2009 APR 20 - (NewsRx.com) -- As the job market declines, the population of uninsured Americans swells. And paying for health insurance, along with everything else, weighs heavily on a multitude of minds these days. When it comes to options, COBRA may be the buzzword, but a little-known alternative called short-term medical insurance (STM) may offer a more palatable solution (see also Health Plan Administrators).
Unemployment rose from 7.5 to 8.1 percent in February 2009its highest rate in more than 25 years according to the Bureau of Labor Statistics. A study by the Kaiser Commission on Medicaid and the Uninsured, April 2008, indicates that each one percent increase in the national unemployment rate leads to more than 1 million additional people losing their health insurance.
Through COBRA, employees who lose their jobs are able to continue employer-sponsored coverage for up to 18 months. However, they must pay 102 percent of the cost of the traditional health insurance premium for COBRA continuation coverage.
Relief seemed to appear in February 2009 when President Obama signed the $787 billion economic stimulus package, which included a subsidy covering 65 percent of COBRA premiums for the first nine months of unemployment. This assistance is available to eligible workers who have lost or will lose their jobs as a result of the current economic recession between September 1, 2008 and December 31, 2009.
Still, COBRA remains out of reach for many collecting unemployment checks and struggling to pay for bare necessities. Pre-subsidy annual COBRA premiums average $4,400 for individuals and $11,000 for families, according to Kaiser Family Foundation statistics.
At HPA, we understand that these are tough economic times. We understand that people are worried about keeping their job, and if they should lose their job, the struggle to make ends meet with COBRA premiums seems overwhelming, said Jim Kenneally, chief sales officer at Health Plan Administrators, a member of the IHC Group. We want people to know they have options, and that STM is a viable alternative.
Typically, STM premiums are significantly less expensive than COBRA premiums or premiums for an individual major medical health insurance policy. In addition to lower monthly payments, STM plans offer greater ease of qualification and enrollment. With STM, there is no lengthy underwriting process and the applicant can complete the entire process online within a matter of minutes. If approved after answering a handful of health-related questions, they will receive their approval confirmation, ID card and certificate almost instantaneously. Coverage may begin as early as the next day.
STM coverage periods may last as few as 30 days or as many as 12 months, depending on the state. Individuals who need to extend their coverage may apply again and get another policy; however, additional policies are considered entirely new and do not cover pre-existing conditions. That means illnesses or medical conditions developed and/or treated under the first policy will not be covered on the new one or any subsequent STM policies. Unlike traditional individual major medical insurance coverage and COBRA continuation coverage, pre-existing diseases and physical conditions are not covered under STM policies. And, while STM insurance would not count as creditable coverage toward any individual health insurance issued after an STM policy ends, an STM policy would count as creditable coverage toward group health issued to an individual after the temporary STM policy ends.
People who are in good health and anticipate the need for less than six months of coverage are typically ideal candidates for STM. Those with serious health conditions are unlikely to qualify. Anyone trying to choose between STM and COBRA continuation coverage under their current health plan can visit www.hpainsurance.com to determine their STM eligibility.
If there is any question in peoples minds about what they should do, it is always best to talk to an insurance professional, Kenneally advises.
Visit www.bls.gov/news.release/empsit.nr0.htm for the latest Bureau of Labor Statistics press release on the unemployment situation. About Health Plan Administrators Health Plan Administrators, Inc. (HPA) is an industry leader in short-term major medical (STM) insurance. Although STM is at the core of its business, HPA is also a well-respected provider of dental and travel medical insurance, in addition to offering an affordable prescription drug discount program. Founded in 1939, HPA celebrates an impressive 70 years in the insurance industry in 2009.
HPA, headquartered in Tampa, Florida, is a member of the IHC Group, an insurance organization composed of Independence Holding Company (NYSE:IHC) and its operating subsidiaries, including Madison National Life Insurance Company, Inc., Standard Security Life Insurance Company of New York and Independence American Insurance Company. The IHC Group has been providing life, health and stop-loss insurance solutions for over 25 years. For information on Independence Holding Company and the IHC Group, see www.ihcgroup.com.
Short-Term Medical Insurance Offers COBRA Alternative
Pensions ‘Perfect Storm’ Looms For Unprepared World, HSBC Insurance Study Reveals
METTAWA, Ill.--(BUSINESS WIRE)-- A "˜perfect storm' of demographic, individual and financial elements is poised to derail people's retirement plans unless they prepare properly now, a global survey from HSBC Insurance reveals today.
The fifth annual Future of Retirement study, It's Time to Prepare, shows:
- People's short-term survival strategies in the midst of recession are creating a serious long-term pensions "˜downturn deficit'
- There is a continuing lack of pensions planning, even though people are aware that they are likely to live longer
- This is being exacerbated by poor levels of financial understanding, education and access to advice
- People are more concerned with protecting their possessions in the short-term than ensuring they can look forward to a financially secure retirement
Stephen Green, Group Chairman of HSBC, said: "A perfect storm is confronting pensions planning, created by an ageing population, falling pension funds values, a drop in state and employer contributions and an economic downturn which is forcing people to make tough financial choices."
The preparedness gap
It's Time to Prepare has identified a "˜preparedness gap' in people's pensions planning across the world with nearly 9 out of 10 people not feeling fully prepared for their retirement.
The Future of Retirement survey, which questioned 15,000 people in 15 countries, making it the largest study of its kind in the world, reveals:
- Only 13% of respondents feel fully prepared for their retirement
- 86% do not know what income they will receive in retirement
- Only a quarter (27%) feel they fully understand their long-term finances
- Approaching half (43%) have undertaken some planning for later life, but still remain unclear about what their retirement income will look like
- 14% have done no retirement planning at all.
