tag:blogger.com,1999:blog-73940463202346029292024-02-08T12:35:24.817-08:00Wikipedia ArticlesDescription from the Wikipedia articleZhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-7394046320234602929.post-8697253722170981012012-07-20T05:38:00.004-07:002012-07-20T05:39:04.000-07:00Trade credit insurance<b style="background-color: white;">Trade credit insurance, business credit insurance</b><span style="background-color: white;">, </span><b style="background-color: white;">export credit insurance</b><span style="background-color: white;">, or </span><b style="background-color: white;">credit insurance</b><span style="background-color: white;"> is an </span><a href="http://en.wikipedia.org/wiki/Insurance_policy" style="background-color: white;" title="Insurance policy">insurance policy</a><span style="background-color: white;"> and a </span><a href="http://en.wikipedia.org/wiki/Risk_management" style="background-color: white;" title="Risk management">risk management</a><span style="background-color: white;"> product offered by private insurance companies and governmental </span><a href="http://en.wikipedia.org/wiki/Export_credit_agency" style="background-color: white;" title="Export credit agency">export credit agencies</a><span style="background-color: white;"> to business entities wishing to protect their </span><a href="http://en.wikipedia.org/wiki/Accounts_receivable" style="background-color: white;" title="Accounts receivable">accounts receivable</a><span style="background-color: white;"> from loss due to </span><a href="http://en.wikipedia.org/wiki/Credit_risk" style="background-color: white;" title="Credit risk">credit risks</a><span style="background-color: white;"> such as protracted </span><a href="http://en.wikipedia.org/wiki/Default_%28finance%29" style="background-color: white;" title="Default (finance)">default</a><span style="background-color: white;">, </span><a href="http://en.wikipedia.org/wiki/Insolvency" style="background-color: white;" title="Insolvency">insolvency</a><span style="background-color: white;"> or </span><a href="http://en.wikipedia.org/wiki/Bankruptcy" style="background-color: white;" title="Bankruptcy">bankruptcy</a><span style="background-color: white;">.</span><br />
<br />
This insurance product is a type of <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Property_%26_casualty_insurance" title="Property & casualty insurance">property & casualty insurance</a>, and should not be confused with such products as <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Credit_life_insurance" title="Credit life insurance">credit life</a> or <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Credit_disability_insurance" title="Credit disability insurance">credit disability insurance</a>,
which individuals obtain to protect against the risk of loss of income
needed to pay debts. Trade Credit Insurance can include a component of <a href="http://en.wikipedia.org/wiki/Political_risk_insurance" title="Political risk insurance">political risk insurance</a>
which is offered by the same insurers to insure the risk of non-payment
by foreign buyers due to currency issues, political unrest,
expropriation etc.<br />
<br />
This points to the major role trade credit insurance plays in facilitating <a href="http://en.wikipedia.org/wiki/International_trade" title="International trade">international trade</a>. <a href="http://en.wikipedia.org/wiki/Trade_credit" title="Trade credit">Trade credit</a> is offered by vendors to their customers as an alternative to prepayment or <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Cash_on_delivery" title="Cash on delivery">cash on delivery</a>
terms, providing time for the customer to generate income from sales to
pay for the product or service. This requires the vendor to assume
non-payment risk. In a local or domestic situation as well as in an
export transaction, the risk increases when laws, customs communications
and customer's reputation are not fully understood. In addition to
increased risk of non-payment, international trade presents the problem
of the time between product shipment and its availability for sale. The
account receivable is like a loan and represents capital invested, and
often borrowed, by the vendor. But this is not a secure asset until it
is paid. If the customer's debt is credit insured the large, risky asset
becomes more secure, like an insured building. This asset may then be
viewed as <a href="http://en.wikipedia.org/wiki/Collateral_%28finance%29" title="Collateral (finance)">collateral</a>
by lending institutions and a loan based upon it used to defray the
expenses of the transaction and to produce more product. Trade credit
insurance is, therefore, a trade finance tool.<br />
<a name='more'></a><br />
Trade credit insurance is purchased by business entities to insure
their accounts receivable from loss due to the insolvency of the
debtors. The product is not available to individuals. The cost (premium)
for this is usually charged monthly, and are calculated as a percentage
of sales for that month or as a percentage of all outstanding
receivables.<br />
<br />
Trade credit insurance usually covers a portfolio of buyers and pays
an agreed percentage of an invoice or receivable that remains unpaid as a
result of protracted default, insolvency or bankruptcy. Policy holders
must apply a <a href="http://en.wikipedia.org/wiki/Credit_limit" title="Credit limit">credit limit</a>
on each of their buyers for the sales to that buyer to be insured. The
premium rate reflects the average credit risk of the insured portfolio
of buyers. In addition, credit insurance can also cover single
transactions or trade with only one buyer.<br />
<br />
Trade credit insurance was born at the end of nineteenth century, but it was mostly developed in Western Europe between the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/First_World_War" title="First World War">First</a> and <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Second_World_War" title="Second World War">Second World Wars</a>.
