Principles of insurance

From the point of view of the insurance company there are four general criteria for deciding whether to insure events or not. 1. there must be a larger number of similar objects so the financial outcome of insuring the pool of exposures is predictable. Therefore they can calculate a "fair" premium. 2. the losses have to be accidental and unintentional from the point of view of the insured. 3. the losses must be measurable, identifiable in location, time, and be definate. They also want the losses to cause economic hardship. That is, so the insured has an incentive to protect and preserve the property to minimize the probabilty that the losses occur. 4. the loss potential to the insurer must be non-catastropic. It cannot put the insurance company in financial jeopardy.

Losses must be uncertain.

The rate and distribution of losses must be predictable: To set premiums (prices) insurers must be able to estimate them accurately. This is done using the Law of Large Numbers which states that: The larger the number of homogenous exposures considered, the more closely the losses reported will equal the underlying probability of loss. If the coverage is unique, the insured will pay a correspondingly higher premium. Lloyd's of London often accepts unique coverages. (e.g., the insuring of Tina Turner's legs and Jennifer Lopez's buttocks)

The loss must be significant: The legal principle of De minimis dictates that trivial matters are not covered. Furthermore, rational insurance uses existing insurance when the transaction costs dictate that filing a claim is not rational. Actually, De minimis does not come into play here. The reality is that it costs too much to insure frequent and/or small losses. It is much more cost effective to not transfer small loss potential to insurance companies by taking the largest deductible that you can stand (given adequate price reduction). As for filing small claims, if the insurance company contractually should pay for it, you should file it. This is the difference between deciding before the contract the parameters and after following through.

The loss must not be catastrophic: If the insurer is insolvent, it will be unable to pay the insured. In the United States, there is a system of Guarantee Funds that run at the state level to reimburse insured people whose insurance companies have become insolvent. [1] This program is run by the National Association of Insurance Commissioners (NAIC). [2] To avoid catastrophic depletion of their own capital, insurers almost universally purchase reinsurance to protect them against excessively large accumulations of risk in a single area, and to protect them against large-scale catastrophes.

Additionally, “speculative risks” like those incurred through gambling or through the purchase of company stocks are uninsurable.

Homeowners insurance

Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.

Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.

Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility.

Choosing the right reverse mortgage?

I get many emails and calls about the differences in the different reverse mortgage programs. The usually want to see how the different programs work and how much money they can receive from each program.

When we do a free reverse mortgage analysis we will be able to see the results from all the solutions. At that point we can put together a page showing the different amount, fees, and interest. This form is great for people to compare the different options.

We noticed recently that the most common reverse mortgage has been the FHA HECM (Home Equity Conversion Mortgage) . This loan has been providing our clients with the highest payouts.

As FHA continues to add increased benefits and payouts to the HECM it will probably remain at the top for the near future. RTG Consultants will continue to monitor the different reverse mortgage products to bring our clients the best solutions.

I also added the links for the the FHA HECM and Fannie Mae HomeKeeper products. If you have any questions, please comment here or email me.
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Auto insurance

Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy.

Auto insurance provides property, liability and medical coverage:

Property coverage pays for damage to or theft of your car.

Liability coverage pays for your legal responsibility to others for bodily injury or property damage.

Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you're financing a car, your lender may also have requirements.

Most auto policies are for six months to a year. Your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium.
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