p> <p>There have been many historical arguments regarding the combination of money's functions, some arguing that they need more separation and that a single unit is insufficient to deal with them all. One of these arguments is that the role of money as a <a href="http://en.wikipedia.org/wiki/Medium_of_exchange" title="Medium of exchange">medium of exchange</a> is in conflict with its role as a <a href="http://en.wikipedia.org/wiki/Store_of_value" title="Store of value">store of value</a>: its role as a store of value requires holding it without spending, whereas its role as a medium of exchange requires it to circulate.<sup id="_ref-greco_1" class="reference"><a href="http://en.wikipedia.org/wiki/Money#_note-greco" title="">[4]</a></sup> 'Financial capital' is a more general and inclusive term for all liquid instruments, whether or not they are a uniformly recognized tender.</p> <p><a name="Medium_of_exchange" id="Medium_of_exchange"></a></p> <h3><span class="mw-headline">Medium of exchange</span></h3> <dl><dd> <div class="noprint relarticle mainarticle"><i>Main article: <a href="http://en.wikipedia.org/wiki/Medium_of_exchange" title="Medium of exchange">Medium of exchange</a></i></div> </dd></dl> <p>Money is used as an intermediary for trade, in order to avoid the inefficiencies of a barter system. Such usage is termed a <i>medium of exchange.</i></p> <p><a name="Unit_of_account" id="Unit_of_account"></a></p> <h3><span class="mw-headline">Unit of account</span></h3> <dl><dd> <div class="noprint relarticle mainarticle"><i>Main article: <a href="http://en.wikipedia.org/wiki/Unit_of_account" title="Unit of account">Unit of account</a></i></div> </dd></dl> <p>A <b>unit of account</b> is a standard numerical unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt.</p> <ul><li>Divisible into small units without destroying its value; precious metals can be coined from bars, or melted down into bars again.</li><li><a href="http://en.wikipedia.org/wiki/Fungibility" title="Fungibility">Fungible</a>: that is, one unit or piece must be exactly equivalent to another, which is why <a href="http://en.wikipedia.org/wiki/Diamond" title="Diamond">diamonds</a>, works of <a href="http://en.wikipedia.org/wiki/Art" title="Art">art</a> or <a href="http://en.wikipedia.org/wiki/Real_estate" title="Real estate">real estate</a> are not suitable as money.</li><li>A specific weight, or measure, or size to be verifiably countable. For instance, coins are often made with ridges around the edges, so that any removal of material from the coin (lowering its commodity value) will be easy to detect.</li></ul> <p><a name="Store_of_value" id="Store_of_value"></a></p> <h3><span class="mw-headline">Store of value</span></h3> <dl><dd> <div class="noprint relarticle mainarticle"><i>Main article: <a href="http://en.wikipedia.org/wiki/Store_of_value" title="Store of value">Store of value</a></i></div> </dd></dl> <p>To act as a <b>store of value</b>, a commodity, a form of money, or <a href="http://en.wikipedia.org/wiki/Financial_capital" title="Financial capital">financial capital</a> must be able to be reliably saved, stored, and retrieved — and be predictably useful when it is so retrieved. Fiat currency like paper or electronic currency no longer backed by gold in most countries is not considered by some economists to be a store of value.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-24480937122199880292008-01-20T06:00:00.000-08:002008-01-20T06:01:48.484-08:00Money<p><b>Money</b> is any token or other object that functions as a <a href="http://en.wikipedia.org/wiki/Medium_of_exchange" title="Medium of exchange">medium of exchange</a> that is socially and legally accepted in <a href="http://en.wikipedia.org/wiki/Payment" title="Payment">payment</a> for goods and services and in settlement of <a href="http://en.wikipedia.org/wiki/Debts" title="Debts">debts</a>. Money also serves as a standard of value for measuring the relative worth of different goods and services and as a store of value. Some authors explicitly require money to be a <a href="http://en.wikipedia.org/wiki/Standard_of_deferred_payment" title="Standard of deferred payment">standard of deferred payment</a>.<sup id="_ref-0" class="reference"><a href="http://en.wikipedia.org/wiki/Money#_note-0" title="">[1]</a></sup></p> <p>Money includes both <a href="http://en.wikipedia.org/wiki/Currency" title="Currency">currency</a>, particularly the many <a href="http://en.wikipedia.org/wiki/List_of_circulating_currencies" title="List of circulating currencies">circulating currencies</a> with <a href="http://en.wikipedia.org/wiki/Legal_tender" title="Legal tender">legal tender</a> status, and various forms of financial deposit accounts, such as demand deposits, savings accounts, and certificates of deposit. In modern economies, currency is the smallest component of the <a href="http://en.wikipedia.org/wiki/Money_supply" title="Money supply">money supply</a>.</p> <p>Money is not the same as real value, the latter being the basic element in economics. Money is central to the study of <a href="http://en.wikipedia.org/wiki/Economics" title="Economics">economics</a> and forms its most cogent link to <a href="http://en.wikipedia.org/wiki/Finance" title="Finance">finance</a>. The absence of money causes an economy to be inefficient because it requires a <a href="http://en.wikipedia.org/wiki/Coincidence_of_wants" title="Coincidence of wants">coincidence of wants</a> between traders, and an agreement that these needs are of equal value, before a <a href="http://en.wikipedia.org/wiki/Barter" title="Barter">barter</a> exchange can occur. The efficiency gains through the use of money are thought to encourage trade and the division of labour, in turn increasing productivity and <a href="http://en.wikipedia.org/wiki/Wealth" title="Wealth">wealth</a>.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-15418234126396245862007-12-17T08:35:00.001-08:002007-12-17T08:35:49.177-08:00Debt & Arguments against debt<p>Some argue against debt as an instrument and institution, on a personal, family, social, corporate and governmental level. Islam forbids lending with interest even today, while the Catholic church allowed it from 1822 onwards, and the Torah states that all debts should be erased every 7 years and every 50 years.</p> <p>Debt will increase through time if it is not repaid faster than it grows through interest. This effect may be termed <a href="http://en.wikipedia.org/wiki/Usury" title="Usury">usury</a>, while the term "usury" in other contexts refers only to an excessive rate of interest, in excess of a reasonable profit for the <a href="http://en.wikipedia.org/wiki/Risk" title="Risk">risk</a> accepted.</p> <p>In international legal thought, <a href="http://en.wikipedia.org/wiki/Odious_debt" title="Odious debt">Odious debt</a> is debt that is incurred by a regime for purposes that do not serve the interest of the state. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state.</p><br /><p><br /></p><h2><span class="mw-headline">Levels and flows</span></h2>Global debt underwriting grew 4.3% year-over-year to $5.19 trillion during 2004.<br /><h3><span class="mw-headline">Inflation indexed debt</span></h3> <p>Borrowing and repayment arrangements linked to inflation-indexed units of account are possible and are used in some countries. For example, the US government issues two types of <a href="http://en.wikipedia.org/wiki/Inflation-indexed_bond" title="Inflation-indexed bond">inflation-indexed bonds</a>, Treasury Inflation-Protected Securities (TIPS) and I-bonds. These are one of the safest forms of investment available, since the only major source of risk — that of <a href="http://en.wikipedia.org/wiki/Inflation" title="Inflation">inflation</a> — is eliminated. A number of other governments issue similar bonds, and some did so for many years before the US government.</p> <p>In countries with consistently high inflation, ordinary borrowings at banks may also be inflation indexed.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-77453697025340271872007-12-17T08:34:00.001-08:002007-12-17T08:34:56.971-08:00Debt & Effects of debt<p>Debt allows people and organizations to do things that they would otherwise not be able, or allowed, to do. Commonly, people in industrialised nations use it to purchase houses, cars and many other things too expensive to buy with cash on hand. Companies also use debt in many ways to leverage the <a href="http://en.wikipedia.org/wiki/Investment" title="Investment">investment</a> made in their <a href="http://en.wikipedia.org/wiki/Asset" title="Asset">assets</a>, "levering" the return on their <a href="http://en.wikipedia.org/wiki/Stock" title="Stock">equity</a>. This <a href="http://en.wikipedia.org/wiki/Leverage_%28finance%29" title="Leverage (finance)">leverage</a>, the proportion of debt to equity, is considered important in determining the riskiness of an investment; the more debt per equity, the riskier. For both companies and individuals, this increased risk can lead to poor results, as the cost of servicing the debt can grow beyond the ability to pay due to either external events (income loss) or internal difficulties (poor management of resources).</p> <p>Excesses in debt accumulation have been blamed for exacerbating economic problems. For example, prior to the beginning of the <a href="http://en.wikipedia.org/wiki/Great_Depression" title="Great Depression">Great Depression</a> debt/GDP ratio was very high. Economic agents were heavily indebted. This excess of debt, equivalent to excessive expectations on future returns, accompanied asset bubbles on the stock markets. When expectations corrected, deflation and a <a href="http://en.wikipedia.org/wiki/Credit_crunch" title="Credit crunch">credit crunch</a> followed. <a href="http://en.wikipedia.org/wiki/Deflation_%28economics%29" title="Deflation (economics)">Deflation</a> effectively made debt more expensive and, as Fisher explained, this reinforced deflation again, because, in order to reduce their debt level, economic agents reduced their <a href="http://en.wikipedia.org/wiki/Consumption_%28economics%29" title="Consumption (economics)">consumption</a> and investment. The reduction in demand reduced business activity and caused further unemployment. In a more direct sense, more <a href="http://en.wikipedia.org/wiki/Bankruptcy" title="Bankruptcy">bankruptcies</a> also occurred due both to increased debt cost caused by deflation and the reduced demand.</p> <p>It is possible for some organizations to enter into alternative types of borrowing and repayment arrangements which will not result in bankruptcy. For example, companies can sometimes convert debt that they owe into <a href="http://en.wikipedia.org/wiki/Stock" title="Stock">equity</a> in themselves. In this case, the creditor hopes to regain something equivalent to the debt and interest in the form of dividends and capital gains of the borrower. The "repayments" are therefore proportional to what the borrower earns and so can not in themselves cause bankruptcy. Once debt is converted in this way, it is no longer known as debt.