Several companies were founded in many countries; some of them also
managed the political risks of export on behalf of their state.<br />
<br />
During the 1990s, a concentration of the trade credit insurance
market took place and three groups now account for over 85% of the
global credit insurance market. These main players focused on Western
Europe, but rapidly expanded towards Eastern Europe, Asia and the
Americas:<br />
<ul>
<li><a href="http://en.wikipedia.org/wiki/Euler_Hermes" title="Euler Hermes">Euler Hermes</a>, merger of the two credit insurance companies of the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Allianz_Group" title="Allianz Group">Allianz Group</a>. Euler Hermes is the world's number one credit insurance provider.<sup class="reference" id="cite_ref-0"><a href="http://en.wikipedia.org/wiki/Trade_credit_insurance#cite_note-0">[1]</a></sup></li>
<li><a href="http://en.wikipedia.org/wiki/Atradius" title="Atradius">Atradius</a>,
a merger between NCM and Gerling Kreditversicherung. Later renamed
Atradius after it was demerged from the Gerling insurance group.</li>
<li><a class="mw-redirect" href="http://en.wikipedia.org/wiki/Coface" title="Coface">Coface</a>. Formerly a French government sponsored institution established in 1946, this company is now part of the <a href="http://en.wikipedia.org/wiki/Natixis" title="Natixis">Natixis</a> group.</li>
</ul>
Many variations of trade credit insurance have evolved ranging from
coverage that can be canceled or reduced at an insurers discretion, to
coverage that cannot be canceled or reduced by the insurer during the
policy period. Other programs may allow the policy holder to act as the
underwriter.<br />
<br />
While trade credit insurance is often mostly known for protecting
foreign or export accounts receivable, there has always been a large
segment of the market that uses Trade Credit Insurance for domestic
accounts receivable protection as well. Domestic trade credit insurance
provides companies with the protection they need as their customer base
consolidates creating larger receivables to fewer customers. This
further creates a larger exposure and greater risk if a customer does
not pay their accounts. The addition of new insurers in this area have
increased the availability of domestic cover for companies.<br />
<br />
Many businesses found that their insurers withdrew trade credit insurance during the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Late-2000s_financial_crisis" title="Late-2000s financial crisis">late-2000s financial crisis</a>, foreseeing large losses if they continued to <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Underwrite" title="Underwrite">underwrite</a>
sales to failing businesses. This led to accusations that the insurers
were deepening and prolonging the recession, as businesses could not
afford the risk of making sales without the insurance, and therefore
contracted in size or had to close. Insurers countered these criticisms
by claiming that they were not the cause of the crisis, but were
responding to economic reality and ringing the alarm bells.<br />
<br />
In the UK, the Government set up a £5 billion emergency fund for
trade credit top-up. However, this was considered a failure as the
take-up was very low.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/mortgage-insurance.html" target="_blank">Trade credit insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Trade_credit_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com3tag:blogger.com,1999:blog-7394046320234602929.post-78316020886404188972012-07-20T05:36:00.001-07:002012-07-20T05:36:33.636-07:00Mortgage insurance<b style="background-color: white;">Mortgage insurance</b><span style="background-color: white;"> (also known as </span><b style="background-color: white;">mortgage guarantee</b><span style="background-color: white;">) is an </span><a href="http://en.wikipedia.org/wiki/Insurance_policy" style="background-color: white;" title="Insurance policy">insurance policy</a><span style="background-color: white;"> which compensates lenders or investors for losses due to the </span><a href="http://en.wikipedia.org/wiki/Default_%28finance%29" style="background-color: white;" title="Default (finance)">default</a><span style="background-color: white;"> of a </span><a href="http://en.wikipedia.org/wiki/Mortgage_loan" style="background-color: white;" title="Mortgage loan">mortgage loan</a><span style="background-color: white;">.