"If people prepare adequately for the long-term an extended later life can present a golden opportunity for many - but now is the time for people to seriously consider boosting their pensions contributions to improve their prospects of a comfortable retirement. The cost of procrastination is likely to be high."
Advice gap opens up
It's Time to Prepare also reveals a parallel "˜advice gap' linking a lack of preparedness to insufficient financial education and guidance:
- 43% of respondents have never had any form of financial education
- 29% also feel "˜fairly' unprepared for their retirement
- Almost half (47%) have never had any form of professional financial advice
Coping with the downturn - possessions not pensions?
People are paying little attention to long-term considerations such as their likely retirement needs, focusing instead on purely practical short-term concerns which they better understand, It's Time to Prepare reveals.
General insurance solutions - motor, travel, home and even pet insurance - are seen as a greater priority than addressing longer-term needs around insuring health or income, even when job security is in question.
Despite global economic uncertainty, only 6% intend to take out income protection insurance in the next 12 months compared to 16% insuring their home.
The Future of Retirement survey shows that, as a result of the economic downturn:
- 92% of people have changed some element of their finances
- Only 19% will now retire as planned
- 17% are reducing retirement savings or stopping saving for retirement altogether
- 18% have used savings to pay off debt
- 9% expect to delay their retirement
"As the economic "˜perfect storm' threatens it is important that people are encouraged to understand long-term risks and to manage them effectively. While people are taking more responsibility for themselves, there is also a definite role for financial institutions to continue, and to build on, their work to educate and inform."
Notes to editors
The Future of Retirement:
The Future of Retirement programme is a key initiative, establishing HSBC Insurance as a market leader in the increasingly important retirement market. Now in its fifth year, the programme has positioned HSBC Insurance at the forefront of retirement "˜thought leadership'.
The report findings are crucial to HSBC meeting the needs of its 128 million customers worldwide.
It enables HSBC to continue to produce innovative financial solutions, specific to the needs and aspirations of each gender and age group, in the many countries around the globe.
Countries surveyed for It's Time to Prepare include: Brazil, Canada, China, France, Hong Kong, India, Japan, Mexico, Saudi Arabia, Singapore, South Korea, Turkey, UAE, UK, and US
For further information visit www.hsbc.com/retirement/future-of-retirement
HSBC Insurance:
HSBC Insurance provides policies in over 50 countries and territories to its personal, commercial, corporate, institutional and private banking customers. The diverse needs of its customers worldwide are recognised by HSBC Insurance and it offers products and services to suit them including: life assurance, general insurance, commercial risk and retirement provision.
Find out more at www.hsbc.com/insurance
Cicero Consulting:
Cicero Consulting is a leading UK and Brussels based financial services consultancy specialising in thought leadership and market developments in retirement planning and pensions issues.
Visit www.cicero-europe.com
Media inquiries
HSBC - North America
Neil Brazil, 224-544-7638
neil.brazil@us.hsbc.com
Source: HSBC - North America
Egyptian Takaful company rolls out Eskadenia insurance solutions
The software suited includes General and Life insurance capabilities, plus reporting and other financial systems that will help Egyptian Takaful Company to speed up processes and reduce costs while keeping data secure.
The software will speed up the creation of quotations and the issuing of policies, as well as managing reinsurance, endorsements, claims and renewal transactions, with Life insurance for group and individual business, and General insurance covering underwriting for all classes of business.
The system is compliant with Takaful and Sharia requirements, and can also be integrated with the financial modules of Eskadenia’s Business Manager software. The solution, which is built on Microsoft .NET technology residing on Oracle DB, also allows for collaboration across the enterprise, and report generation, to help improve business decision making.
Shadi Saadeh, Sales Manager for Enterprise & Insurance Products at ESKADENIA Software said: “This marks the first project for ESKADENIA Software in the Egyptian insurance market and we are very pleased to start with Egyptian Takaful. Our software systems have been enriched with the largest set of advanced insurance functions in the local and regional Insurance practice providing Egyptian Takaful with a strong start for effective operation and customer service. We do hope that this would be just the beginning of many further projects in this new market.”
Auto Insurance: 8 Savings Secrets
1. Older car? Drop collision.
Have a car that's 7 or 8 years old? Is it worth less than $2,500? That's the time to start thinking about taking the risk and dropping comp and collision premiums from your policy. The reason why? Chances are your deductible is closing in on the value of your car and any major collision will send you to the dealership, anyway.
2. Buy home and auto with different companies
With everything being bundled today – from cell phones to Internet and cable TV – you'd think that having your home and auto insurance bundled at the same company would save money. But, do your research, and you may discover that having separate policies can be well worth it. Good rates abound for both types of insurance – but it's rare to find the lowest rate for both from the same company. So, unless you buy an umbrella policy, there's no overriding reason to keep your policies together if you can save.
3. Minimum liability? Not enough.
You may tell an agent that you can only afford the minimum car insurance required by law. And some agents may be more than happy to provide you with that policy – and then get you out the door so the next paying customer can step in. What he may neglect to tell you is that in some states – particularly Ohio, Pennsylvania, South Carolina, Nevada, New Jersey and Oklahoma – state-mandated limits are ridiculously low. And there's a good chance those minimums won't even come close to covering the costs of a serious accident. Which means you could be paying WAY more than you bargained for if you're at fault.
4. Shop around for lower rates
A State Farm agent only quotes State Farm. Same for Allstate. So what are the chances their agent will tell you to shop around for the best deal? Even independent agents only represent a few auto insurers, so how do you know what's fair? Shopping for and comparing services online from companies like Insurance.co.nr allows you to fine-tune the deductibles and coverage you want and then compare auto insurance rates side-by-side. All in one place. All at one time.