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-26063751090454754362007-12-17T08:33:00.000-08:002007-12-17T08:34:20.519-08:00Debt & Debt ratings, risk and cancellation<h3><span class="mw-headline">Risk free interest rate</span></h3> <dl><dd> <div class="noprint relarticle mainarticle"><i>Main article: <a href="http://en.wikipedia.org/wiki/Risk-free_interest_rate" title="Risk-free interest rate">risk-free interest rate</a></i></div> </dd></dl> <p>Lendings to stable financial entities such as large companies or governments are often termed "risk free" or "low risk" and made at a so-called "<a href="http://en.wikipedia.org/wiki/Risk-free_interest_rate" title="Risk-free interest rate">risk-free interest rate</a>". This is because the debt and interest are highly unlikely to be defaulted. A good example of such risk-free interest is a <a href="http://en.wikipedia.org/wiki/Treasury_security" title="Treasury security">US Treasury security</a> - it yields the minimum return available in economics, but investors have the comfort of the (almost) certain expectation that the US Treasury will not default on its debt instruments. A risk-free rate is also commonly used in setting floating interest rates, which are usually calculated as the risk-free interest rate plus a bonus to the creditor based on the creditworthiness of the debtor (in other words, the risk of him defaulting and the creditor losing the debt). In reality, no lending is truly risk free, but borrowers at the "risk free" rate are considered the least likely to default.</p> <p>However, if the real value of a currency changes during the term of the debt, the purchasing power of the money repaid may vary considerably from that which was expected at the commencement of the loan. So from a practical investment point of view, there is still considerable risk attached to "risk free" or "low risk" lendings. The real value of the money may have changed due to inflation, or, in the case of a foreign investment, due to exchange rate fluctuations.</p> <p>The <a href="http://en.wikipedia.org/wiki/Bank_for_International_Settlements" title="Bank for International Settlements">Bank for International Settlements</a> is an <a href="http://en.wikipedia.org/wiki/Organisation" title="Organisation">organisation</a> of <a href="http://en.wikipedia.org/wiki/Central_bank" title="Central bank">central banks</a> that sets rules to define how much capital banks have to hold against the loans they give out.</p><h3><span class="mw-headline">Ratings and creditworthiness</span></h3> <p>Specific bond debts owed by both governments and private corporations is rated by <a href="http://en.wikipedia.org/wiki/Rating_agency" title="Rating agency">rating agencies</a>, such as <a href="http://en.wikipedia.org/wiki/Moody%27s" title="Moody's">Moody's</a>, <a href="http://en.wikipedia.org/wiki/A._M._Best" title="A. M. Best">A. M. Best</a> and <a href="http://en.wikipedia.org/wiki/Standard_%26_Poor%27s" title="Standard & Poor's">Standard & Poor's</a>. The government or company itself will also be given its own separate rating. These agencies assess the ability of the debtor to honor his obligations and accordingly give him a <a href="http://en.wikipedia.org/wiki/Credit_rating" title="Credit rating">credit rating</a>. Moody's uses the letters <i>Aaa Aa A Baa Ba B Caa Ca C</i>, where ratings <i>Aa-Caa</i> are qualified by numbers 1-3. <a href="http://en.wikipedia.org/wiki/Munich_Re" title="Munich Re">Munich Re</a>, for example, currently is rated <i>Aa3</i> (<a href="http://en.wikipedia.org/wiki/As_of_2004" title="As of 2004">as of 2004</a>). S&P and other rating agencies have slightly different systems using capital letters and +/- qualifiers.</p> <p>A change in ratings can strongly affect a company, since its cost of <a href="http://en.wikipedia.org/wiki/Refinancing" title="Refinancing">refinancing</a> depends on its <a href="http://en.wikipedia.org/wiki/Creditworthiness" title="Creditworthiness">creditworthiness</a>. Bonds below Baa/BBB (Moody's/S&P) are considered <a href="http://en.wikipedia.org/wiki/Junk_bonds" title="Junk bonds">junk-</a> or high risk bonds. Their high risk of default (approximately 1.6% for Ba) is compensated by higher interest payments. Bad Debt is a loan that can not (partially or fully) be repaid by the debtor. The debtor is said to <a href="http://en.wikipedia.org/wiki/Default_%28finance%29" title="Default (finance)">default</a> on his debt. These types of debt are frequently repackaged and sold below face value. Buying junk bonds is seen as a risky but potentially profitable form of investment</p><h3><span class="mw-headline">Cancellation</span></h3> <p>Short of bankruptcy, it is rare that debts are wholly or partially forgiven. Traditions in some cultures demand that this be done on a regular (often annual) basis, in order to prevent systemic inequities between groups in society, or anyone becoming a specialist in holding debt and coercing repayment. Under <a href="http://en.wikipedia.org/wiki/English_law" title="English law">English law</a>, when the creditor is deceived into forgoing payment, this is a <a href="http://en.wikipedia.org/wiki/Crime" title="Crime">crime</a>: see <a href="http://en.wikipedia.org/wiki/Theft_Act_1978" title="Theft Act 1978">Theft Act 1978</a>.</p> <p>International <a href="http://en.wikipedia.org/wiki/Third_World_debt" title="Third World debt">Third World debt</a> has reached the scale that many <a href="http://en.wikipedia.org/wiki/List_of_economists" title="List of economists">economists</a> are convinced that <a href="http://en.wikipedia.org/w/index.php?title=Debt_cancellation&action=edit" class="new" title="Debt cancellation">debt cancellation</a> is the only way to restore global equity in relations with the <a href="http://en.wikipedia.org/wiki/Developing_nation" title="Developing nation">developing nations</a>.</p> <p><a name="Satisfaction_by_writeoff" id="Satisfaction_by_writeoff"></a></p> <h3><span class="editsection"></span><span class="mw-headline">Satisfaction by writeoff</span></h3> <p>A debt is repaid in full by the lender writing off as a bad debt (for tax purposes) the principal and interest owed(on a debt that is not being paid), leaving no debt remaining on its (the lenders) books.</p> <p>A simple analogy gives a better understanding-if a stranger comes in and pays off a debt you owe,you no longer owe it, it(your debt)has been paid. And in the tax writeoff example, the lender in writingoff the principal and interest of your debt has been paid 100% of both principal and interest by his tax deduction yielding a tax savings equal to 100% of your debt. And accounting recognizes this by extinguishing your debt in full -no longer permitting that debt to be shown on the lender's books.</p> <p>Further "transfer" of this already paid debt to a collection agency is simply fraud as no debt remains to be collected upon</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-7224289516919411982007-12-17T08:32:00.002-08:002007-12-17T08:33:14.250-08:00Debt & SecuritizationSecuritization occurs when a company groups together assets or receivables and sells them in units to the market through a trust. Any asset with a cashflow can be securitized. The cash flows from these receivables are used to pay the holders of these units. Companies often do this in order to remove these assets from their balance sheets and monetize an asset. Although these assets are "removed" from the balance sheet and are supposed to be the responsibility of the trust, that does not end the company's involvement. Often the company maintains a special interest in the trust which is called an "interest only strip" or "first loss piece". Any payments from the trust must be made to regular investors in precedence to this interest. This protects investors from a degree of risk, making the securitization more attractive. The aforementioned brings into question whether the assets are truly off balance sheet given the company's exposure to losses on this interest.<br /><br /><h2><span class="mw-headline">Debt, inflation and the exchange rate</span></h2> <p>As noted above, debt is normally denominated in a particular monetary <a href="http://en.wikipedia.org/wiki/Currency" title="Currency">currency</a>, and so changes in the valuation of that <a href="http://en.wikipedia.org/wiki/Currency" title="Currency">currency</a> can change the effective size of the debt. This can happen due to <a href="http://en.wikipedia.org/wiki/Inflation" title="Inflation">inflation</a> or <a href="http://en.wikipedia.org/wiki/Deflation_%28economics%29" title="Deflation (economics)">deflation</a>, so it can happen even though the borrower and the lender are using the same <a href="http://en.wikipedia.org/wiki/Currency" title="Currency">currency</a>. Thus it is important to agree on standards of deferred payment in advance, so that a degree of fluctuation will also be agreed as acceptable. It is for instance common to agree to "<a href="http://en.wikipedia.org/wiki/United_States_dollar" title="United States dollar">US dollar</a> denominated" debt.</p> <p>The form of debt involved in <a href="http://en.wikipedia.org/wiki/Banking" title="Banking">banking</a> accounts for a large proportion of the money in most industrialised nations (see <a href="http://en.wikipedia.org/wiki/Money" title="Money">money</a> and <a href="http://en.wikipedia.org/wiki/Credit_money" title="Credit money">credit money</a> for a discussion of this). There is therefore a complex relationship between <a href="http://en.wikipedia.org/wiki/Inflation" title="Inflation">inflation</a>, <a href="http://en.wikipedia.org/wiki/Deflation_%28economics%29" title="Deflation (economics)">deflation</a>, the <a href="http://en.wikipedia.org/wiki/Money_supply" title="Money supply">money supply</a>, and debt. The <a href="http://en.wikipedia.org/wiki/Store_of_value" title="Store of value">store of value</a> represented by the entire economy of the industrialized nation itself, and the state's ability to levy tax on it, acts to the foreign holder of debt as a guarantee of repayment, since industrial goods are in high demand in many places worldwide.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-34773409968608473172007-12-17T08:32:00.001-08:002007-12-17T08:32:45.066-08:00Debt & Accounting debt<p>In national accounting, debts are added according to those who are indebted. Household debt is the debt held by households. "National" or Public debt is the debt held by the various governmental institutions (federal government, states, cities ...). Business debt is the debt held by businesses. Financial debt is the debt held by the financial sector (from one financial institution to another). Total debt is the sum of all those debts, excluding financial debt to prevent double accounting. These various types of debt can be computed in debt/GDP ratios. Those ratios help to assess the speed of variations in the indebtness and the size of the debt due. For example the USA have a high consumer debt and a low public debt, while in European countries the opposite tends to be true.</p> <p>There are differences in the accounting of debt for private and public agents. If a private agent promises to pay something later, it has a debt, and this debt is enforceable by public agents. If a public body passes a law stating that it'll pay something later (a kind of promise), it keeps the right to change the law later (and not to pay). This is why for instance the money governments promised to pay for retirements does not show up in the public debt assessment, whereas the money private companies promised to pay for retirements do.