Mortgage insurance can be either public or private depending upon the
insurer. The policy is also known as a mortgage indemnity guarantee
(MIG), particularly in the UK.</span><br />
<br />
For example, suppose Ms Smith decides to purchase a house which costs $150,000. She pays 10% ($15,000) <a href="http://en.wikipedia.org/wiki/Down_payment" title="Down payment">down payment</a>
and takes out a $135,000 ($150,000-$15,000) mortgage on the remaining
90%. Lenders will often require mortgage insurance for mortgage loans
which exceed 80% (the typical cut-off) of the property's sale price.
Because of her limited equity, the lender requires that Ms Smith pay for
mortgage insurance that protects the lender against her default. The
lender then requires the mortgage insurer to provide insurance coverage
at, for example, 25% of the $135,000 ($33,750), leaving the lender with
an exposure of $101,250. The mortgage insurer will charge a premium for this coverage, which may
be paid by either the borrower or the lender. If the borrower defaults
and the property is sold at a loss, the insurer will cover the first
$33,750 of losses. Coverages offered by mortgage insurers can vary from
20% to 50% and higher.<br />
<a name='more'></a><br />
To obtain public mortgage insurance from the <a href="http://en.wikipedia.org/wiki/Federal_Housing_Administration" title="Federal Housing Administration">Federal Housing Administration</a> in the United States, Ms. Smith must pay an <i>upfront mortgage insurance premium</i> (UFMIP) equal to 1.75 percent of the loan amount at closing. This premium is normally financed by the lender and paid to FHA on the borrower's behalf. Depending on the <a href="http://en.wikipedia.org/wiki/Loan-to-value_ratio" title="Loan-to-value ratio">loan-to-value ratio</a>, there may be a monthly premium as well. The United States Veterans Administration also offers insurance on mortgages.<br />
<br />
<h2>
<span class="mw-headline" id="Private_mortgage_insurance">Private mortgage insurance</span></h2>
Private mortgage insurance is typically required when down payments
are below 20%. Rates can range from 0.5% to 6% of the principal of the
loan per year based upon loan factors such as the percent of the loan
insured, loan-to-value (LTV), fixed or variable, and credit score. The rates may be paid in a single lump sum, annually, monthly, or in
some combination of the two (split premiums). In the U.S., payments by
the borrower were tax-deductible until 2010.<br />
<br />
<h3>
<span class="mw-headline" id="Borrower-paid_private_mortgage_insurance">Borrower-paid private mortgage insurance</span></h3>
BPMI or "Traditional Mortgage Insurance" is a default insurance on
mortgage loans provided by private insurance companies and paid for by
borrowers. BPMI allows borrowers to obtain a mortgage without having to
provide 20% down payment, by covering the lender for the added risk of a
high loan-to-value (LTV) mortgage.<br />
<br />
The US <a class="new" href="http://en.wikipedia.org/w/index.php?title=Homeowners_Protection_Act_of_1998&action=edit&redlink=1" title="Homeowners Protection Act of 1998 (page does not exist)">Homeowners Protection Act of 1998</a>
allows for borrowers to request PMI cancellation when the amount owed
is reduced to a certain level. The Act requires cancellation of
borrower-paid mortgage insurance when a certain date is reached. This
date is when the loan is <i>scheduled</i> to reach 78% of the original appraised value or sales price is reached, whichever is less, based on the original <a href="http://en.wikipedia.org/wiki/Amortization_schedule" title="Amortization schedule">amortization schedule</a>
for fixed-rate loans and the current amortization schedule for
adjustable-rate mortgages. BPMI can, under certain circumstances, be
cancelled earlier by the servicer ordering a new appraisal showing that
the loan balance is less than 80% of the home's value due to
appreciation. This generally requires at least two years of on-time
payments. Each investor's LTV requirements for PMI cancellation differ
based on the age of the loan and current or original occupancy of the
home. While the Act applies only to single family primary residences at
closing, the investors Fannie Mae and Freddie Mac allow mortgage
servicers to follow the same rules for secondary residences. Investment
properties typically require lower LTVs.<br />
<br />
In Australia, borrowers must pay Lenders Mortgage Insurance (LMI) for
home loans over 80% of the purchase price. Genworth Financial and QBE
LMI are two of the largest Lenders Mortgage Insurance providers in