5. Go green; keep green
Even auto insurance companies are green – offering discounts that will trim a bit off your premium. Look for things like a discount for driving a hybrid, for opting for paperless statements or electronic payment plans. Even signing your policy with an e-signature can save you some pennies. Basically, the less the company has to spend on paper, the more they'll pass those savings on to you.
6. Consider paying that claim yourself
Naturally, you don't really want to hear that, but if you've backed into the garage, think twice about asking your company to repair it. Why? Besides the possibility that your rates will go up at the time of renewal, the next time you shop for new insurance, many insurance companies will use an insurance history report to see if you've made any car insurance claims, and how much money was paid. Although accidents can only affect your rates for three years, many companies will look back five or more years when deciding if they want to offer you insurance. Having more claims will affect that result.
7. Your car makes a difference. Don't buy that turbo convertible.
All vehicles are not created equal. Small or large, old or new, the type of car you drive will affect the size of the premium you pay, often based on algorithms insurance companies use to determine how expensive it might be to pay a claim. That'll affect how much your premium will be. Even more reason to shop around for the best deal.
8. Teenager turned 16? Don't add them to your policy – yet.
If your teenager has turned 16 but isn't a licensed driver, you're not required to add them to your insurance policy. You're only required to insure them once they become licensed to drive. That also means in most instances you don't have to insure them if they just have a learning permit. But check. Some policies may require it.
Life insurance
Annuities 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 pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
Certain life insurance contracts accumulate cash 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 endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.
In many countries, such as the U.S. and the UK, the tax law 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 saving as well as protection in the event of early death.
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.
Insurance companies
* Life insurance companies, which sell life insurance, annuities and pensions products.
* Non-life, General, or Property/Casualty insurance companies, which sell other types of insurance.
General insurance companies can be further divided into these sub categories.
* Standard Lines
* Excess Lines
In most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting 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 decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year.
In the United States, standard line insurance companies are "mainstream" insurers. These are the companies that typically insure autos, homes or businesses. 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.
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 are not required to file rates and forms as the "admitted" carriers do. However, they still have substantial regulatory requirements placed upon them. State laws generally require insurance placed with surplus line agents and brokers not to be available through standard licensed insurers.
Insurance companies are generally classified as either mutual or stock companies. Mutual companies are owned by the policyholders, while stockholders (who may or may not own policies) own stock insurance companies. Demutualization of mutual insurers to form stock companies, as well as the formation of a hybrid known as a mutual holding company, became common in some countries, such as the United States, in the late 20th century. Other possible forms for an insurance company include reciprocals, in which policyholders 'reciprocate' in sharing risks, and Lloyds organizations.
Insurance companies are rated by various agencies such as A. M. Best. 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.
Reinsurance 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.
Captive insurance 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% 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.
The types of risk that a captive can underwrite for their parents include property damage, public and product 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.
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:
* heavy and increasing premium costs in almost every line of coverage;
* difficulties in insuring certain types of fortuitous risk;
* differential coverage standards in various parts of the world;
* rating structures which reflect market trends rather than individual loss experience;
* insufficient credit for deductibles and/or loss control efforts.
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. 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.
Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. 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.
The financial stability and strength of an insurance company should be a major consideration when buying 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 Best's, Fitch, Standard & Poor's, and Moody's Investors Service, provide information and rate the financial viability of insurance companies.
Insurance financing vehicles
* No-fault insurance is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.
* Protected Self-Insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization 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.
* Retrospectively Rated Insurance 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.
* Formal self insurance 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.
* Reinsurance is a type of insurance purchased by insurance companies or self-insured employers to protect against unexpected losses. Financial reinsurance is a form of reinsurance that is primarily used for capital management rather than to transfer insurance risk.
* Social insurance 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 requires 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 welfare state. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others):
o National Insurance
o Social safety net
o Social security
o Social Security debate (United States)
o Social Security (United States)
o Social welfare provision
* Stop-loss insurance provides protection against catastrophic or unpredictable losses. It is purchased by organizations 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.
Other types
* Defense Base Act Workers' compensation or DBA Insurance provides coverage for civilian workers hired by the government to perform contracts outside the U.S. and Canada. DBA is required for all U.S. citizens, U.S. residents, U.S. 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.
* Expatriate insurance provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
* Financial loss insurance protects individuals and companies against various financial risks. For example, a business might purchase coverage to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover the failure of a creditor to pay money it owes to the insured. This type of insurance is frequently referred to as "business interruption insurance." Fidelity bonds and surety bonds 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.
* Kidnap and ransom insurance
* Locked funds insurance 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.
* Nuclear incident insurance covers damages resulting from an incident involving radioactive materials and is generally arranged at the national level. See the Nuclear exclusion clause and for the United States the Price-Anderson Nuclear Industries Indemnity Act)
* Pet insurance insures pets against accidents and illnesses - some companies cover routine/wellness care and burial, as well.
* Pollution Insurance which consists of 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.
* Purchase insurance 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.
* Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
* Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, personal liabilities, etc.
* Media Insurance is designed to cover professionals that engage in film, video and TV production.
Liability insurance
* Directors and officers liability insurance protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes made by directors and officers for which they are liable. In the industry, it is usually called "D&O" for short.
* Environmental liability insurance protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.
* Errors and omissions insurance: See "Professional liability insurance" under "Liability insurance".
* Prize indemnity insurance 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.
* Professional liability insurance, also called professional indemnity insurance, protects insured professionals such as architectural corporation and medical practice 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 malpractice insurance. Notaries public may take out errors and omissions insurance (E&O). Other potential E&O policyholders include, for example, real estate brokers, Insurance agents, home inspectors, appraisers, and website developers.
