Insurance

Insurance - insurance companies and insurance brokers in the United States

Insurance
A system for indemnifying or guaranteeing an individual against loss. Reimbursement is made from a fund to which many individuals exposed to the same risk have contributed specified amounts, known as premiums, so that payment for the loss is divided among many, not falling heavily upon the actual loser. The essence of the contract of insurance, called a policy, is mutuality. The amount of the premium is determined by the operation of the law of averages, as calculated by actuaries. Reinsurance, whereby losses are distributed among many companies, was devised to meet the enormous claims resulting from disasters. Insurance may now be obtained against almost any conceivable risk. Fire insurance usually covers damage from lightning; other insurance against the elements includes hail, tornado, flood, and drought. Life insurance, originally conceived to protect a wage-earner's family when he or she died, has developed policies that provide a lump sum at the end of a term of years or payment of benefits to a terminally ill person. Annuity policies, which pay the insured a yearly income after a certain age, are also available. Automobile insurance compensates not only for fire and theft, but also for damage to the car and for injury to the victim of an accident (liability insurance, now required in many states). Under no-fault insurance plans, automobile-accident victims are compensated by their own company, eliminating the need for a lawsuit, except in serious cases. Bonding, or fidelity insurance, protects an employer against dishonesty or default by an employee. In group insurance, employees pay a lower premium than they would as individuals. By investing premium payments in a wide range of revenue-producing projects, insurance companies have become a major supplier of capital. Many forms of insurance, such as social security, workers' compensation, and unemployment benefits, are government-sponsored. Devices resembling modern insurance seem to have originated in ancient times. By the mid-14th cent. marine insurance was common in the maritime nations of Europe. The first life-insurance policy is believed to have been issued in England in 1583, and Lloyds, perhaps the world's best-known insurer, began issuing marine insurance in London in the 1600s. The first insurance company in the American colonies was founded at Charlestown, S.C., in 1735.