Australia.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/payment-protection-insurance.html" target="_blank">Mortgage insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Mortgage_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-89379735643251425092012-07-20T05:33:00.004-07:002012-07-20T05:34:21.875-07:00Payment protection insurance<b style="background-color: white;">Payment protection insurance</b><span style="background-color: white;"> (</span><b style="background-color: white;">PPI</b><span style="background-color: white;">), also known as </span><b style="background-color: white;">credit insurance</b><span style="background-color: white;">, </span><b style="background-color: white;">credit protection insurance</b><span style="background-color: white;">, or </span><b style="background-color: white;">loan repayment insurance</b><span style="background-color: white;">,
is an insurance product that enables consumers to insure repayment of
loans if the borrower dies, becomes ill or disabled, loses a job, or
faces other circumstances that may prevent them from earning income to
service the debt. It is not to be confused with </span><a href="http://en.wikipedia.org/wiki/Income_protection_insurance" style="background-color: white;" title="Income protection insurance">income protection insurance</a><span style="background-color: white;">,
which is not specific to a debt but covers any income. PPI is widely
sold by banks and other credit providers as an add-on to the loan or
overdraft product.</span><br />
<br />
Credit insurance can be purchased to insure all kinds of consumer
loans including car loans, loans from finance companies, and home
mortgage borrowing. <a href="http://en.wikipedia.org/wiki/Credit_card" title="Credit card">Credit card</a> agreements may include a form of PPI cover as standard. Policies are also available to cover specific categories of risk, e.g. <b>credit life insurance</b>, <b>credit disability insurance</b>, and <b>credit accident insurance</b>.<br />
<br />
Although the policy is purchased by the consumer/borrower, the
benefit paid in the event of a claim goes to the company that extended
credit to the consumer.<br />
PPI usually covers minimum loan (or overdraft) payments for a finite
period (typically 12 months). After this point the borrower must find
other means to repay the debt, though the period covered by insurance is
typically long enough for most people to start working again and earn
enough to service their debt. PPI is different from other types of
insurance such as <a href="http://en.wikipedia.org/wiki/Home_insurance" title="Home insurance">home insurance</a>,
in that it can be quite difficult to determine if it is right for a
person or not. Careful assessment of what would happen if a person
became unemployed would need to be considered, as payments in lieu of
notice (for example) may render a claim ineligible despite the insured
person being genuinely unemployed. In this case, the approach taken by
PPI insurers is consistent with that taken by the Benefits Agency in
respect of <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Unemployment_benefit" title="Unemployment benefit">unemployment benefits</a>.<br />
<a name='more'></a><br />
<h2>
<span class="mw-headline" id="Controversy">Controversy</span></h2>
In all types of insurance some claims are accepted and some are
rejected, however in the case of PPI the number of rejected claims is
high compared to other types of insurance. A primary reason for this is
that, as with many forms of general insurance, the insurance is not
underwritten at the sales stage and is sometimes taken out by customers
without careful consideration as to whether it is right for their
circumstances and without careful attention to the policy eligibility
conditions. Individuals who seek out and purchase a policy without
advice have little recourse if and when a policy does not benefit them.
However most PPI policies are not sought out by consumers and in some
cases consumers claim to be unaware that they even have the insurance.<br />
<br />
As PPI is designed to cover repayments on loans and credit cards,
most loan and credit card companies sell the product at the same time as
they sell the credit product. By May 2008 20 million PPI policies
existed in the UK with a further increase of 7 million policies a year
being purchased thereafter. Surveys show that 40% of policyholders claim to be unaware that they had a policy.<br />
<br />
"PPI was mis-sold and complaints about it mishandled on an industrial scale for well over a decade." With this mis-selling being carried out by not only the banks or
providers but also by third party brokers. One major high street bank
sold almost £400m of PPI with their financial products making a gross
profit margin of 80%. The sale of such policies was typically encouraged by large commissions, as the insurance would commonly make the bank/provider more money than
the interest on the original loan such that many mainstream personal
loan providers made little or no profit on the loans themselves; all or
almost all profit was derived from PPI commission and profit share.