Property insurance
Property insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.
* Automobile insurance, known in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insured's vehicle itself. Throughout the United States an 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 no-fault system, which reduces or eliminates the ability to sue for compensation but provides automatic eligibility for benefits. Credit card companies insure against damage on rented cars.
o Driving School Insurance insurance provides cover for any authorized driver whilst undergoing tuition, cover also unlike other motor policies provides cover for instructor liability where both the pupil and driving instructor are equally liable in the event of a claim.
* Aviation insurance insures against hull, spares, deductibles, hull wear and liability risks.
* Boiler insurance (also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery.
* Builder's risk insurance 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.
* Crop insurance "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."
* Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage. Most earthquake insurance policies feature a high deductible. Rates depend on location and the probability of an earthquake, as well as the construction of the home.
* A fidelity bond is a form of casualty insurance that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
* Flood insurance protects against property loss due to flooding. Many insurers in the U.S. do not provide flood insurance in some portions of the country. In response to this, the federal government created the National Flood Insurance Program which serves as the insurer of last resort.
* Home insurance or homeowners' insurance: See "Property insurance".
* Landlord insurance is specifically designed for people who own properties which they rent out. Most house insurance cover in the U.K will not be valid if the property is rented out therefore landlords must take out this specialist form of home insurance.
* Marine insurance 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.
* Surety bond insurance is a three party insurance guaranteeing the performance of the principal.
* Terrorism insurance provides protection against any loss or damage caused by terrorist activities.
* Volcano insurance is an insurance that covers volcano damage in Hawaii.
* Windstorm insurance is an insurance covering the damage that can be caused by hurricanes and tropical cyclones.
Types of insurance
Business insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of professional liability insurance, also called professional indemnity insurance, which are discussed below under that name; and (b) the business owner's 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.[8]
History of insurance
Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively.[7] Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.
Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.
The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much."[1]
A thousand years later, the inhabitants of Rhodes invented the concept of the 'general average'. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage.
The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.
Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.
Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.
Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes.
The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional federal charter (OFC)) for insurance similar to that which oversees state banks and national banks.
Principles of insurance
1. A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.[2] The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.
2. Definite Loss. The event that gives rise to the loss that is subject to the insured, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
3. Accidental Loss. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
4. Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.
5. Affordable Premium. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the U.S. Financial Accounting Standards Board standard number 113)
6. Calculable Loss. There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
7. Limited risk of catastrophically large losses. The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurer's appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.
$5,000 AD&D Insurance Plan
Be Prepared-Activate Your Plan Today!
No one likes to think about it. But accidents are a part of everyday life.
When accidents happen, their financial impact can be devastating. Your Veterans Advantage AD&D plan with up to $5,000 in insurance coverage is just one more way your membership can help ensure financial protection is available for you and your loved ones.
Activate your coverage today: Click Here Now
AD&D Plan Benefits
To help protect you and your family from the unforeseen financial hardship of a serious accident that causes death or dismemberment, your Veterans Advantage AD&D coverage delivers you the following valuable benefits:
- Up to $5,000 in coverage, depending upon the injury or loss.
- No physical exam required.
- Coverage for all age groups.
- Great supplemental insurance--benefits are paid in addition to any other insurance coverage you may already have.
- Coverage 24/7, worldwide, whether you are home or away, or on or off the job.
- Provided through your membership with no additional fees or charges for coverage.
Eligibility and Coverage
As a member of Veterans Advantage, you are eligible for this plan. You simply enroll to activate your coverage.You cannot be declined for medical reasons--as long as a you are Veterans Advantage Card member, you are eligible for coverage under our group insurance policy, regardless of your age or health.
No matter how careful you are, accidents do happen. Accidental injury remains the number one cause of death for people under 40 and the fifth leading cause of death for all ages1. While no one can predict when or where an accident may occur, you can be prepared with your insurance coverage from Veterans Advantage.
As a Veterans Advantage Card member, you are eligible for coverage from our $5,000 AD&D insurance plan under our group policy. There are no additional member fees or charges for coverage. You cannot purchase this plan independent of your membership.This plan will provide you with protection in the event of an accidental death or a covered injury. It is designed to reduce the financial burdens associated with an accident that causes the loss of life, limb, or sight.
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No one likes to think about the worst occurring. However, it is a comfort to know that your family members can receive a death benefit in the event of a fatal accident during a business trip, vacation or recreational pursuits, or simply while going about daily activities. You will receive 24-hour-a-day coverage, 365 days a year, whether you are at home, at work or at play.
If you have loved ones whose security would be threatened if an accident took your life suddenly, or you could not earn an income owing to a dismembering disability or loss of sight, your AD&D insurance plan will deliver you a valuable financial benefit, without having to purchase additional life insurance to cover such a possibility. And, if you already have other forms of insurance, it offers an added layer of protection.
You may believe that if you do have an accident, it will most likely be on the job, and workman’s compensation benefits will provide coverage. Our plan will also pay you for accidents on the job, and provides supplemental coverage to any existing insurance. But, it is important to note that, of all the injury-related deaths in 2004 involving workers, roughly 90 percent occurred while employees were off the job.2
Travel Health Insurance
Have you ever thought of health insurance plans while traveling? If not, then understand the necessity of travel health insurance which is extremely essential for any overseas travel plan. You do not realize the need of it until and unless there is an emergency. These insurance plans take good care of your health and baggage during any of the international and domestic travel.
Insurance policies designed for travel plans secure you for the upcoming trip. Accidents are unpredictable and can occur during your travel. Serious cases require immediate medical attention with lot of money involved in it. It is then the travel health insurance comes to picture and takes care of all the expenses.
