MTHEL131 Chapter Notes - Chapter ch1: Term Life Insurance, Life Insurance, Social Insurance
1 Feb 2016
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Document Summary
From an economic perspective, insurance is a nancial intermediation( ) function by which individuals exposed to a speci ed contingency( ) each contribute to a pool from which covered events suffered by participating individuals are paid. Under this view, individuals purchase the right to collect from the pool if the insured contingency occurs. Insurance then is a contingency claim contract on the pool"s assets. The person whose life, health, or property is the object of the insurance policy is referred to as the insured. In most instances, the insured is also the policy owner-the person who exercises contractual rights under the policy, the person to whom the payment is made on the insured"s death is the bene ciary. Social insurance emphasizes on social equity through income redistribution. Private insurance focuses on individual equity (insured"s premium re ect the expected value of the loss)!
