Insurance Companies And Pension Funds

Topics: Pension, Insurance, Cash balance plan Pages: 16 (958 words) Published: April 21, 2015
Insurance Companies
and
Pension Funds

Insurance Companies
Insurance companies assume the risk of their

clients in return for a fee, called the Premium.
Most people purchase insurance because they
are risk-averse-they would rather pay a certainty
equivalent (the premium) than accept a gamble
What is Insurance?
A contract (policy) in which an individual or
entity receives financial protection or
reimbursement against losses from an insurance
company. The company pools clients’ risks to make
payments more affordable for the insured.

Types of Insurance
Insurance is classified by which type of
undesirable
event is covered:
 Life Insurance
 Health Insurance
 Property and Casualty Insurance

Life Insurance
Life insurance policies comes in many forms.

Some of the typical policies include:
Term Life: the insured is covered while the
policy is in effect, usually 10-20 years.
Whole Life: similar to term life, but allows
the policyholder to borrow against the
policies cash value. When the term of policy
expires, the insured can get the cash value of
the policy.

Life Insurance
Life insurance policies come in many forms.
Some of the typical policies include:
 Universal Life: includes both a term life
portion and a savings portion.
 Annuities: pay a benefit to insured until
death, to cover retirement years.

Life Insurance:
Company Assets and Liabilities

Life insurance companies derive funds from

two sources:
o They receive premiums that must be used to
payout future claims when the insured dies.
o They receive premiums paid into pension
funds managed by the life insurance
company.

Health Insurance
A type of insurance coverage that pays for

medical and surgical expenses that are
incurred by the insured. Health insurance
can either reimburse the insured for
expenses incurred from illness or injury or
pay the care provider directly. Health
insurance is often included in employer
benefit packages as a means of enticing
quality employees.

Property and Casualty Insurance
Insurance that protects against property

losses to your business, home or car and/or
against legal liability that may result from
injury or damage to the property of others.
This type of insurance can protect a person or
a business with an interest in the insured
physical property against losses.

Property and Casualty Insurance
Property Insurance: protects businesses

and owner from the risk associated with
ownership.
Casualty Insurance: also known as liability
insurance, it protects against financial losses
because of a claim of negligence.
Reinsurance: allocates a portion of the risk
to another company in exchange for a portion
of the premium.

Pension Funds
A pension is a fixed sum to be paid regularly to a person,

typically following retirement from service. There are many
different types of pensions, including defined benefit plans, defined contribution plans, as well as several others. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement plan and superannuation refer to a

pension granted upon retirement of the individual.Retirement plans may be set up by employers, insurance companies, the
government or other institutions such as employer associations or trade unions.The common use of the term pension is to
describe the payments a person receives upon retirement,
usually under pre-determined legal or contractual terms. A
recipient of a retirement pension is known as a pensioner or retiree.

Types of Pension
Employment-based pensions (retirement plans)
A retirement plan is an arrangement to provide
people with an income during retirement when
they are no longer earning a steady income
from employment. Often retirement plans
require both the employer and employee to
contribute money to a fund during their
employment in...
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