These insurance policies issue an identification card for the passenger during his travel. It will depend on the plan you choose and the premium amount you pay. The traveler gets all benefit during a medical crisis as per the plan he chooses. The identification card takes off the entire burden from initial hospitalization to all other medical requirements.
The insurance companies make the payment usually by either of the two ways. They may directly deal with the doctor and make the payments. On the contrary they may ask you to make the payments and later claim for reimbursement. Travel health insurance is therefore very important and can save your life in a different country where you are unaware of the system and process.
Internet is now the most reliable source of information about insurances companies as they have their official websites. These websites are equipped with the latest updates and calculators to find out the premium amount as per the plans. Testimonials of the existing members can prove to be beneficial.
Check reputed companies in order to avoid any hassles for paperwork and get better customer service. It is indeed a good idea to check with friends who are frequent travelers. Practically their experience would be the most reliable information you could depend on. Travel health insurance is for your safety and you should never ignore it for any of your travel plans.
Insurance companies give coverage to every age group starting from 1 year to 85 years. Special features of reputed companies include coverage for dental care, medical evacuation, baggage loss and delay, cancellation, interruption of trips etc. These features almost take care of all possible problems which you can expect in your travel. Both health and baggage insurance can be clubbed together to get all the benefits.
Travel health insurance will require having your medical check up done after a certain age group. Most of the companies have fixed the age of 70 for medical check up. Pre-existing health issues are not covered in almost all the policies. However, some reputed companies give coverage in critical situations when it comes to life and death.
It is a really a comfortable feeling when you know that you and your family are protected with health insurance to face any unexpected medical expenses. Encourage yourself and others to buy travel health insurance. It will keep your journey safe and secured.
Essential For Overseas TravEssential For Overseas Traveling
AIG Insurance
However, the story of this company is one that stretches back to the early 1900s, and not only represents a fine example of entrepreneurship, but also of a man who made popular a unique business model and stuck to it. In 1919, Cornelius Vander Starr became the very first Westerner to sell insurance in Shanghai, China. After growing large enough, he then expended into Asia, Latin America, Europe and the Middle East. He could not, however, find matched success in America. >> Read More
Life Insurance
First of all, it is important to know what the different kinds of policies are, what coverage they will afford you, and what type you should be looking at in order to help your survivors meet your financial obligations after your death. >> Read More
Auto Insurance Quotes
Being proactive, however, does not necessarily mean that you as the consumer are trying to find the cheapest package available. After all, you would not just buy the cheapest car on the market, would you? >> Read More
Auto Insurance Quotes
Being proactive, however, does not necessarily mean that you as the consumer are trying to find the cheapest package available. After all, you would not just buy the cheapest car on the market, would you? No, you would examine all the characteristics of the car and the company behind it before making your decision. Similarly, when it comes to protection for your car, you need to look at which plans will provide you with the coverage you need. Cheap is good, but not if it comes from a company that is not very well established. You want to buy insurance from a company that you know you can rely on should the time ever come.
Thus, price plans are not the only thing that should be compared before you make your purchasing decision. Rather, a company’s history and reputation for service should be looked over as well. Nowadays, it has become extremely popular to search online for the best deals. While the Internet does indeed offer the convenience of searching at home, for no cost, and at your own pace, make sure you do not get lost in the maze of websites that have sprung up claiming to offer unbeatable rates.
There are a number of different variables that go into determining auto insurance quotes, of which you should be aware. The age of the driver, where the car will be bought and driven, and the driver’s past record. Insurance companies might also look at where the car will be primarily parked and how often it will supposedly be used.
Comparing policy prices is also not just something you should do when you are first buying your plan. Rather, it should become a habitual process, something you do every time it comes to the renewal period. Compare your current policy to those out there to make sure you still have the best deal available. If you do decide to switch plans, make sure your new one will have all the same benefits as the last, and that you only do it at renewal time. Switching companies mid-way through your coverage period could result in some hefty cancellation fees.
Using an insurance broker is often a good way to get many different auto insurance quotes at once. But, because they earn a commission on any sale they get, it is always important to keep your own eyes open and ears wide in order to look out for something that you think might be better.
10 Tips Help You Save on Car Insurance
1. Drive less and earn a discount
If you drive less than 7,500 miles per year, you may qualify for a low-mileage discount on your auto insurance. And, some car insurance companies offer a commuter discount if you use public transportation during the week.
2. Don't use your car for business purposes
Some insurance companies will add a "business use surcharge" or increase your car insurance premium as your annual mileage increases. But, if you must use your car for business, be sure to tell your company or agent, so that your daily business travel is covered.
3. Increase your deductible
You might reduce your annual auto insurance premium by as much as 10 to 15% if you increase your deductible from $250 to $500. But, remember that you'll be required to pay the larger deductible upfront if you have an accident.
4. Keep an eye on your credit report
Your credit history is one of many "risk factors" that most auto insurance companies evaluate when setting rates (in states where it's permissible by law). Paying your bills on time and maintaining a solid credit history will help keep your auto and home insurance rates lower.
5. Drive safely
You may be eligible for a price break on your car insurance policy if you have no accidents or traffic violations for a specified period (usually three years – but a few companies will look back five years). Even a single speeding ticket can increase your auto insurance rates 5 to 10% depending on your state.
6. Buy a low-profile car
Cars are rated on a risk scale for auto insurance purposes. In general, sports cars and other high-performance, flashy vehicles are classified as higher risks because they are common targets for thieves and vandals, and because statistically, the people who own them tend to drive more recklessly.
7. Move
If you live in a rural community with little crime and traffic congestion, your insurance premium will generally be lower than if you live in an urban area where your car is more likely to be stolen, vandalized, or involved in an accident. We love city life – but sadly it costs more for car insurance.
