MTHEL131 Chapter Notes - Chapter 1: Disability Insurance, Life Annuity, Payment Protection Insurance
11 Oct 2013
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Chapter 1: economic security and the economics of life and health insurance. Private insurance can be defined from 2 perspectives: economic and legal. Insurance is a financial intermediation function by which individuals exposed to a specified contingency contribute to a pool from which events suffered by participating individuals are paid. Individuals purchase the right to collect from the pool. Insurance is a contingent claim contract on the pool"s assets. Insurance is an agreement (policy or contract) by which policyowner pays premium to the insurer. In return, insurer agrees to pay defined amount of money if a covered event occurs during policy term. The person whose life, health or property is insured is known as the insured. Usually, the insured is also the policy owner. The person who receives the payment when the insured dies is the beneficiary. Social insurance is different from private insurance due to its emphasis on social equity through income redistribution.
