Property and life insurance are complex issues with details that are relevant to any policy holder and invaluable for all policy holders to look into. There comes a point in time when it is important for a person to buy life, or property insurance. This is particularly so for a single parent who wants to care for her children in the eventuality of her death or for a business owner who wants to insure his property in the event of accident. The terminology and details of both property and life insurance are, however, complex and mathematically abstruse. The following essay takes up some concerns of both and vivifies, as well as teaches certain aspects of life insurance, via examples.
The first section concerns property insurance. The second exercise talks about life insurance.
Property insurance
Example hotel
Co-insurance clause refers to a splitting or spreading of risk among multiple parties in this case likely between insurers and insuring company. (Insurelane)
Let us imagine that a certain hotel is insured for $200,000 under a commercial property insurance policy. The policy contains an 80% coinsurance clause. The hotel sustained a $50,000 loss because of a fire in a storage area. The replacement cost of the hotel at the time of loss is $500,000. What we have here is a case of an underreporting penalty (the hotel is insured for less than its value) and the calculation is worked out in the following way:
The hotel is valued at $500,000. It contains an 80% coinsurance clause, but is insured for only $200,000 Since its insured value is less than 80% of its actual value, when it suffers a loss, the insurance payout will be subject to the underreporting penalty. For example: It suffers a $50,000 loss because of a fire in a storage area.
The calculation is the following:
The insured would recover $200,000 + (.80 x $500,000) x 50,000 = $100,000
The insurer's liability is $100,000.
The hotel is valued at $500,000. It contains an 80% coinsurance clause, and is insured for the full amount, i.e. $500,000. The hotel suffers a $10,000 loss because of a fire in a storage area; the calculation now would be the following:
. The insured would recover $500,000 + (.80 x $500,000) x 10,000 = $8,000
The hotel will collect $8,000.
Life Insurance
Let us speculative that the hotel's Human Resources manager has asked the Life Insurance agency representative to provide an educational seminar to several new employees from the housekeeping staff. The need approach is widely used for determining the amount of life insurance to purchase and the speaker first discusses this.
The needs approach
The needs approach is a method of calculating how much life insurance is required by an individual/family to cover their needs (i.e. expenses). These include things like funeral expenses, legal fees, estate and gift taxes, business buyout costs, probate fees, medical deductibles, emergency funds, mortgage expenses, rent, debt and loans, college, child care, private schooling and maintenance costs (Investopedia.com Needs approach)
The needs approach is calculated on two variables:
1. How much will be needed at death to meet obligations.
2. How much future income is needed to sustain the household?
The needs approach takes into account three variables: (1) the regular needs for a typical family (2) special needs (3) income needs
The regular needs for a typical family would include things like medical deductibles, emergency funds, mortgage expenses, rent, debt and loans, college, child care,…
Combining Life Insure With Trusts to Provide Better Family Financial Security Summery: Life Insurance and Trusts are two financial arrangements which provide security to the family and living relatives of the owner of property or trust. In this article, we look at insurance, trusts and how these can be used for better financial security and risk management. The article contains six references. Financial risk management is an important concept in the field
Northwestern Mutual Life Insurance Co Insurance business in modern day has adopted a differential approach to dealing with policy issues and consumer behavior yet some companies like Northwestern Mutual Life retain their original course of actions with clear mission and core values to provide exceptional service to their consumers. The following report is an analysis of such exceptional quality and distinguishable positioning of the company. Whether one is a business entity, a
Insurance Fraud After tax evasion, insurance fraud is considered the highest-ranked among white-collar crimes. The original concept of insurance, as a for-profit endeavor, was to collect funds from a large number of people to pay for damages and accidents that involved a small percentage of the population that paid premiums. Insurance fraud is an ever-growing problem. Solving or eliminating this problem requires the resources and knowledge of individuals or associations with
The delivery of the deed and the warranties of title are all notions being presented in this chapter. Chapter 11 discusses notions related to the title assurance, starting with the basic information pertaining to the recording system. The chapters introduces the basic, common law rule, which is that a grantee who was prior in time prevailed over one subsequent in time. The chapter continues by defining the several types of
2. Second, the deductibility of mortgage interest and property tax payments serves to lower the after-tax cost of homeownership, also contributing to owners' ability to increase savings or consumption. Many low-income owners may not benefit from these provisions, however, because the standard deduction often exceeds interest and property tax 3. Third, homeownership allows a borrower to tap into secured lending against his or her home, which, all else equal, is often
In other words Emotional Intelligence means that the individual is capable of: (1) Accurately perceiving emotions in oneself and others; (2) Uses emotions to facilitate thinking; (3) Understands emotional meanings; and (4) Manages emotions well. This model is referred to as the 'ability' model of emotional intelligence. (Mayer & Salovey, 1997) DANIEL GOLEMAN-PERSONAL & SOCIAL COMPETENCE Daniel Goleman proposed the model of emotional intelligence based on the Personal and Social competencies
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now