8. Keep your car in a garage
Cars parked in garages are less likely to be stolen, vandalized, or struck by other vehicles. Using a garage to store your car may get you to a slight auto insurance premium reduction.
9. Install safety or anti-theft devices
Car insurance companies offer a variety of discounts for anti-lock brakes, automatic seat belts, and airbags. Similarly, anti-theft devices such as car alarms and tracking systems (e.g., LoJack®) may also get you an insurance discount because they reduce the chances of your car being stolen or vandalized.
10. Look for discounts
You may receive a discount from your auto insurance company if you buy more than one type of insurance through that same company (e.g., auto and homeowners). A discount may also apply to your auto insurance if you insure multiple cars under the same policy or with the same company. In addition, you can earn money-saving discounts for taking a defensive driving course, being a AAA member or staying with the same auto insurance company for a number of years. These discounts vary by company.
10+ Shop around
OK, it might go without saying, but your current car insurance company might not be the best one for you in the future! We recommend researching your options 30 to 45 days before your current policy is set to renew, especially if you have not shopped recently. (Fact: Insurance.com customers reported annual auto insurance savings of $538 a year in April 2009. Your savings may vary.)
Auto Insurance
When it comes to protecting yourself, you need to think about more than just your business. As entrepreneurs, we are often quick to purchase policies that cover our own lives or our companies. However, we fail to purchase adequate protection for one of the most crucial things to both our business and personal lives: our car. Auto insurance is a contract in which one party agrees to pay for another’s financial loss resulting from a specific event that has caused damage to their car. It may not come cheap, but you don’t ever want to be caught without it. You never know when that next storm will come or when somebody will miss the red light and run into your car instead.
Protecting your car – and any cars your business may provide to employees – is an expensive business, which entices many to try and cut corners. Like any other insurance, naturally, there are minimal packages available. But, do you really want to risk not having the full protection if you some day by accident hit that Porsche Boxster? Guaranteed, if you hit an expensive sports car, minimal insurance packages will not be enough to cover you. You will wind up on the side of the street wondering why you hadn’t paid those few extra dollars to get you complete coverage.
There are normally government laws that make it mandatory to have minimum protection for your car. But, as entrepreneurs, when have we ever settled for just the minimum? Don’t we always strive to put in 110 percent of ourselves in our business? Don’t we work longer hours than most to get our company off the ground and running? Don’t we sacrifice much of our personal lives for the sake of our babies – our businesses, that is? In one fell swoop, failing to adequately protect your car can take all of that away from you.
As expensive as auto insurance is the good news is that it offers more different ways to save money as does, for instance, life insurance. First and foremost, it is important to evaluate when and where you will be using your car. Do you really need to take that trip in the bad weather or heavy traffic? Also, keep your car in the best possible condition so as to minimize the chance of damage. And, make sure your vehicle is stored in a safe place at night. If it’s a garage, verify the security of that garage with its owner/
Another sure fire way to cut your coverage costs is to try and increase your deductibles. This will necessarily decrease your premiums. Just make sure that when the time comes, you can actually afford to pay those deductibles.
Finally, while it’s crucial to buy adequate protection for your cars, it is equally important not to buy what you may not need. For instance, coverage for vehicles that are used strictly by your employees for business may not need to include medical claims if those would be covered under your company’s worker’s compensation package.
Auto insurance may be a headache to deal with now, but the real pain comes when you don’t have what you need.
Accident Insurance
Accidents do not just happen when you are driving your car, or away on vacation. Thus, your normal car or travel insurance might not be enough to protect you and your family when the time comes. A personal protection plan that covers specifically accidents is a good idea to have as a supplement to your regular life insurance policy.
There are a number of different protection packages that you can purchase depending on your requirements. For instance, an Accidental Death plan will allow benefits to be paid to your beneficiary should you die as the direct result of an injury caused by an accident. Air Travel Accident will cover you if your death is the direct result of an injury caused by a plane accident, provided you paid for your ticket and it occurred on a regularly schedule commercial flight.
Accident Insurance is not just something you should think about for yourself, either. If you have a spouse or children, you should consider looking into plans that offer child care benefits or tuition benefits in case something happens to either parent. Some other packages also offer job training benefits for one spouse to upgrade their skills should the other pass away.
Whatever package you buy, it is important to always keep in mind the conditions that come along with it. For instance, with many coverage plans, you need to report any accident claims within five working days of when the accident occurred in order for the claims to be valid. You also need to provide independent evidence that the accident occurred and that your injury as a direct result of that accident. You will already be dealing with the traumatic stress of the event itself. You don’t want to let the fine print on your insurance cause you any additional hassle.
It is something that many people do not bother to think about, but purchasing additional protection over your regular life insurance plan can be an affordable and effective way to close the coverage gap and give you and your family peace of mind.
Accidents are called accidents for a reason; they are unplanned events that take us by surprise. Life should not be boring; we should be allowed to take the risks that make life worth it without having to worry about the consequences of getting injured. Do not get caught off guard and make your loved ones pay as a result. Get the proper protection of accident insurance today.
International Group Insurance
Understanding What Is Necessary When Creating an International Group Insurance Plan
Sending an employee overseas is a huge investment for an organization—large or small. Most firms don’t realize that the cost of a failed overseas assignment can often run past $500,000 once all the costs are accounted for. Thus, it makes a lot of sense to invest in an employee’s financial safety net—his or her international group insurance.