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-23779668995166951262007-12-17T08:31:00.002-08:002007-12-17T08:32:23.032-08:00Debt & Payment & Types of debt<h2><span class="mw-headline">Payment</span></h2> <p>Before a debt can be, both the <a href="http://en.wikipedia.org/wiki/Debtor" title="Debtor">debtor</a> and the <a href="http://en.wikipedia.org/wiki/Creditor" title="Creditor">creditor</a> must agree on the manner in which the debt will be repaid, known as the <a href="http://en.wikipedia.org/wiki/Standard_of_deferred_payment" title="Standard of deferred payment">standard of deferred payment</a>. This <a href="http://en.wikipedia.org/wiki/Payment" title="Payment">payment</a> is usually denominated as a sum of <a href="http://en.wikipedia.org/wiki/Money" title="Money">money</a> in <a href="http://en.wikipedia.org/wiki/Units_of_measurement" title="Units of measurement">units</a> of <a href="http://en.wikipedia.org/wiki/Currency" title="Currency">currency</a>, but can sometimes be denominated in terms of <a href="http://en.wikipedia.org/wiki/Good_%28economics_and_accounting%29" title="Good (economics and accounting)">goods</a>. Payment can be made in increments over a period of <a href="http://en.wikipedia.org/wiki/Time" title="Time">time</a>, or all at once at the end of the <a href="http://en.wikipedia.org/wiki/Loan_agreement" title="Loan agreement">loan agreement</a>.</p><h2><span class="mw-headline">Types of debt</span></h2> <p>There are numerous types of debt, including basic <a href="http://en.wikipedia.org/wiki/Loan" title="Loan">loans</a>, <a href="http://en.wikipedia.org/wiki/Syndicated_loan" title="Syndicated loan">syndicated loans</a>, <a href="http://en.wikipedia.org/wiki/Bond_%28finance%29" title="Bond (finance)">bonds</a>, and <a href="http://en.wikipedia.org/wiki/Promissory_note" title="Promissory note">promissory notes</a>. Debt, especially large sums of debt, can also be <a href="http://en.wikipedia.org/wiki/Secured_debt" title="Secured debt">secured</a> through a <a href="http://en.wikipedia.org/wiki/Mortgage" title="Mortgage">mortgage</a> or other <a href="http://en.wikipedia.org/wiki/Security_interest" title="Security interest">security interest</a> over some of the debtor's <a href="http://en.wikipedia.org/wiki/Property" title="Property">property</a>, in which case the creditor will have some <a href="http://en.wikipedia.org/wiki/Right" title="Right">rights</a> over that property in the event that the debtor becomes unable to repay the debt and <a href="http://en.wikipedia.org/wiki/Default_%28finance%29" title="Default (finance)">defaults</a> on the loan.</p> <p>A basic <a href="http://en.wikipedia.org/wiki/Loan" title="Loan">loan</a> is the simplest form of debt. It consists of an agreement to lend a principal sum for a fixed period of <a href="http://en.wikipedia.org/wiki/Time" title="Time">time</a>, to be repaid by a certain date. In commercial loans <a href="http://en.wikipedia.org/wiki/Interest" title="Interest">interest</a>, calculated as a percentage of the principal sum per <a href="http://en.wikipedia.org/wiki/Annum" title="Annum">annum</a>, will also have to be paid by that date.</p> <p>In some loans, the amount actually loaned to the debtor is less than the principal sum to be repaid; the additional principal has the same economic effect as a higher interest rate (see <a href="http://en.wikipedia.org/wiki/Point_%28mortgage%29" title="Point (mortgage)">point (mortgage)</a>).</p> <p>A <a href="http://en.wikipedia.org/wiki/Syndicated_loan" title="Syndicated loan">syndicated loan</a> is a loan that is granted to companies that wish to borrow more money than any single lender is prepared to risk in a single loan, usually many millions of dollars. In such a case, a syndicate of banks can each agree to put forward a portion of the principal sum.</p> <p>A <a href="http://en.wikipedia.org/wiki/Bond_%28finance%29" title="Bond (finance)">bond</a> is a debt <a href="http://en.wikipedia.org/wiki/Security_%28finance%29" title="Security (finance)">security</a> issued by certain institutions such as <a href="http://en.wikipedia.org/wiki/Company_%28law%29" title="Company (law)">companies</a> and <a href="http://en.wikipedia.org/wiki/Government" title="Government">governments</a>. A bond entitles the holder to repayment of the principal sum, plus <a href="http://en.wikipedia.org/wiki/Interest" title="Interest">interest</a>. Bonds are issued to <a href="http://en.wikipedia.org/wiki/Investment" title="Investment">investors</a> in a <a href="http://en.wikipedia.org/wiki/Marketplace" title="Marketplace">marketplace</a> when an institution wishes to borrow money. Bonds have a fixed lifetime, usually a number of <a href="http://en.wikipedia.org/wiki/Year" title="Year">years</a>; with long-term bonds, lasting over 30 years, being less common. At the end of the bond's life the money should be repaid in full. Interest may be added to the end payment, or can be paid in regular installments (known as <a href="http://en.wikipedia.org/wiki/Coupon_%28bond%29" title="Coupon (bond)">coupons</a>) during the life of the bond. Bonds may be traded in the <a href="http://en.wikipedia.org/wiki/Bond_market" title="Bond market">bond markets</a>, and are widely used as relatively safe investments in comparison to <a href="http://en.wikipedia.org/wiki/Stock" title="Stock">equity</a>.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-84833267423736014802007-12-17T08:31:00.001-08:002007-12-17T08:31:44.739-08:00Debt<p><b>Debt</b> is that which is owed; usually referencing <a href="http://en.wikipedia.org/wiki/Assets" title="Assets">assets</a> owed, but the term can cover other obligations. In the case of assets, debt is a means of using future <a href="http://en.wikipedia.org/wiki/Purchasing_power" title="Purchasing power">purchasing power</a> in the present before a <a href="http://en.wikipedia.org/wiki/Sum" title="Sum">summation</a> has been earned. Some <a href="http://en.wikipedia.org/wiki/Company" title="Company">companies</a> and <a href="http://en.wikipedia.org/wiki/Corporation" title="Corporation">corporations</a> use debt as a part of their overall <b><a href="http://en.wikipedia.org/wiki/Corporate_finance" title="Corporate finance">corporate finance</a></b> strategy.</p> <p>A debt is created when a <a href="http://en.wikipedia.org/wiki/Creditor" title="Creditor">creditor</a> agrees to <a href="http://en.wikipedia.org/wiki/Loan" title="Loan">lend</a> a sum of assets to a <a href="http://en.wikipedia.org/wiki/Debtor" title="Debtor">debtor</a>. In modern society, debt is usually granted with expected repayment; in many cases, plus <a href="http://en.wikipedia.org/wiki/Interest" title="Interest">interest</a>. Historically, debt was responsible for the creation of <a href="http://en.wikipedia.org/wiki/Indentured_servant" title="Indentured servant">indentured servants</a>.</p><p><br /></p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-91993518347199040422007-12-17T08:30:00.001-08:002007-12-17T08:30:30.296-08:00Helmet & Function and structure<p>Despite various designs and requirements, helmets attempt to protect the user's head through a mechanical energy-absorption process. Therefore, their structure and protective capacity are altered in high-energy impacts. Beside their energy-absorption capability, their volume and weight are also important issues, since higher volume and weight increase the injury risk for the user's head and neck.</p> <p>Classical helmets from the ancient Greeks to today treat the head uniformly and are currently tested on rigid headforms. Anatomical helmets adapted to the inner head structure were invented by <a href="http://en.wikipedia.org/wiki/Neurosurgery" title="Neurosurgery">neurosurgeons</a> at the end of the 20th century. Since the materials are disposed according to the anatomical structure of the <a href="http://en.wikipedia.org/wiki/Head" title="Head">head</a>, they are smaller and lighter than the classical helmets.</p><br /><p><br /></p><h2><span class="mw-headline">Types of helmets</span></h2> <p>Helmets used for different purposes differ greatly in their design. For example, a <a href="http://en.wikipedia.org/wiki/Bicycle_helmet" title="Bicycle helmet">bicycle helmet</a> would chiefly need to protect against blunt impact forces. A helmet designed for rock climbing, however, would need to protect against objects (e.g. small rocks and <a href="http://en.wikipedia.org/wiki/Climbing_equipment" title="Climbing equipment">climbing equipment</a>) falling from above. Consequently, bicycling and rock climbing helmets little resemble each other. Practical concerns also dictate helmet design: a bicycling helmet would preferably be aerodynamic in shape and probably well ventilated, while a rock climbing helmet would be lightweight and with a minimum of bulk to reduce any detrimental effect on the climber's technique.</p> <p><a href="http://en.wikipedia.org/wiki/Goggles" title="Goggles">Goggles</a>, face guards and <a href="http://en.wikipedia.org/wiki/Ear_plug" title="Ear plug">ear plugs</a> are other forms of <a href="http://en.wikipedia.org/wiki/Protective_headgear" title="Protective headgear">protective headgear</a>. <a href="http://en.wikipedia.org/wiki/Hard_hat" title="Hard hat">Hard hats</a> are typically preferred in modern times for construction workers. Helmets are often used by <a href="http://en.wikipedia.org/wiki/Riot_police" title="Riot police">riot police</a>.</p> <p>Sometimes medical conditions need a helmet to be worn to protect the brain because of a gap in the <a href="http://en.wikipedia.org/wiki/Braincase" title="Braincase">braincase</a>, e.g. because of <a href="http://en.wikipedia.org/wiki/Cleidocranial_dysostosis" title="Cleidocranial dysostosis">cleidocranial dysostosis</a> or in separated <a href="http://en.wikipedia.org/wiki/Craniopagus" title="Craniopagus">craniopagus</a> twins.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-33829961859154590622007-12-17T08:29:00.001-08:002007-12-17T08:29:59.312-08:00Helmet & Military origins and symbolism<p>Helmets were among the oldest forms of combat protection, and are known to have been worn by <a href="http://en.wikipedia.org/wiki/Ancient_Greeks" title="Ancient Greeks">ancient Greeks</a>, <a href="http://en.wikipedia.org/wiki/Ancient_Rome" title="Ancient Rome">Romans</a>, throughout the <a href="http://en.wikipedia.org/wiki/Middle_Ages" title="Middle Ages">Middle Ages</a>, and up to the end of the 1600s by many combatants. At that time, they were purely military equipment, protecting the head from cutting blows with <a href="http://en.wikipedia.org/wiki/Sword" title="Sword">swords</a>, flying <a href="http://en.wikipedia.org/wiki/Arrow" title="Arrow">arrows</a>, and low-velocity <a href="http://en.wikipedia.org/wiki/Musket" title="Musket">musketry</a>. Some helmets, in order to protect the neck as well, have a sort of extension made of leather strips called <a href="http://en.wikipedia.org/wiki/Pteruges" title="Pteruges">pteruges</a>, particularilly common in the Middle East. They were initially constructed from <a href="http://en.wikipedia.org/wiki/Leather" title="Leather">leather</a>, and then <a href="http://en.wikipedia.org/wiki/Bronze" title="Bronze">bronze</a> and <a href="http://en.wikipedia.org/wiki/Iron" title="Iron">iron</a> during the <a href="http://en.wikipedia.org/wiki/Bronze_Age" title="Bronze Age">Bronze</a> and <a href="http://en.wikipedia.org/wiki/Iron_Age" title="Iron Age">Iron</a> Ages, but soon came to be made entirely from forged <a href="http://en.wikipedia.org/wiki/Steel" title="Steel">steel</a> in many societies after about 950A.D. Military use of helmets declined after 1670, and rifled <a href="http://en.wikipedia.org/wiki/Firearms" title="Firearms">firearms</a> ended their use by foot soldiers after 1700. By the 18th century, cavalry units often wore steel body <a href="http://en.wikipedia.org/wiki/Cuirass" title="Cuirass">cuirasses</a>, and frequently metal skull protectors under their hats, called "secrets". The Prussian spiked helmet, or <i><a href="http://en.wikipedia.org/wiki/Pickelhaube" title="Pickelhaube">Pickelhaube</a></i>, offered almost no protection from the increased use of heavy artillery during <a href="http://en.wikipedia.org/wiki/World_War_I" title="World War I">World War I</a>, and in 1916 was replaced by the German steel helmet, or <i><a href="http://en.wikipedia.org/wiki/Stahlhelm" title="Stahlhelm">Stahlhelm</a></i>, and afterwards it was worn merely for tradition.