Certain companies developed sales scripts which guided salespeople to
say only that the loan was “protected” without mentioning the nature or
cost of the insurance. When challenged by the customer, they sometimes
incorrectly stated that this insurance improved the borrower's chances
of getting the loan or that it was mandatory. A consumer in a financial difficulty is unlikely to further question the policy and risk the loan being refused.<br />
<br />
Several high-profile companies have now been fined by the Financial
Services Authority for the widespread mis-selling of Payment Protection
Insurance.<span style="background-color: white;"> Alliance and Leicester were fined £7m for their part in the
mis-selling controversy, several others including Capital One, HFC and
Egg were fined up to £1.1m</span><span style="background-color: white;"> Claims against mis-sold PPI have been slowly increasing and may
approach the levels seen during the 2006-07 period, when thousands of
bank customers made claims relating to allegedly unfair </span><a href="http://en.wikipedia.org/wiki/Bank_charge" style="background-color: white;" title="Bank charge">bank charges</a><span style="background-color: white;">.
In their 2009/2010 annual report, the FOS stated that 30% of new cases
referred to payment protection insurance. A customer who purchases a PPI
policy may initiate a claim for mis-sold PPI by complaining to the
bank, lender or broker who sold the policy.</span><br />
On 20 April 2011, the UK courts ruled in favour of consumers.<br />
<br />
Slightly before that, on 6 April 2011, the Competition Commission released their designed to prevent mis-selling in the future. Key rules in the order,
designed to enable the customer to shop around and make an informed
decision, include: provision of adequate information when selling
payment protection and providing a personal quote; obligation to provide
an annual review; prohibition of selling payment protection at the same
time the credit agreement is entered into. Most rules came into force
in October 2011 with some following in April 2012.<br />
<br />
<h2>
<span class="mw-headline" id="Calculations">Calculations</span></h2>
The price paid for payment protection insurance can vary quite
significantly depending on the lender. A survey of forty-eight major
lenders by <a href="http://en.wikipedia.org/wiki/Which%3F" title="Which?">Which? Ltd</a> found the price of PPI was 16-25% of the amount of the debt.<br />
<br />
PPI premiums may be charged on a monthly basis or the full PPI
premium may be added to the loan up-front to cover the cost of the
policy. With this latter payment approach, known as a “Single Premium
Policy”, the money borrowed from the provider to pay for the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Insurance_contract" title="Insurance contract">insurance policy</a>
incurs additional interest, typically at the same APR as is being
charged for the original sum borrowed, further increasing the effective
total cost of the policy to the customer.<br />
<br />
Payment protection insurance on credit cards is calculated
differently from lump sum loans, as initially there is no sum
outstanding and it is unknown if the customer will ever use their card
facility. However, in the event that the credit facility is used and the
balance is not paid in full each month, a customer will be charged
typically between 0.78% and 1% or £0.78 to £1.00 from every £100 which
is a balance of their current card balance on a monthly basis, as the
premium for the insurance. When interest on the credit card is added to
the premium, it can become very expensive. For example, the cost of PPI
for the average credit card in the UK charging 19.32% on an average of
£5,000 each month adds an extra £3,219.88 in premiums and interest.<br />
<br />
With lump sum loans PPI premiums are paid upfront with the cost from 13% to 56% of the loan amount as reported by the <a href="http://en.wikipedia.org/wiki/Citizens_Advice_Bureau" title="Citizens Advice Bureau">Citizens Advice Bureau (CAB)</a> who launched a Super Complaint into what it called the Protection Racket.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/liability-insurance.html" target="_blank">Payment protection insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Payment_protection_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com3tag:blogger.com,1999:blog-7394046320234602929.post-27380398204387547952012-07-20T05:30:00.006-07:002012-07-20T05:31:16.854-07:00Liability insurance<b>Liability insurance</b> is a part of the general <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a> system of <a href="http://en.wikipedia.org/wiki/Risk" title="Risk">risk</a>
financing to protect the purchaser (the "insured") from the risks of
liabilities imposed by lawsuits and similar claims. It protects the
insured in the event he or she is sued for claims that come within the
coverage of the <a href="http://en.wikipedia.org/wiki/Insurance_policy" title="Insurance policy">insurance policy</a>.<br />
<br />
Originally, individuals or companies that faced a common <i>peril</i>,
formed a group and created a self-help fund out of which to pay
compensation should any member incur loss (in other words, a mutual
insurance arrangement). The modern system relies on dedicated carriers,
usually for-profit, to offer protection against specified perils in <a href="http://en.wikipedia.org/wiki/Consideration" title="Consideration">consideration</a> of a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Insurance_premium" title="Insurance premium">premium</a>.