These days it is not unusual for a U.S. manufacturing firm to operate a factory in India, an American airline to have its reservations processed in Ireland, or a Bahamas-registered offshore company to have expatriate employees in Africa. As we all know, the world has long since changed into a global marketplace with a global workforce. More and more, companies are sending their employees abroad to search out new markets or run operations. The employees who are sent overseas are attracted by the exotic locations, a chance to travel and experience various social and business cultures, and, of course, the lower taxation in some countries, and sometimes the higher salary. These employees travel frequently and are key assets for the business. Most companies want to offer them optimized protection while safeguarding the continuity of their business. Many Canadian and U.S. companies are also hiring third-country nationals, especially if they have skills that don’t exist in the company or country. More often than not, the offshore company will have to hire local nationals to fill various positions when needed. Depending on the country and labor requirements, these local employees may require benefits from a local insurance company. However, local nationals can be fully or partially covered by expatriate benefit programs. Such a decision will also hinge on the reliability and quality of the local insurance firms. Generally, most insurers are not keen on covering local nationals. If they do, the insurer will want to make sure the majority of the employees covered are expatriates.
Selecting an Expat Insurance Company
Some expat employers operating offshore use a local insurance company, but this can be fraught with inconvenience and danger. In many countries, supervisory bodies or cartel arrangements strictly regulate insurance firms. Other nations may have blocked currencies or significant foreign exchange regulations. It must be asked whether the employee really wants to receive his or her benefits in a fragile currency. Of course, this could also be said of the U.S. dollar of late. This is not a problem if the insurance company is reimbursing health or dental expenses, but currency payments for life and disability insurance for an expatriate should be made in a stable currency, such as U.S. dollars, euro, or U.K. pounds. In addition, employees may not be in a particular country long enough to qualify for membership in the local insurance plan,or there may be a citizenship requirement. Having a pooled offshore plan simplifies reporting, administration, and communication because the benefit manager will have one single-source clearinghouse and will not have to negotiate with several foreign insurers. Finally, companies must decide whether they wish to deal with a highly stable European or North American insurance company or a company from a less stable country.
In addition to looking at the overall cost of the expat benefit plan, one should also include ease of administration. Employees are also impressed by a plan that has prompt claims settlement in any currency and the ability to settle claims directly. Once the employee repatriates back to his or her home country, the coverage usually ends. Most expatriate plans are not in compliance with state and federal laws such as HIPAA, COBRA, and ERISA—check with your international insurance broker for guidance on this.
Avoid Using Domestic Plans
Some expat employers like to use their domestic insurer to cover their expatriate employees. This is not a good idea for a variety of reasons. First, the domestic firm cannot insure local or third-party nationals. Second, payments can only be made in the domestic insurer’s home currency. Third, domestic plans are designed to work in their home country and comply with domestic rules and administration, not the rigors of international administration and claims payments. Fourth, disability payments from the firm’s domestic insurer may have to be made if the employee returns home for treatment and often may not cover disabilities occurring overseas. Finally, these insurers will at least want a time limit on insuring someone who works abroad. Basically, coverage when you need it may not be there. One should also check with an accountant to ensure that being part of a domestic employee benefit plan does not affect residency tax status. Compounding the preceding issues, statutory requirements imposed on benefit plans for expatriates vary from nation to nation, and many states have no reciprocal social arrangements or do not allow the transfer of benefit entitlements abroad. Insurance schemes put in place at the various countries may vary so substantially that it is impossible to conduct product/price comparisons.
I have found that many human resources managers use domestic insurers because they want everyone to have the same coverage—but this misses the above points plus you can’t expect your expat plan to perfectly match your domestic employee’s coverage. These are expatriates and they have to be treated as such. Pooled expatriate plans also harness savings potential through higher economies of scale by insuring several operations in various countries under one plan.
A Wide Range of Expat Insurance Policies
The above-all points need to look at consolidating an international employer’s global insurance policies with one offshore benefit provider that will provide solid, portable, and continuous protection. This will help streamline risk management, and cut administration and communication costs. Such pooled expatriate plans also harness savings potential through higher economies of scale by insuring several operations in various countries under one plan. Expatriate plans offer portability of benefits and bring the quality and security of benefits required by employees. Quality benefits at a reasonable price for expatriates are imperative for HR managers. If an employee becomes injured and has to be evacuated or is permanently disabled, he or she will come to the employer for help. Benefit payments can be made in the local or a set currency such as U.S. dollars. Some of the international benefit plans offer a comprehensive program, while others offer just traditional insurance protection, such as life insurance.
Most expatriate benefit schemes offer life insurance based on a multiple of salary, such as two or three times of an employee’s earnings. Others offer a flat benefit amount. Two times’ earnings is a common amount of life insurance. Dependent life insurance is not very common in expatriate benefit plans. Most employers will match the currency of the cover with the salary the employee is paid in, but this is not a hard and fast rule. As one would expect, the U.S. dollar is the most common currency used for international benefit plans, despite its recent drops in value.
The amount of accidental death and dismemberment (AD&D) usually matches the life insurance. As the name implies, this insurance is paid if an employee dies in an accident or suffers a permanent loss of use or severing of a limb, loss of an eye, arm, finger, etc. AD&D coverage will vary quite a bit from plan to plan.
Most expatriate insurers will not offer short-term disability (STD) coverage. With employees and insurers dealing with each other over such long distances and the relative ease of self-insuring this benefit, a STD plan is usually not necessary for most clients. But an employer should have a written policy that states when income will be paid if the employee is sick or injured before the long-term disability (LTD) plan from the insurer commences.