</p> <p>The Napoleonic era saw ornate cavalry helmets reintroduced for <a href="http://en.wikipedia.org/wiki/Cuirassier" title="Cuirassier">cuirassiers</a> and <a href="http://en.wikipedia.org/wiki/Dragoon" title="Dragoon">dragoons</a> in some armies; they continued to be used by French forces during <a href="http://en.wikipedia.org/wiki/World_War_I" title="World War I">World War I</a> as late as 1915, when they were replaced by the new French <a href="http://en.wikipedia.org/wiki/Adrian_helmet" title="Adrian helmet">Adrian helmet</a>. It was soon followed by the adoption of similar steel helmets by the other warring nations.</p> <p>World War I and its increased use of heavy artillery had renewed the need for steel helmets, which were quickly introduced by all the combatant nations for their foot soldiers. In the 20th century, such helmets offered protection for the head from shrapnel and spent, or glancing, bullets.</p> <p>The use of protective helmets by millions of fighting men in the two world wars increased awareness of "hard hat" protection. By the 1950s, hundreds of new applications for helmets were found. The helmet offered an unexpected advantage: <a href="http://en.wikipedia.org/wiki/Symbolism" title="Symbolism">Symbolism</a>. It can signify that, like a soldier, the wearer is someone qualified for or capable of a certain task or activity, such as construction, operation of heavy machinery, or participation in certain sports.</p> <p>Today's militaries often use high-quality helmets made of ballistic materials such as <a href="http://en.wikipedia.org/wiki/Kevlar" title="Kevlar">Kevlar</a>, which have excellent bullet and fragmentation stopping power. Some helmets also have good non-ballistic protective qualities, though many do not. Non-ballistic injuries may be caused by many things, including (but not limited to) concussive <a href="http://en.wikipedia.org/wiki/Shock_wave" title="Shock wave">shockwaves</a> from <a href="http://en.wikipedia.org/wiki/Explosion" title="Explosion">explosions</a>, motor vehicle accidents, or falls.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-45326303230154150992007-12-17T08:28:00.000-08:002007-12-17T08:29:36.552-08:00Helmethis article is about the type of headgear. For the band, see <a href="http://en.wikipedia.org/wiki/Helmet_%28band%29" title="Helmet (band)">Helmet (band)</a>. For other uses, see <a href="http://en.wikipedia.org/wiki/Helmet_%28disambiguation%29" title="Helmet (disambiguation)">Helmet (disambiguation)</a>. <div class="thumb tright"> <div class="thumbinner" style="width: 182px;"><a href="http://en.wikipedia.org/wiki/Image:Millward0004_211.jpg" class="image" title="A female wearing a cycling helmet"><br /></a> <div class="thumbcaption"> <div class="magnify" style="float: right;"><a href="http://en.wikipedia.org/wiki/Image:Millward0004_211.jpg" class="internal" title="Enlarge"><br /></a></div> A female wearing a cycling helmet</div> </div> </div> <p>A <b>helmet</b> is a form of <a href="http://en.wikipedia.org/wiki/Protective_gear" title="Protective gear">protective gear</a> worn on the <a href="http://en.wikipedia.org/wiki/Head_%28anatomy%29" title="Head (anatomy)">head</a>. Traditionally, helmets have been made of <a href="http://en.wikipedia.org/wiki/Metal" title="Metal">metal</a>. In recent decades helmets made from <a href="http://en.wikipedia.org/wiki/Resin" title="Resin">resin</a> or <a href="http://en.wikipedia.org/wiki/Plastic" title="Plastic">plastic</a> and typically reinforced with <a href="http://en.wikipedia.org/wiki/Aramid" title="Aramid">Aramid</a> fiber (e.g. <a href="http://en.wikipedia.org/wiki/Twaron" title="Twaron">Twaron</a> or <a href="http://en.wikipedia.org/wiki/Kevlar" title="Kevlar">Kevlar</a>) have become preferred for most applications. Designed for protection of the head in combat, or in civilian life, from sports injuries, falling objects or high-speed collisions.</p> <p>Helmets are common in the <a href="http://en.wikipedia.org/wiki/Military" title="Military">military</a>, <a href="http://en.wikipedia.org/wiki/Construction" title="Construction">construction</a>, <a href="http://en.wikipedia.org/wiki/Mining" title="Mining">mining</a>, and some sports, including <a href="http://en.wikipedia.org/wiki/American_football" title="American football">American football</a>, <a href="http://en.wikipedia.org/wiki/Baseball" title="Baseball">baseball</a>, <a href="http://en.wikipedia.org/wiki/Ski" title="Ski">ski</a>, <a href="http://en.wikipedia.org/wiki/Snowboarding" title="Snowboarding">snowboarding</a>, <a href="http://en.wikipedia.org/wiki/Ice_hockey" title="Ice hockey">ice hockey</a>, <a href="http://en.wikipedia.org/wiki/Equestrianism" title="Equestrianism">equestrian sports</a>, <a href="http://en.wikipedia.org/wiki/Auto_racing" title="Auto racing">motorsports</a>, and <a href="http://en.wikipedia.org/wiki/Rock_climbing" title="Rock climbing">rock climbing</a>. <a href="http://en.wikipedia.org/wiki/Motorcycle_helmet" title="Motorcycle helmet">Motorcycle helmets</a> and <a href="http://en.wikipedia.org/wiki/Bicycle_helmet" title="Bicycle helmet">bicycle helmets</a> are compulsory headgear in some jurisdictions; in the <a href="http://en.wikipedia.org/wiki/United_Kingdom" title="United Kingdom">United Kingdom</a> only <a href="http://en.wikipedia.org/wiki/Sikh" title="Sikh">Sikhs</a> are allowed to ride <a href="http://en.wikipedia.org/wiki/Motorcycle" title="Motorcycle">motorcycles</a> without wearing motorcycle helmets. <a href="http://en.wikipedia.org/wiki/Bicycle_helmet" title="Bicycle helmet">Bicycle helmet</a> compulsion and even strong promotion has been a heated subject of debate amongst cyclists and scientists since at least the 1990s, lately focusing on alleged net protective effect at the population level.</p><br /><p><br /></p><p><br /></p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-60477122752913390302007-12-17T08:26:00.004-08:002007-12-17T08:28:04.276-08:00Insurance contract & Parts of an insurance contract<h2><span class="mw-headline">Parts of an insurance contract</span></h2> <ul><li>Definitions - define important terms used in the policy language.</li><li>Insuring Agreement - describes the covered perils, or risks assumed, or nature of coverage, or makes some reference to the contractual agreement between insurer and insured. It summarizes the major promises of the insurance company, as well as stating what is covered.</li><li>Declarations - identifies who is an insured, the insured's address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount.</li><li>Exclusions - take coverage away from the Insuring Agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.</li><li>Conditions - provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not met, the insurer can deny the claim.</li></ul><br /><h3><span class="mw-headline">Life insurance specific features</span></h3> <ul><li>Incontestibility - in the <a href="http://en.wikipedia.org/wiki/United_States" title="United States">United States</a>, life insurance contracts may not be contested by the insurer at any point after the contract has been in force for two years. The insurer has the burden to investigate fully anything they wish to make sure the insured is an acceptable risk within those two years. Any material mistatements on the insurance application (which generally forms a part of the contract) cannot be used as a reason for the insurer not to pay the death benefit, as long as it does not constitute <a href="http://en.wikipedia.org/wiki/Fraud" title="Fraud">fraud</a> on the part of the insured. The insurer's only recourse if there is no fraud is they can adjust the death benefit to correct for the correct age or sex of the insured if they are different from what the application noted.</li></ul><br /><h2><span class="mw-headline">Definitions</span></h2> <ul><li>insured - the person whom benefits would be paid to, or on the behalf of, if certain defined events occur.</li></ul>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-82244809603842949172007-12-17T08:26:00.003-08:002007-12-17T08:26:52.463-08:00Insurance contractAn <b>Insurance contract</b> determines the <a href="http://en.wikipedia.org/wiki/Law" title="Law">legal</a> framework under which the features of an <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a> policy are enforced. Insurance <a href="http://en.wikipedia.org/wiki/Contract" title="Contract">contracts</a> are designed to meet very specific needs and thus have many features not found in many other types of contracts. Many features are similar across a wide variety of different types of insurance policies.<br /><br /><h2><span class="mw-headline">General Features</span></h2> <p>The insurance contract is a contract whereby the insurer will pay the <a href="http://en.wikipedia.org/wiki/Insurance_contract#Definitions" title="Insurance contract">insured</a> (the person whom benefits would be paid to, or on the behalf of), if certain defined events occur. Subject to the "fortuity principle", the event must be uncertain. The uncertainty can be either as to when the event will happen (i.e. in a life insurance policy, the time of the insured's death is uncertain) or as to if it will happen at all (i.e. a fire insurance policy).</p> <ul><li>Insurance contracts are generally considered <b>contracts of adhesion</b> because the insurer draws up the contract and the insured has little or no ability to make material changes to it. This is interpreted to mean that the insurer bears the burden if there is any ambiguity in any terms of the contract.</li></ul> <ul><li>Insurance contracts are <b>aleatory</b> in that the amounts exchanged by the insured and insurer are unequal and depend upon uncertain future events.</li></ul> <ul><li>Insurance contracts are <b>unilateral</b>, meaning that only the insurer makes legally enforceable promises in the contract. The insured is not required to pay the premiums, but the insurer is required to pay the benefits under the contract if the insured has paid the premiums and met certain other basic provisions.</li></ul> <ul><li>Insurance contracts are governed by the principle of <b>utmost good faith</b> (<a href="http://en.wikipedia.org/wiki/Uberrima_fides" title="Uberrima fides">uberrima fides</a>) which requires both parties of the insurance contact to deal in good faith and in particular it imparts on the insured a duty to disclose all material facts which relate to the risk to be covered. This contrasts with the legal doctrine that covers most other types of contracts, <a href="http://en.wikipedia.org/wiki/Caveat_emptor" title="Caveat emptor">caveat emptor</a> (let the buyer beware).</li></ul>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-57351302259835476332007-12-17T08:26:00.001-08:002007-12-17T08:26:40.608-08:00Insurance contractAn <b>Insurance contract</b> determines the <a href="http://en.wikipedia.org/wiki/Law" title="Law">legal</a> framework under which the features of an <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a> policy are enforced. Insurance <a href="http://en.wikipedia.org/wiki/Contract" title="Contract">contracts</a> are designed to meet very specific needs and thus have many features not found in many other types of contracts. Many features are similar across a wide variety of different types of insurance policies.