What is the difference between term and universal life insurance?

June 30, 2024 No Comments

A: Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection for accidental death and possibly debilitating injuries for a specified period of time. If you or your beneficiaries do not make any claims

What is the expense ratio in the insurance industry?

June 30, 2024 No Comments

A: The expense ratio in the insurance industry is a measure of profitability calculated by dividing the expenses associated with acquiring, underwriting and servicing premiums by the net premiums earned by the insurance company. The expenses can include advertising, employee wages and commissions for the

What is the main business model for insurance companies?

June 30, 2024 No Comments

A: Insurance companies base their business models around assuming and diversifying risk. The essential insurance model involves pooling risk from individual payers and redistributing it across a larger portfolio. Most insurance companies generate revenue in two ways: Charging premiums in exchange for insurance coverage, then reinvesting

What is the pro rata condition of average on an insurance claim?

June 30, 2024 No Comments

A: The term “pro rata” is used to describe a proportionate distribution. In the insurance industry, “pro rata” means that claims are only paid out in proportion to the insurance interest in the asset; this is also known as the first condition of average. Pro

What level of reserve ratios is typical for an insurance company to protect against large losses?

June 30, 2024 No Comments

A: In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance companies to conduct business. There may be large differences in the nature and definition of acceptable reserves; however, this can make it tricky for companies, and their

What types of companies are in the automotive sector besides auto manufacturers?

June 30, 2024 No Comments

A: The automotive sector includes several types of companies besides auto manufacturers. Some of these companies focus on the component parts that go into cars and trucks. Other companies are responsible for vehicle sales, rentals or repairs. Three kinds of companies manufacture parts used in

What types of regulations are in place regarding fringe benefits?

June 30, 2024 No Comments

A: Government influence on non-salary employee benefits, also called “fringe benefits,” comes, in large part, through the tax code. The Internal Revenue Service (IRS) issues publications on the tax treatment of certain non-salary employee benefits, many of which are deductible to the employer. Certain benefits,

When is it a good idea to use an irrevocable life insurance trust?

June 30, 2024 No Comments

A: The irrevocable life insurance trust (ILIT) is a trust that cannot be rescinded, amended or modified in any way after its creation. Once the grantor contributes property or life insurance death benefits to the trust, he or she cannot change the terms of the trust or

What is authorized stock?

June 30, 2024 No Comments

Authorized stock represents the maximum number of common shares that can be issued legally by the company as stated in the company’s charter. The number of authorized shares that is identified in the company’s charter often greatly exceeds the number of shares that is issued

What is disability-income insurance?

June 30, 2024 No Comments

Disability-income insurance is insurance that provides financial benefits to a policyholder in the event of sickness or injury that inhibits the ability to work. Disability-income insurance is meant as a substitute of no more than 80% of income on a tax-free basis should illness keep

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