Unfortunately, LTD coverage is an often-neglected benefit with most expatriate clients that I encounter. Despite the fact that your employees’ most valuable asset is their ability to earn an income, many expat employers still don’t have a salary continuance plan in place or worse yet try to self-insure. An LTD claim for an employee with a decent salary can easily exceed a million dollars if the employee becomes permanently disabled. Most disabilities lasting longer than two years are permanent in nature. A typical plan pays 60 to 70 percent of an employee’s salary. As you would expect, the rates for the life, AD&D, and disability benefits are based on the age, sex, occupation, income, and location of the employees. As an example, the company of an expatriate who is traveling in Africa in a very politically unstable country can expect to pay more than a company with employees in an office in Europe.
The next benefit almost always offered is a health package. This coverage includes benefits such as hospital expenses, drugs, professional services, maternity expenses, and physicians’ charges. The premiums are based on many of the same factors as the life and LTD plans, but may weigh more heavily on the operating nation. Medical evacuation and emergency travel coverage is also available. Dental insurance can be added to the plan to cover basic dental services such as cleaning, scaling, and extractions. Crowns and bridges are usually covered at 50 percent, as is dependent orthodontics. This benefit is more easily self-insured.
Probably the largest factor in the pricing of an international health insurance plan is where the employee can access treatment. Many expat health plans will price their health insurance to either cover or exclude treatment in the United States and Canada because of the high cost of medical treatment in North America. If one has American citizens covered, it is always a good idea to pay extra to make sure they are covered for treatment back in the United States. If an American expat becomes seriously ill or injured, they will want to get treated in the United States. Some plans will encourage the use of PPOs by eliminating coinsurance or deductibles if the employee is treated in a PPO network or if he or she gets treated outside of the United States.
While some employers don’t provide coverage for spouses and children, this can be a short sighted way to decrease costs. A spouse’s dissatisfaction with living overseas is a very common cause of foreign work assignments not being successful with the resulting high costs to the employer. It is a good idea to make sure your expat health plan covers an employee’s dependents well. One such important benefit is maternity.
Many group international benefit plans do not cover maternity or place limits and conditions on it because of the inherent high-claims risk. As you would expect, covering maternity is going to increase your costs. Almost all expat group plans will have a 12-month waiting period for maternity—something to think of before you send an employee or spouse overseas who is already pregnant or will be in the next 12 months. A good plan will cover newborns at birth, but administrators have to make sure that the insurer is advised of the birth and that the newborn child is added to the plan.
Dental and vision benefits are less common with many expat benefit plans, but it is still a worthwhile part of your benefits strategy. While dental benefits can be self-insured, you have to weigh the administration cost of adjudicating dental claims. Some employers might prefer to give the employee a dental allowance each year. Employee benefit plans include the payment of eyeglasses and contact lenses. This benefit is quite inexpensive and can be easily self-insured.
Common Exclusions
In terms of fine print, it makes sense to examine the plan, paying particular attention to the exclusions. As discussed, some benefit plans exclude maternity expenses and care for newborn children while others place limits on pre-existing conditions. Still other plans have pre-existing clauses that limit the benefits for conditions, which were being treated 90 days prior to being insured by the medical plan. Such exclusions may be removed for an additional premium charge by some firms. The larger the number of employees, the more the insurer may be willing to remove the pre-existing clause for health insurance and even cover employees without any medical questions. Another standard exclusion clause is for war and riot. All firms will have a war, terrorism, riot clause of some sort or another, but some will cover the employees if they are killed, disabled, or injured by such an event as long as they are an innocent bystander. This is what we call passive war risk. It basically means you are not covered if you are actively participating in a war, riot, or terrorist act. Any client who has employees in a country highly susceptible to such events should make sure that passive war and terrorism are covered. Of course, these days, which country is not susceptible to terrorism? As a broker with a background in political studies, I examine the political situation in the countries my expatriate clients operate in to advise them of whether or not they should try to have the war risk clause taken out. Controlled risks offers more in-depth risk analysis for clients who are sending workers to dangerous countries.
Other common exclusions or limited benefits in group insurance plans are participating in a crime, alcoholism, HIV for health benefits, mental illness, nuclear or biological attacks or accidents, contraception, obesity, cosmetic surgery, and fertility treatments.
Accessibility
A company need not be big to obtain these insurance plans. Expatriate plans are available for as few as three employees who may be in different countries. If a company has more than 50 employees, the plan design can be even more flexible. Also, the larger the number of employees, the more the claims experience becomes part of the renewal premium. With some plans, if the annual international net results are positive, a dividend can be paid to the head office of the multinational. If the claims results are negative, it can be written off provided stop-loss protection was agreed or carried over to a new accounting period. For most small- and mid-size offshore companies, their claims experience will not affect their renewal rates. Some clients have combined the local insurance schemes with the expatriate coverage. This can be done, for example, by using the local health and dental coverage with an expatriate disability and life insurance plan. In some cases, it can integrate third-party policies.
Selecting a Benefit Plan
Choosing an expatriate benefit plan does not only depend on price. Another factor is the ease of administration; for example, an employer will want a plan with a 24-hour helpline for employees with queries about their membership or medical coverage. Personalized membership cards and booklets to effectively communicate the plan are also important. In addition, employees are impressed by a plan that has prompt claims settlement in any currency. Finally, it must be determined whether the expatriate insurer is financially stable. This is of obvious importance, especially for employees who become disabled and will be receiving payments for many years.
You Don’t Have to Be a Large Firm to Obtain These Plans
Expatriate benefit plans are available for as few as three employees who may be in different countries. If a firm has fewer than five employees with no foreseeable growth, it may want to simply consider an individual international health insurance plan, such as the ones offered by Expat Financial. Once you have more than 10 employees, the plan design can be even more flexible. With some large benefit plans, if the annual international net results are positive, the dividend can be paid to the head office of the multi-national. If the claims results are negative, it can be written off if stop-loss protection was agreed or carried over to a new accounting period.
Conclusion