<br /><br /><h2><span class="mw-headline">General Features</span></h2> <p>The insurance contract is a contract whereby the insurer will pay the <a href="http://en.wikipedia.org/wiki/Insurance_contract#Definitions" title="Insurance contract">insured</a> (the person whom benefits would be paid to, or on the behalf of), if certain defined events occur. Subject to the "fortuity principle", the event must be uncertain. The uncertainty can be either as to when the event will happen (i.e. in a life insurance policy, the time of the insured's death is uncertain) or as to if it will happen at all (i.e. a fire insurance policy).</p> <ul><li>Insurance contracts are generally considered <b>contracts of adhesion</b> because the insurer draws up the contract and the insured has little or no ability to make material changes to it. This is interpreted to mean that the insurer bears the burden if there is any ambiguity in any terms of the contract.</li></ul> <ul><li>Insurance contracts are <b>aleatory</b> in that the amounts exchanged by the insured and insurer are unequal and depend upon uncertain future events.</li></ul> <ul><li>Insurance contracts are <b>unilateral</b>, meaning that only the insurer makes legally enforceable promises in the contract. The insured is not required to pay the premiums, but the insurer is required to pay the benefits under the contract if the insured has paid the premiums and met certain other basic provisions.</li></ul> <ul><li>Insurance contracts are governed by the principle of <b>utmost good faith</b> (<a href="http://en.wikipedia.org/wiki/Uberrima_fides" title="Uberrima fides">uberrima fides</a>) which requires both parties of the insurance contact to deal in good faith and in particular it imparts on the insured a duty to disclose all material facts which relate to the risk to be covered. This contrasts with the legal doctrine that covers most other types of contracts, <a href="http://en.wikipedia.org/wiki/Caveat_emptor" title="Caveat emptor">caveat emptor</a> (let the buyer beware).</li></ul>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-63188004375682068502007-12-17T08:25:00.001-08:002007-12-17T08:25:44.522-08:00Insurance & Controversies.. & ..<h3><span class="mw-headline">The insurance industry and rent seeking</span></h3> <p>Certain insurance products and practices have been described as <a href="http://en.wikipedia.org/wiki/Rent_seeking" title="Rent seeking">rent seeking</a> by critics. That is, some insurance products or practices are useful primarily because of legal benefits, such as reducing taxes, as opposed to providing protection against risks of adverse events. Under United States tax law, for example, most owners of <a href="http://en.wikipedia.org/wiki/Annuity_%28US_financial_products%29" title="Annuity (US financial products)">variable annuities</a> and <a href="http://en.wikipedia.org/wiki/Variable_universal_life_insurance" title="Variable universal life insurance">variable life insurance</a> can invest their premium payments in the stock market and defer or eliminate paying any taxes on their investments until withdrawals are made. Sometimes this tax deferral is the only reason people use these products. Another example is the legal infrastructure which allows life insurance to be held in an irrevocable trust which is used to pay an <a href="http://en.wikipedia.org/wiki/Estate_tax" title="Estate tax">estate tax</a> while the proceeds themselves are immune from the estate tax.</p><h3><span class="mw-headline">Criticism of insurance companies</span></h3> <p>Some people believe that modern insurance companies are money-making businesses which have little interest in insurance. They argue that the purpose of insurance is to spread risk so the reluctance of insurance companies to take on high-risk cases (e.g. houses in areas subject to flooding, or young drivers) runs counter to the principle of insurance.</p> <p>Other criticisms include:</p> <ul><li>Insurance policies contain too many <a href="http://en.wikipedia.org/wiki/Exclusion_clause" title="Exclusion clause">exclusion clauses</a>. For example, some house insurance policies do not cover damage to garden walls.</li></ul> <ul><li>Most insurance companies now use <a href="http://en.wikipedia.org/wiki/Call_centre" title="Call centre">call centres</a> and staff attempt to answer questions by reading from a script. It is difficult to speak to anybody with expert knowledge.</li><li><h2><span class="mw-headline">Glossary</span></h2> </li><li>'Combined ratio' = loss ratio + expense ratio. Loss ratio is calculated by dividing the amount of losses (sometimes including loss adjustment expenses) by the amount of earned premium. Expense ratio is calculated by dividing the amount of operational expenses by the amount of earned premium. A lower number indicates a better return on the amount of capital placed at risk by an insurer.</li><li>'URIE' = unincorporated reciprocal inter-insurance exchange.</li><li>'SSA' = subscriber savings account.</li><li>'AIF' = attorney in fact</li></ul>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-78528716731930271282007-12-17T08:24:00.003-08:002007-12-17T08:24:55.400-08:00Insurance & Controversies.. & Insurance patents<p><i>See <a href="http://en.wikipedia.org/wiki/Insurance_patent" title="Insurance patent">insurance patent</a> for more details.</i></p> <p>New insurance products can now be protected from copying with a <a href="http://en.wikipedia.org/wiki/Business_method_patent" title="Business method patent">business method patent</a> in the <a href="http://en.wikipedia.org/wiki/United_States" title="United States">United States</a>.</p> <p>A recent example of a new insurance product that is patented is telematic <a href="http://en.wikipedia.org/wiki/Auto_insurance" title="Auto insurance">auto insurance</a>. It was independently invented and patented by a major U.S. auto insurance company, <a href="http://en.wikipedia.org/wiki/Progressive_Corporation" title="Progressive Corporation">Progressive Auto Insurance</a> (<a href="http://patft.uspto.gov/netacgi/nph-Parser?patentnumber=5797134" class="external text" title="http://patft.uspto.gov/netacgi/nph-Parser?patentnumber=5797134" rel="nofollow">U.S. Patent 5,797,134</a><span class="PDFlink noprint"><a href="http://www.pat2pdf.org/pat2pdf/foo.pl?number=5797134" class="external text" title="http://www.pat2pdf.org/pat2pdf/foo.pl?number=5797134" rel="nofollow"> </a></span>) and a Spanish independent inventor, Salvador Minguijon Perez (<a href="http://v3.espacenet.com/textdoc?DB=EPODOC&IDX=EP0700009" class="external text" title="http://v3.espacenet.com/textdoc?DB=EPODOC&IDX=EP0700009" rel="nofollow">EP patent 0700009</a>).</p> <p>The basic idea of telematic auto insurance is that a driver's behavior is monitored directly while he or she drives and the information is transmitted to the insurance company. The insurance company uses the information to assess the likelihood that a driver will have an accident and adjusts premiums accordingly. A driver who drives great distances at high speeds, for example, might be charged a different rate than a driver who drives short distances at low speeds. The precise effect on charges is not known as it is not clear that a high speed long distance driver incurs greater risk to an insurance pool than the slow around-town driver.<sup class="noprint Template-Fact"><span title="This claim needs references to reliable sources since February 2007" style="white-space: nowrap;">[<i><a href="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed">citation needed</a></i>]</span></sup></p> <p>A British auto insurance company, <a href="http://en.wikipedia.org/wiki/Norwich_Union" title="Norwich Union">Norwich Union</a>, has obtained a license to both the Progressive patent and Perez patent. They have made investments in infrastructure and developed a commercial offering called "Pay As You Drive" or PAYD.</p> <p>Recent theoretical economic research on the social welfare effects of Progressive's telematics technology business process patents have questioned whether the business process patents are pareto efficient for society. Premliminary results suggest that they are not, but more work is needed. <sup id="_ref-9" class="reference"><a href="http://en.wikipedia.org/wiki/Insurance#_note-9" title="">[10]</a></sup> <sup id="_ref-10" class="reference"><a href="http://en.wikipedia.org/wiki/Insurance#_note-10" title="">[11]</a></sup></p> <p>Many independent inventors are in favor of patenting new insurance products since it gives them protection from big companies when they bring their new insurance products to market. Independent inventors account for 70 percent of the new U.S. patent applications in this area.</p> <p>Many insurance executives are opposed to patenting insurance products because it creates a new risk for them. <a href="http://en.wikipedia.org/wiki/The_Hartford" title="The Hartford">The Hartford</a> insurance company, for example, recently had to pay $80 million to an independent inventor, Bancorp Services, in order to settle a patent infringement and theft of trade secret lawsuit for a type of corporate owned life insurance product invented and patented by Bancorp.</p> There are currently about 150 new patent applications on insurance inventions filed per year in the United States. The rate at which patents have issued has steadily risen from 15 in 2002 to 44 in 2006Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-74965837645899915262007-12-17T08:24:00.001-08:002007-12-17T08:24:30.950-08:00Insurance & Controversies..<h3><span class="mw-headline">Redlining</span></h3> <p><a href="http://en.wikipedia.org/wiki/Redlining" title="Redlining">Redlining</a> is the practice of denying insurance coverage in specific geographic areas, purportedly because of a high likelihood of loss, while the alleged motivation is unlawful discrimination. <a href="http://en.wikipedia.org/wiki/Racial_profiling" title="Racial profiling">Racial profiling</a> or <a href="http://en.wikipedia.org/wiki/Redlining" title="Redlining">redlining</a> has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research by government agencies, industry and community groups, and academics, it is clear that race has long affected and continues to affect the policies and practices of the insurance industry.<sup id="_ref-8" class="reference"><a href="http://en.wikipedia.org/wiki/Insurance#_note-8" title="">[9]</a></sup></p> <p>In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, <a href="http://en.wikipedia.org/wiki/Credit_score" title="Credit score">credit scores</a>, <a href="http://en.wikipedia.org/wiki/Gender" title="Gender">gender</a>, <a href="http://en.wikipedia.org/wiki/Profession" title="Profession">occupation</a>, <a href="http://en.wikipedia.org/wiki/Marital_status" title="Marital status">marital status</a>, and <a href="http://en.wikipedia.org/wiki/Education" title="Education">education</a> level. However, the use of such factors is often considered to be unfair or unlawfully <a href="http://en.wikipedia.org/wiki/Discriminatory" title="Discriminatory">discriminatory</a>, and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used.