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  3. Sharing Economic Losses through Insurance Each minute of the day or night, everyone faces a possible financial loss. A home

Sharing Economic Losses through Insurance Each minute of the day or night, everyone faces a possible financial loss. A home

admin2010-06-11  31
问题                         Sharing Economic Losses through Insurance
    Each minute of the day or night, everyone faces a possible financial loss. A home may be destroyed by fire, damaged by lightning, or leveled by a tornado. Personal belongings may be stolen. A car may be damaged in an accident, or it may cause injury to people and property. Income may be lost as the result of the. death, disability, or unemployment of a family wage earner. The chance that a loss of this kind may occur is called an economic risk.
    Savings provide one way to take care of financial losses. But savings are not the answer to large losses. The best way to guard against large financial losses is through insurance.
    Insurance Is a plan for sharing Risks and Losses
    Ted Mather and four of his friends have a rock group called Quint. Each member of the group owns a valuable instrument. Ted’s bass alone cost ＄ 900. If an instrument were stolen or damaged, it would be a serious financial loss for its owner.
    Suppose, however, that the members of the group agree to share any losses that occur. For example, if Ted’s bass is stolen, each member of the group would contribute＄ 180 to replace it. In other words, they would share the loss. This is the principle of insurance. Persons facing the same risk share the losses that among them.
    From an insurance standpoint, however, an informal agreement like that made by Quint would not provide much protection. Why? The reason is that all the instruments might be stolen or damaged at the same time. The group rehearses in the Mathers’ garage and sometimes leaves their instruments there between rehearsals. They also travel together in a van when they perform.  Suppose that a thief broke into the garage and stole all the instruments. What if the garage caught fire? What if all instruments were damaged in an accident on the way to or from a concert? Each member of the group would have to pay one-fifth of the total loss. For some members, this might be more than the amount of their own actual loss.
    The purpose of insurance is to provide protection against financial loss at a reasonable cost. This is possible only when the cost of insurance is shared by many people who face a similar risk. But not all of them are likely to have actual losses at the same time.
    You Buy Insurance from Insurance Companies
    Almost 4, 800 companies in the United States are in the business of providing insurance protection. These businesses are called insurance companies. Because most insurance companies operate on a big scale, they provide a way for large numbers of people to share their losses.
    When you buy insurance, you enter into a written agreement with the insurance company. This agreement is called a policy. The person who buys insurance is the policyholder.  According to the agreement, the insurance company promises to pay the policyholder if certain types of losses occur. The policy states exactly what losses the company will pay for. For this protection, the policyholders make regular payments to the insurance company. Each payment is called a premium. The premiums paid by all policyholders are used to pay those who have losses. In this way, a loss that might result in great financial hardship for one person or household is shared by many people. Because only a portion of those insured will actually have losses, premiums are small compared to the amount of protection provided.
    Many Kinds of Risks Can Be Insured
    Insurance can provide protection against almost any kind of loss. Singers may insure their voices. Photographers may insure their negatives. The owner of a home freezer may insure against food loss in case of a power failure. A business owner can insure his or her place of business. A business owner can also insure against a loss of profits during a shutdown following a fire or damaging accident.
    However, the kinds of insurance protection that most people buy can be divided into three broad groups: property and liability insurance, life insurance, and health insurance.
    Property insurance provides protection against possible financial losses resulting from damages to the policyholder’s property. For example,, a homeowner can buy insurance  against losses resulting from fire and lightning, windstorm, explosion, riot, aircraft,  and vandalism. Liability insurance protects against financial losses resulting from injuries to other persons or damage to their property. Injuries or property damage resulting from an automobile accident are examples
    Life insurance, of course, protects against financial losses resulting from a person’s death. Health insurance protects against financial losses resulting from illness or accident.
    Let’s look into two specific examples of insurances to help us understand insurance better.
    First, there are four types of group insurance that provide home loan payment protection:  they are Mortgage Life Insurance, Mortgage Accidental Death and Disability, Mortgage Disability Insurance and Disaster Mortgage Protection.
    The benefits of these group policies include:
    •Lower Rates
    Generally, group insurance coverage costs less than personal insurance policies.
    •Easy Payment
    Just add the monthly premium to your home loan payment check.
    •Simplicity
    Medical exams are not usually required for mortgage life and mortgage accidental death and disability insurance.
    •Secondly, the State Unemployment Insurance Benefits
    In general, the Federal-State Unemployment Insurance Program provides unemployment  benefits to eligible workers who are unemployed through no fault of their own (as determined under State law), and meet other eligibility requirements of State law.
    Unemployment insurance payments (benefits) are intended to provide temporary financial assistance to unemployed workers who meet the requirements of State law.
    Each State administers a separate unemployment insurance program within guidelines established by Federal law.
    Eligibility for unemployment insurance, benefit amounts and the length of time benefits available are determined by the State law under which unemployment insurance claims are established.
In the majority of States, benefit funding is based solely on a tax imposed on employers.
    The Cost of Insurance Is Based on Probability
    Like all private firms, insurance companies must charge enough for protection to pay their operating costs and make a profit. The main factor affecting the price of insurance, however, is the amount of risk involved. The more risk an insurance company assumes for a policyholder the higher the premium. Risk is measured in terms of probable losses.
    An insurance company must collect enough money from its policyholders to pay the claims of those who have losses. A claim is a request for payment of a loss. It is impossible to tell, of course, which policyholders will have losses. But it is possible to estimate with some accuracy bow many will have losses. A company does it by studying its past losses.
    For example, from its records, an insurance company can tell how many of its policyholders will probably die each year. It can tell how many policyholders will probably be hospitalized and unable to work. It can also predict how many homes will probably catch fire and what the average loss will probably be. Using this information a company can figure about how much it will have to pay in claims during a year. It can then determine what a policyholder must pay for protection. As some people would say, insurance premiums are based on probability.
    Some Kinds of Insurance Are Provided by the Government
    You have learned that needed goods and services cannot always be provided at a profit by business firms. Then they may be provided by government. This is how it is with some kinds of insurance. An example is flood insurance. To understand why, you need to keep in mind one of the principles of insurance. It works only when a large number of people share losses that only a few of them will have.
    So, who needs flood insurance? Those who live where floods might occur. But if a flood did occur, it could result in losses to all those living in the flood area. To pay the losses, an insurance company would have to collect more in premiums than most people could afford to pay. It would be as if each property owner were paying his or her own entire loss. Flood insurance, therefore, is made available by the federal government in communities that qualify.
    The federal government also operates a crime insurance program. This insurance protects people and business firms in high crime areas against burglary and robbery. If a private company provided this protection, the cost would be so great that most people could not afford it.
    For somewhat the same reason, the federal government makes crop insurance available to farmers. When crop losses occur they usually affect most of the farmers in an area.  The principle of sharing losses in that case would not work. And who hasn’t heard of the government insurance program best known as social security?  The basic purpose of social security is to provide income for retired, disabled, or unemployed workers.
In the U. S. , each State can administer a separate unemployment insurance program under the restriction of______.
选项
答案guidelines established by Federal law
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