1. Which type of business does life insurance belong to insurance?
2. What is the difference between general insurance and life insurance? The former is based on…, but latter on…
3. What does a financial economist consider life insurance as?
Business of Insurance Companies
Insurance companies do two types of business. One is general insurance against various forms of risk, and the other is long-term insurance which is mainly life insurance. General insurance will agree to pay a person or a company a sum of money in the event of something happening or not happening. It’s a big business today. If the project succeeds, shareholders in your company will expect to be paid a dividend. If you ask an insurer to underwrite your project, then he will require a payment in advance, a premium. If the project succeeds, he keeps the premium, but you don’t pay him anything else. Paying a premium to an insurer or underwriter is often cheaper than paying a divident to shareholders. If your dividends are paid to shareholders, then more money can be kept as retention to finance the company’s next project. Another type of insurance business is the life insurance. It differs basically from general insurance in that it is based not on the risk but on certainty. The certainty that each of us will one day die. Life insurance is the basis of pension funds which provide for retirement and guard against other contingencies, such as ill-health, but is best seen by a financial economist as a means of collecting many small savings to put together into large investments, in short, as a form of intermediation.
Why did the two brothers grow cold and often quarrel with each other?
The division of their father’s property their bone of contention.