</p> <p>An insurance underwriter's job is to evaluate a given risk as to the likelihood that a loss will occur. Any factor that causes a greater likelihood of loss should theoretically be charged a higher rate. This basic principle of insurance must be followed if insurance companies are to remain solvent. Thus, "discrimination" against (i.e., differential treatment of) potential insureds in the risk evaluation and premium-setting process is a necessary by-product of the fundamentals of insurance underwriting. For instance, insurers charge older people significantly higher premiums than they charge younger people for term life insurance. Older people are thus treated differently than younger people (i.e., a distinction is made, discrimination occurs). The rationale for the differential treatment goes to the heart of the risk a life insurer takes: Old people are likely to die sooner than young people, so the risk of loss (the insured's death) is greater in any given period of time and therefore the risk premium must be higher to cover the greater risk. However, treating insureds differently when there is no actuarially sound reason for doing so is unlawful discrimination.</p> <p>What is often missing from the debate is that prohibiting the use of legitimate, actuarially sound factors means that an insufficient amount is being charged for a given risk, and there is thus a deficit in the system. The failure to address the deficit may mean insolvency and hardship for all of a company's insureds. The options for addressing the deficit seem to be the following: Charge the deficit to the other policyholders or charge it to the government (i.e., externalize outside of the company to society at large)</p><p><br /></p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-23285839563112438542007-12-17T08:23:00.000-08:002007-12-17T08:24:07.373-08:00Insurance & Controversies.<h3><span class="mw-headline">Complexity of insurance policy contracts</span></h3> <p>Insurance policies can be complex and some policyholders may not understand all the fees and coverages included in a policy. As a result, people may buy policies on unfavorable terms. In response to these issues, many countries have enacted detailed statutory and regulatory regimes governing every aspect of the insurance business, including minimum standards for policies and the ways in which they may be <a href="http://en.wikipedia.org/wiki/Advertising" title="Advertising">advertised</a> and sold.</p> <p>Many institutional insurance purchasers buy insurance through an insurance broker. Brokers represent the buyer (not the insurance company), and typically counsel the buyer on appropriate coverages, policy limitations. A broker generally holds contracts with many insurers, thereby allowing the broker to "shop" the <a href="http://en.wikipedia.org/wiki/Market" title="Market">market</a> for the best rates and coverage possible.</p> <p>Insurance may also be purchased through an agent. Unlike a broker, who represents the policyholder, an agent represents the insurance company from whom the policyholder buys. An agent can represent more than one company.</p><h3> <span class="mw-headline">Health insurance</span></h3> <p>Health insurance, which is coverage for individuals to protect them against medical costs, is a highly charged and political issue in the United States, which does not have socialized health coverage. In theory, the market for health insurance should function in a manner similar to other insurance coverages, but the skyrocketing cost of health coverage has disrupted markets around the globe, but perhaps most glaringly in the U.S. See <a href="http://en.wikipedia.org/wiki/Health_insurance" title="Health insurance">health insurance</a>.</p><h3><span class="mw-headline">Dental insurance</span></h3> <p>Dental insurance, like health insurance, is coverage for individuals to protect them against dental costs. In the U.S., dental insurance is often part of an employer's benefits package, along with health insurance.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-43397152513562254722007-12-17T08:22:00.002-08:002007-12-17T08:23:21.061-08:00Insurance & Controversies<h3><span class="mw-headline">Insurance insulates too much</span></h3> <p>By creating a "security blanket" for its insureds, an insurance company may inadvertently find that its insureds may not be as risk-averse as they might otherwise be (since, by definition, the insured has transferred the risk to the insurer). This problem is known to the insurance industry as <a href="http://en.wikipedia.org/wiki/Moral_hazard" title="Moral hazard">moral hazard</a>. To reduce their own financial exposure, insurance companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in behavior that grossly magnifies their risk of loss or liability.</p> <p>For example, life insurance companies may require higher premiums or deny coverage altogether to people who work in hazardous occupations or engage in dangerous sports. Liability insurance providers do not provide coverage for liability arising from <a href="http://en.wikipedia.org/wiki/Intentional_tort" title="Intentional tort">intentional torts</a> committed by the insured. Even if a provider were so irrational as to desire to provide such coverage, it is against the public policy of most countries to allow such insurance to exist, and thus it is usually illegal</p><h3><span class="mw-headline">Closed community self-insurance</span></h3> <p>Some communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer, which assigns explicit numerical values to risk. A number of <a href="http://en.wikipedia.org/wiki/Religion" title="Religion">religious</a> groups, including the <a href="http://en.wikipedia.org/wiki/Amish" title="Amish">Amish</a> and some Muslim groups, depend on support provided by their <a href="http://en.wikipedia.org/wiki/Community" title="Community">communities</a> when <a href="http://en.wikipedia.org/wiki/Disaster" title="Disaster">disasters</a> strike. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind. In supportive communities where others can be trusted to follow community leaders, this tacit form of insurance can work. In this manner the community can even out the extreme differences in insurability that exist among its members. Some further justification is also provided by invoking the <a href="http://en.wikipedia.org/wiki/Moral_hazard" title="Moral hazard">moral hazard</a> of explicit insurance contracts.</p> <p>In the <a href="http://en.wikipedia.org/wiki/United_Kingdom" title="United Kingdom">United Kingdom</a> <a href="http://en.wikipedia.org/wiki/The_Crown" title="The Crown">The Crown</a> (which, for practical purposes, meant the <a href="http://en.wikipedia.org/wiki/Civil_service" title="Civil service">Civil service</a>) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies, and rented back, this arrangement is now less common and may have disappeared altogether.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-76727813300668893192007-12-17T08:22:00.001-08:002007-12-17T08:22:31.583-08:00Insurance & Financial viability of insurance companiesFinancial stability and strength of an insurance company should be a major consideration when purchasing an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). A number of independent rating agencies, such as <a href="http://www.ambest.com/" class="external text" title="http://www.ambest.com/" rel="nofollow">Best's</a>, <a href="http://www.fitchratings.com/jsp/corporate/AboutFitch.faces?context=1&detail=1" class="external text" title="http://www.fitchratings.com/jsp/corporate/AboutFitch.faces?context=1&detail=1" rel="nofollow">Fitch</a>, <a href="http://www.standardandpoors.com/" class="external text" title="http://www.standardandpoors.com" rel="nofollow">Standard & Poor's</a>, and <a href="http://www.moodys.com/moodys/cust/AboutMoodys/AboutMoodys.aspx?topic=intro&redir_url=/cust/AboutMoodys/staticRedirect.asp" class="external text" title="http://www.moodys.com/moodys/cust/AboutMoodys/AboutMoodys.aspx?topic=intro&redir_url=/cust/AboutMoodys/staticRedirect.asp" rel="nofollow">Moody's Investors Service</a>, provide information and rate the financial viability of insurance companies.Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-89263709099856565982007-12-17T08:21:00.004-08:002007-12-17T08:22:08.275-08:00Insurance & Size of global insurance industry<p>Global insurance premiums grew by 9.7 percent in 2004 to reach $3.3 trillion. This follows 11.7 percent growth in the previous year. Life insurance premiums grew by 9.8 percent during the year, thanks to rising demand for annuity and pension products. Non-life insurance premiums grew by 9.4 percent, as premium rates increased. Over the past decade, global insurance premiums rose by more than a half as annual growth fluctuated between 2 percent and 10 percent.<sup class="noprint Template-Fact"><span title="This claim needs references to reliable sources since February 2007" style="white-space: nowrap;">[<i><a href="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed">citation needed</a></i>]</span></sup></p> Advanced economies account for the bulk of global insurance. With premium income of $1,217 billion in 2004, North America was the most important region, followed by the EU (at $1,198 billion) and Japan (at $492 billion). The top four countries accounted for nearly two-thirds of premiums in 2004. The United States and Japan alone accounted for a half of world insurance premiums, much higher than their 7 percent share of the global population. Emerging markets accounted for over 85 percent of the world’s population but generated only 10 percent of premiums. The volume of UK insurance business totaled $295 billion in 2004 or 9.1 percent of global premiumsMaker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-92023386657213005332007-12-17T08:21:00.003-08:002007-12-17T08:21:42.601-08:00Insurance & Life insurance and saving<p>Certain life insurance contracts accumulate <a href="http://en.wikipedia.org/wiki/Cash" title="Cash">cash</a> values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and <a href="http://en.wikipedia.org/wiki/Endowment_policy" title="Endowment policy">endowment policies</a>, are financial instruments to accumulate or <a href="http://en.wikipedia.org/wiki/Liquidation" title="Liquidation">liquidate</a> <a href="http://en.wikipedia.org/wiki/Wealth" title="Wealth">wealth</a> when it is needed. See <a href="http://en.wikipedia.org/wiki/Life_insurance" title="Life insurance">life insurance</a>.</p> <p>In many countries, such as the U.S. and the UK, the <a href="http://en.wikipedia.org/wiki/Tax_law" title="Tax law">tax law</a> provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of <a href="http://en.wikipedia.org/wiki/Saving" title="Saving">saving</a> as well as protection in the event of early death.</p> <p>In U.S., the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. A combination of low-cost term life insurance and a higher-return tax-efficient retirement account may achieve better investment return.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-30589072746264324432007-12-17T08:21:00.001-08:002007-12-17T08:21:23.068-08:00Insurance & Types of insurance companies<p>Insurance companies may be classified as</p> <ul><li><i>Life</i> insurance companies, which sell life insurance, annuities and pensions products.</li><li><i>Non-life</i> or <i>general</i> insurance companies, which sell other types of insurance.</li></ul> <p>General insurance companies can be further divided into these sub categories.