Liability insurance is designed to offer specific protection against
third party insurance claims, i.e., payment is not typically made to the
insured, but rather to someone suffering loss who is not a party to the
insurance contract. In general, damage caused intentionally as well as
contractual liability are not covered under liability insurance
policies. When a claim is made, the insurance carrier has the duty (and
right) to defend the insured. The legal costs of a defense normally do
not affect policy limits unless the policy expressly states otherwise;
this default rule is useful because defense costs tend to soar when
cases go to trial.<br />
<a name='more'></a><br />
<h2>
<span class="mw-headline" id="What_liability_insurance_provides">What liability insurance provides</span></h2>
Liability insurers have two (or three, in some jurisdictions) major
duties: 1) the duty to defend, 2) the duty to indemnify and (in some
jurisdictions), 3) the duty to settle a reasonably clear claim.<br />
<ul>
<li>To defend</li>
</ul>
The duty to defend is triggered when the insured is sued and in turn
"tenders" defense of the claim to its liability insurer. Usually this is
done by sending a copy of the <a href="http://en.wikipedia.org/wiki/Complaint" title="Complaint">complaint</a>
along with a cover letter referencing the relevant insurance policy or
policies and demanding an immediate defense. At this point, the insurer
has three options, to:(1) seek a declaratory judgment of no coverage;
(2) defend; or (3) refuse either to defend or to seek a declaratory
judgment.<br />
If a declaratory judgment is sought, the issue of the insurer's duty to defend will be resolved.<br />
<br />
If the insurer decides to defend, it has thus either waived its
defense of no coverage (later estopped), or it must defend under a
reservation of rights. The latter means that the insurer reserves the
right to withdraw from defending in the event that it turns out the
claim is not covered, and to recover from the insured any funds expended
to date.<br />
<br />
If the insurer chooses to defend, it may either defend the claim with
its own in-house lawyers (where allowed), or give the claim to an
outside law firm on a "panel" of preferred firms which have negotiated a
standard fee schedule with the insurer in exchange for a regular flow
of work. The decision to defend under a reservation of rights must be
undertaken with extreme caution in jurisdictions where the insured has a
right to <a href="http://en.wikipedia.org/wiki/Cumis_counsel" title="Cumis counsel">Cumis counsel</a>.<br />
<br />
The choice to do nothing can be very risky because a later
determination that the duty applied often leads to the tort of bad
faith. (So, insurers often prefer to defend under a reservation of
rights rather than simply do nothing.)<br />
<ul>
<li>To indemnify</li>
</ul>
The duty to indemnify means the duty to pay "all sums" for which the insured is held liable, up to a set policy limit.<br />
<ul>
<li>To settle reasonable claims</li>
</ul>
In some jurisdictions, there is a third duty, the duty to settle a
reasonably clear claim against the insured. The duty is of greatest
import during situations in which the settlement demand equals or
exceeds the policy limits. In that case, the insurer has an incentive
not to settle, since if it settles, it will certainly pay the policy
limit. But this interest is at odds with the interest of its insured.