</p> <ul><li>Standard Lines</li><li>Excess Lines</li></ul> <p>In most countries, life and non-life insurers are subject to different regulatory regimes and different <a href="http://en.wikipedia.org/wiki/Tax" title="Tax">tax</a> and <a href="http://en.wikipedia.org/wiki/Accounting" title="Accounting">accounting</a> rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature — coverage for life assurance or a pension can cover risks over many <a href="http://en.wikipedia.org/wiki/Decade" title="Decade">decades</a>. By contrast, non-life insurance cover usually covers a shorter period, such as one year.</p> <p>In the United States, standard line insurance companies are your "main stream" insurers. These are the companies that typically insure your auto, home or business. They use pattern or "cookie-cutter" policies without variation from one person to the next. They usually have lower premiums than excess lines and can sell directly to individuals. They are regulated by state laws that can restrict the amount they can charge for insurance policies.</p> <p>Excess line insurance companies (aka Excess and Surplus) typically insure risks not covered by the standard lines market. They are broadly referred as being all insurance placed with non-admitted insurers. Non-admitted insurers are not licensed in the states where the risks are located. These companies have more flexibility and can react faster than standard insurance companies because they don't have the same regulations as standard insurance companies. State laws generally require insurance placed with surplus line agents and brokers to not be available through standard licensed insurers.</p> <p>Insurance companies are generally classified as either <i><a href="http://en.wikipedia.org/wiki/Mutual_insurance" title="Mutual insurance">mutual</a></i> or <i>stock</i> companies. This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders, while stockholders (who may or may not own policies) own stock insurance companies. Other possible forms for an insurance company include reciprocals, in which policyholders 'reciprocate' in sharing risks, and Lloyds organizations.</p> <p>Insurance companies are rated by various agencies such as <a href="http://en.wikipedia.org/wiki/A._M._Best" title="A. M. Best">A. M. Best</a>. The ratings include the company's financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products.</p> <p><i><a href="http://en.wikipedia.org/wiki/Reinsurance" title="Reinsurance">Reinsurance</a></i> companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.</p> <p><i><a href="http://en.wikipedia.org/wiki/Captive_insurance" title="Captive insurance">Captive insurance</a></i> companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100 percent subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of an "association" captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.</p> <p>The types of risk that a captive can underwrite for their parents include property damage, public and products liability, professional indemnity, employee benefits, employers liability, motor and medical aid expenses. The captive's exposure to such risks may be limited by the use of reinsurance.</p> <p>Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:</p> <ul><li>heavy and increasing premium costs in almost every line of coverage;</li><li>difficulties in insuring certain types of fortuitous risk;</li><li>differential coverage standards in various parts of the world;</li><li>rating structures which reflect market trends rather than individual loss experience;</li><li>insufficient credit for deductibles and/or loss control efforts.</li></ul> <p>There are also companies known as 'insurance consultants'. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies .</p> <p>Similar to an insurance consultant, an 'insurance broker' also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.</p> <p>Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions.</p> <p>Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have.</p>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0tag:blogger.com,1999:blog-8931439480911939822.post-65724076255080542072007-12-17T08:20:00.002-08:002007-12-17T08:21:01.202-08:00Insurance & Types of insurance<p>Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as "<a href="http://en.wikipedia.org/w/index.php?title=Peril&action=edit" class="new" title="Peril">perils</a>". An insurance policy will set out in detail which perils are covered by the policy and which are not.</p> <p>Below is a (non-exhaustive) list of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set forth below. For example, auto insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from causing an accident). A <a href="http://en.wikipedia.org/wiki/Home_insurance" title="Home insurance">homeowner</a>'s insurance policy in the U.S. 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.</p> <ul><li><a href="http://en.wikipedia.org/wiki/Auto_insurance" title="Auto insurance">Automobile insurance</a>, known in the <a href="http://en.wikipedia.org/wiki/United_Kingdom" title="United Kingdom">UK</a> as <i>motor insurance</i>, is probably the most common form of insurance and may cover both legal <a href="http://en.wikipedia.org/wiki/Liability#In_law" title="Liability">liability</a> claims against the <a href="http://en.wikipedia.org/wiki/Driving" title="Driving">driver</a> and loss of or damage to the insured's <a href="http://en.wikipedia.org/wiki/Vehicle" title="Vehicle">vehicle</a> itself. Throughout the <a href="http://en.wikipedia.org/wiki/United_States" title="United States">United States</a> auto insurance policy is required to legally operate a motor vehicle on public roads. In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to a <a href="http://en.wikipedia.org/wiki/No-fault_insurance" title="No-fault insurance">no-fault</a> system, which reduces or eliminates the ability to sue for compensation but provides automatic eligibility for benefits. Credit card companies insure against <a href="http://en.wikipedia.org/wiki/Damage_waiver" title="Damage waiver">damage</a> on rented cars.</li><li><a href="http://en.wikipedia.org/wiki/Aviation_insurance" title="Aviation insurance">Aviation insurance</a> insures against hull, spares, deductible, hull war and liability risks.</li><li><a href="http://en.wikipedia.org/wiki/Boiler_insurance" title="Boiler insurance">Boiler insurance</a> (also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery.</li><li><a href="http://en.wikipedia.org/wiki/Builder%27s_risk_insurance" title="Builder's risk insurance">Builder's risk insurance</a> insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage due to any cause (including the negligence of the insured) not otherwise expressly excluded.</li><li><a href="http://en.wikipedia.org/wiki/Business_insurance" title="Business insurance">Business insurance</a> can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of <i>professional liability insurance</i>, also called <i>professional indemnity insurance</i>, which are discussed below under that name; and (b) the business owners policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverages that a homeowner needs.<sup id="_ref-6" class="reference"><a href="http://en.wikipedia.org/wiki/Insurance#_note-6" title="">[7]</a></sup></li><li><a href="http://en.wikipedia.org/wiki/Casualty_insurance" title="Casualty insurance">Casualty insurance</a> insures against accidents, not necessarily tied to any specific property.</li><li><a href="http://en.wikipedia.org/wiki/Credit_insurance" title="Credit insurance">Credit insurance</a> repays some or all of a <a href="http://en.wikipedia.org/wiki/Loan" title="Loan">loan</a> back when certain things happen to the borrower such as <a href="http://en.wikipedia.org/wiki/Unemployment" title="Unemployment">unemployment</a>, <a href="http://en.wikipedia.org/wiki/Disability" title="Disability">disability</a>, or <a href="http://en.wikipedia.org/wiki/Death" title="Death">death</a>. Mortgage insurance (which see below) is a form of credit insurance, although the name <i>credit insurance</i> more often is used to refer to policies that cover other kinds of debt.</li><li><a href="http://en.wikipedia.org/w/index.php?title=Crime_insurance&action=edit" class="new" title="Crime insurance">Crime insurance</a> insures the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.</li><li><a href="http://en.wikipedia.org/wiki/Crop_insurance" title="Crop insurance">Crop insurance</a> "Farmers use crop insurance to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease, for instance."<sup id="_ref-7" class="reference"><a href="http://en.wikipedia.org/wiki/Insurance#_note-7" title="">[8]</a></sup></li><li><a href="http://en.wikipedia.org/w/index.php?title=Defense_Base_Act_Workers%27_compensation&action=edit" class="new" title="Defense Base Act Workers' compensation">Defense Base Act Workers' compensation</a> or <a href="http://en.wikipedia.org/w/index.php?title=DBA_Insurance&action=edit" class="new" title="DBA Insurance">DBA Insurance</a> insurance provides coverage for civilian workers hired by the government to perform contracts outside the US and Canada. DBA is required for all US citizens, US residents, US Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, Foreign Nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.</li><li><a href="http://en.wikipedia.org/wiki/Directors_and_officers_liability_insurance" title="Directors and officers liability insurance">Directors and officers liability insurance</a> protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes incurred by directors and officers for which they are liable. In the industry, it is usually called "D&O" for short.</li><li><a href="http://en.wikipedia.org/wiki/Disability_insurance" title="Disability insurance">Disability insurance</a> policies provide financial support in the event the policyholder is unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgages and credit cards. <ul><li><a href="http://en.wikipedia.org/wiki/Total_permanent_disability_insurance" title="Total permanent disability insurance">Total permanent disability insurance</a> insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.</li></ul> </li><li>Errors and omissions insurance: See "Professional liability insurance" under "Liability insurance".</li><li><a href="http://en.wikipedia.org/wiki/Expatriate_insurance" title="Expatriate insurance">Expatriate insurance</a> provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.</li><li><a href="http://en.wikipedia.org/w/index.php?title=Financial_loss_insurance&action=edit" class="new" title="Financial loss insurance">Financial loss insurance</a> protects individuals and companies against various financial risks. For example, a <a href="http://en.wikipedia.org/wiki/Business" title="Business">business</a> might purchase cover to protect it from loss of <a href="http://en.wikipedia.org/wiki/Sales" title="Sales">sales</a> if a fire in a <a href="http://en.wikipedia.org/wiki/Factory" title="Factory">factory</a> prevented it from carrying out its business for a time. Insurance might also cover the failure of a <a href="http://en.wikipedia.org/wiki/Creditor" title="Creditor">creditor</a> to pay <a href="http://en.wikipedia.org/wiki/Money" title="Money">money</a> it owes to the insured. This type of insurance is frequently referred to as "business interruption insurance." <a href="http://en.wikipedia.org/wiki/Fidelity_bond" title="Fidelity bond">Fidelity bonds</a> and <a href="http://en.wikipedia.org/wiki/Surety_bond" title="Surety bond">surety bonds</a> are included in this category, although these products provide a benefit to a third party (the "obligee") in the event the insured party (usually referred to as the "obligor") fails to perform its obligations under a contract with the obligee.</li><li>Fire insurance: See "Property insurance".</li><li>Hazard insurance: See "Property insurance".</li><li><a href="http://en.wikipedia.org/wiki/Health_insurance" title="Health insurance">Health insurance</a> policies will often cover the cost of private medical treatments if the National Health Service in the UK (NHS) or other publicly-funded health programs do not pay for them. It will often result in quicker health care where better facilities are available.</li><li><a href="http://en.wikipedia.org/wiki/Kidnap_and_ransom_insurance" title="Kidnap and ransom insurance">Kidnap and ransom insurance</a></li><li>Home insurance or homeowners insurance: See "Property insurance".</li><li><a href="http://en.wikipedia.org/wiki/Liability_insurance" title="Liability insurance">Liability insurance</a> is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of willful or intentional acts by the insured. <ul><li><a href="http://en.wikipedia.org/w/index.php?title=Environmental_liability_insurance&action=edit" class="new" title="Environmental liability insurance">Environmental liability insurance</a> protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.</li><li><a href="http://en.wikipedia.org/wiki/Professional_liability_insurance" title="Professional liability insurance">Professional liability insurance</a>, also called <i>professional indemnity insurance</i>, protects professional practitioners such as architects, lawyers, doctors, and accountants against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called <i>malpractice insurance.</i> Notaries public may take out <i>errors and omissions insurance (E&O).</i> Other potential E&O policyholders include, for example, real estate brokers, home inspectors, appraisers, and website developers.</li></ul> </li><li><a href="http://en.wikipedia.org/wiki/Life_insurance" title="Life insurance">Life insurance</a> provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, <a href="http://en.wikipedia.org/wiki/Burial" title="Burial">burial</a>, <a href="http://en.wikipedia.org/wiki/Funeral" title="Funeral">funeral</a> and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. <ul><li><a href="http://en.wikipedia.org/wiki/Annuity_%28financial_contracts%29" title="Annuity (financial contracts)">Annuities</a> provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and <a href="http://en.wikipedia.org/wiki/Pension" title="Pension">pensions</a> that pay a benefit for life are sometimes regarded as insurance against the possibility that a <a href="http://en.wikipedia.org/wiki/Retirement" title="Retirement">retiree</a> will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.</li></ul> </li><li><a href="http://en.wikipedia.org/wiki/Locked_funds_insurance" title="Locked funds insurance">Locked funds insurance</a> is a little-known hybrid insurance policy jointly issued by governments and banks. It is used to protect public funds from tamper by unauthorized parties. In special cases, a government may authorize its use in protecting semi-private funds which are liable to tamper. The terms of this type of insurance are usually very strict. Therefore it is used only in extreme cases where maximum security of funds is required.</li><li><a href="http://en.wikipedia.org/wiki/Marine_insurance" title="Marine insurance">Marine insurance</a> and marine cargo insurance cover the loss or damage of ships at sea or on inland waterways, and of the cargo that may be on them. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.</li><li><a href="http://en.wikipedia.org/wiki/Mortgage_insurance" title="Mortgage insurance">Mortgage insurance</a> insures the lender against default by the borrower.</li><li><a href="http://en.wikipedia.org/wiki/National_Insurance" title="National Insurance">National Insurance</a> is the UK's version of social insurance (which see below).</li><li><a href="http://en.wikipedia.org/wiki/No-fault_insurance" title="No-fault insurance">No-fault insurance</a> is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.</li><li>Nuclear incident insurance covers damages resulting from an incident involving radioactive materials and is generally arranged at the national level. (For the United States, see the <a href="http://en.wikipedia.org/wiki/Price-Anderson_Nuclear_Industries_Indemnity_Act" title="Price-Anderson Nuclear Industries Indemnity Act">Price-Anderson Nuclear Industries Indemnity Act</a>.)</li><li><a href="http://en.wikipedia.org/wiki/Pet_insurance" title="Pet insurance">Pet insurance</a> insures pets against accidents and illnesses - some companies cover routine/wellness care and burial, as well.</li><li><a href="http://en.wikipedia.org/wiki/Political_risk_insurance" title="Political risk insurance">Political risk insurance</a> can be taken out by businesses with operations in <a href="http://en.wikipedia.org/wiki/Country" title="Country">countries</a> in which there is a risk that <a href="http://en.wikipedia.org/wiki/Revolution" title="Revolution">revolution</a> or other <a href="http://en.wikipedia.org/wiki/Politics" title="Politics">political</a> conditions will result in a loss.</li><li>Pollution Insurance. A first-party coverage for contamination of insured property either by external or on-site sources. Coverage for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded</li><li><a href="http://en.wikipedia.org/wiki/Prize_indemnity_insurance" title="Prize indemnity insurance">Prize indemnity insurance</a> protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a basketball game, or a hole-in-one at a golf tournament.</li><li><a href="http://en.wikipedia.org/wiki/Property_insurance" title="Property insurance">Property insurance</a> provides protection against risks to property, such as fire, <a href="http://en.wikipedia.org/wiki/Theft" title="Theft">theft</a> or <a href="http://en.wikipedia.org/wiki/Weather" title="Weather">weather</a> damage. This includes specialized forms of insurance such as <a href="http://en.wikipedia.org/wiki/Fire_insurance" title="Fire insurance">fire insurance</a>, <a href="http://en.wikipedia.org/wiki/Flood_insurance" title="Flood insurance">flood insurance</a>, <a href="http://en.wikipedia.org/wiki/Earthquake_insurance" title="Earthquake insurance">earthquake insurance</a>, <a href="http://en.wikipedia.org/wiki/Home_insurance" title="Home insurance">home insurance</a>, inland marine insurance or <a href="http://en.wikipedia.org/wiki/Boiler_insurance" title="Boiler insurance">boiler insurance</a>.</li><li><a href="http://en.wikipedia.org/w/index.php?title=Protected_Self-Insurance&action=edit" class="new" title="Protected Self-Insurance">Protected Self-Insurance</a> is an alternative risk financing mechanism in which an organisation retains the mathematically calculated cost of risk within the organisation and transfers the catastrophic risk with specific and aggregate limits to an Insurer so the maximum total cost of the program is known. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.</li><li><a href="http://en.wikipedia.org/w/index.php?title=Purchase_insurance&action=edit" class="new" title="Purchase insurance">Purchase insurance</a> is aimed at providing protection on the products people purchase. Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance. Such insurance is normally very limited in the scope of problems that are covered by the policy.</li><li><a href="http://en.wikipedia.org/wiki/Retrospectively_Rated_Insurance" title="Retrospectively Rated Insurance">Retrospectively Rated Insurance</a> is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.</li><li>Formal <a href="http://en.wikipedia.org/w/index.php?title=Self_Insurance&action=edit" class="new" title="Self Insurance">Self Insurance</a> is the deliberate decision to pay for otherwise insurable losses out of one's own money. This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self insurance is usually used to pay for high-frequency, low-severity losses. Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.</li><li><a href="http://en.wikipedia.org/wiki/Social_insurance" title="Social insurance">Social insurance</a> can be many things to many people in many countries. But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), plus retirement savings, that mandates participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ensures that everyone can become a claimant when or if he/she needs to. Along the way this inevitably becomes related to other concepts such as the justice system and the <a href="http://en.wikipedia.org/wiki/Welfare_state" title="Welfare state">welfare state</a>. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others): <ul><li><a href="http://en.wikipedia.org/wiki/Social_welfare_provision" title="Social welfare provision">Social welfare provision</a></li><li><a href="http://en.wikipedia.org/wiki/Social_security" title="Social security">Social security</a></li><li><a href="http://en.wikipedia.org/wiki/Social_safety_net" title="Social safety net">Social safety net</a></li><li><a href="http://en.wikipedia.org/wiki/National_Insurance" title="National Insurance">National Insurance</a></li><li><a href="http://en.wikipedia.org/wiki/Social_Security_%28United_States%29" title="Social Security (United States)">Social Security (United States)</a></li><li><a href="http://en.wikipedia.org/wiki/Social_Security_debate_%28United_States%29" title="Social Security debate (United States)">Social Security debate (United States)</a></li></ul> </li><li><a href="http://en.wikipedia.org/w/index.php?title=Stop-loss_insurance&action=edit" class="new" title="Stop-loss insurance">Stop-loss insurance</a> provides protection against catastrophic or unpredictable losses. It is purchased by organisations who do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.</li><li>Surety Bond insurance is a three party insurance guaranteeing the performance of the principal.</li><li><a href="http://en.wikipedia.org/wiki/Terrorism_insurance" title="Terrorism insurance">Terrorism insurance</a> provides protection against any loss or damage caused by <a href="http://en.wikipedia.org/wiki/Terrorist" title="Terrorist">terrorist</a> activities.</li><li><a href="http://en.wikipedia.org/wiki/Title_insurance" title="Title insurance">Title insurance</a> provides a guarantee that title to <a href="http://en.wikipedia.org/wiki/Real_property" title="Real property">real property</a> is vested in the purchaser and/or <a href="http://en.wikipedia.org/wiki/Mortgage" title="Mortgage">mortgagee</a>, free and clear of <a href="http://en.wikipedia.org/wiki/Lien" title="Lien">liens</a> or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a <a href="http://en.wikipedia.org/wiki/Real_estate" title="Real estate">real estate</a> transaction.</li><li><a href="http://en.wikipedia.org/wiki/Travel_insurance" title="Travel insurance">Travel insurance</a> is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, lost of personal belongings, travel delay, personal liabilities, etc.</li><li><a href="http://en.wikipedia.org/w/index.php?title=Volcano_insurance&action=edit" class="new" title="Volcano insurance">Volcano insurance</a> is an insurance that covers volcano damage in Hawaii.</li><li><a href="http://en.wikipedia.org/wiki/Workers%27_compensation" title="Workers' compensation">Workers' compensation</a> insurance replaces all or part of a worker's <a href="http://en.wikipedia.org/wiki/Wage" title="Wage">wages</a> lost and accompanying medical expense incurred because of a job-related injury</li></ul>Maker Moneyhttp://www.blogger.com/profile/08339814107141194204noreply@blogger.com0