The company has incentive not to settle since if the case goes to trial,
there are only two possibilities: its insured loses and insurer pays
the policy limits (nothing gained nothing lost), or its insured wins,
leaving the insurer with no liability. But, if the insurer refuses to
settle, and the case goes to trial, the insured might be held liable for
a sum far exceeding the settlement offer. In turn, the plaintiff might
then attempt to recover the difference between the policy limits and the
actual judgment by obtaining writs of attachment or execution against
the insured's assets.<br />
<br />
This is where the duty to settle comes in. To avoid endangering an
insured to gain a remote possibility of avoiding paying on the policy,
the duty to defend obligates the insurance company to settle reasonably
clear claims. The standard judicial test is that an insurer must settle a
claim if a reasonable insurer, notwithstanding any policy limits, would
have settled the claim.<br />
<ul>
<li>Effects of breach</li>
</ul>
An insurer who breaches <i>any</i> of these three duties may be held liable for the tort of <a href="http://en.wikipedia.org/wiki/Insurance_bad_faith" title="Insurance bad faith">insurance bad faith</a> in addition to <a href="http://en.wikipedia.org/wiki/Breach_of_contract" title="Breach of contract">breach of contract</a>.<br />
<br />
<h3>
<span class="mw-headline" id="Retained_limits_and_SIRs">Retained limits and SIRs</span></h3>
One way for businesses to cut down their liability insurance premiums
is to negotiate a policy with a retained limit or self-insured
retention (SIR), which is somewhat like a deductible. With such
policies, the insured is essentially agreeing to self-insure and
self-defend for smaller claims, and to tender only for liability claims
that exceed a certain number. However, writing such insurance is itself
risky for insurers. The <a href="http://en.wikipedia.org/wiki/California_Courts_of_Appeal" title="California Courts of Appeal">California Courts of Appeal</a>
have held that primary insurers on policies with a SIR must still
provide an "immediate, 'first dollar' defense" (subject, of course, to
their right to later recover the SIR amount from the insured) unless the
policy expressly imposes exhaustion of the SIR as a precondition to the
duty to defend<span style="font-size: x-small;">。</span><br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/aviation-insurance.html" target="_blank">Liability insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Liability_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-9220547662489534502012-07-20T05:28:00.001-07:002012-07-20T05:29:06.835-07:00Aviation insurance<b>Aviation insurance</b> is insurance coverage geared specifically to
the operation of aircraft and the risks involved in aviation. Aviation
insurance policies are distinctly different from those for other areas
of transportation and tend to incorporate aviation terminology, as well
as terminology, limits and clauses specific to aviation insurance.<br />
<br />
<a href="http://en.wikipedia.org/wiki/Aviation" title="Aviation">Aviation</a> Insurance was first introduced in the early years of the 20th Century. The first aviation insurance policy was written by <a href="http://en.wikipedia.org/wiki/Lloyd%27s_of_London" title="Lloyd's of London">Lloyd's of London</a>
in 1911. The company stopped writing aviation policies in 1912 after
bad weather and the resulting crashes at an air meet caused losses on
many of those first policies.<br />
The first aviation polices were underwritten by the marine insurance <a href="http://en.wikipedia.org/wiki/Underwriting" title="Underwriting">underwriting</a> community. The first specialist aviation insurers emerged in 1924.<br />
<br />
In 1929 the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Warsaw_convention" title="Warsaw convention">Warsaw convention</a>
was signed. The convention was an agreement to establish terms,
conditions and limitations of liability for carriage by air, this was
the first recognition of the airline industry as we know it today.<br />
In 1931, Captain A. G. Lamplugh, the British Aviation Insurance
Company's chief underwriter and principal surveyor, said of the new
industry: "Aviation in itself is not inherently dangerous. But to an
even greater degree than the sea, it is terribly unforgiving of any
carelessness, incapacity or neglect."<br />
<a name='more'></a><br />
Realising that there should be a specialist industry sector, the
International Union of Marine Insurance (IUMI) first set up an aviation
committee and later in 1933 created the International Union of Aviation
Insurers (IUAI), made up of eight European aviation insurance companies
and pools.<br />
<br />
The London insurance market is still the largest single centre for
aviation insurance. The market is made up of the traditional Lloyd's of
London syndicates and numerous other traditional insurance markets.
Throughout the rest of the world there are national markets established
in various countries, this is dependent on the aviation activity within
each country, the US has a large percentage of the world's general
aviation fleet and has a large established market.<br />
<br />
No single insurer has the resources to retain a risk the size of a
major airline, or even a substantial proportion of such a risk. The
catastrophic nature of aviation insurance can be measured in the number
of losses that have cost insurers hundreds of millions of dollars (<a href="http://en.wikipedia.org/wiki/Aviation_accidents_and_incidents" title="Aviation accidents and incidents">Aviation accidents and incidents</a>).<br />
<br />
Most airlines arrange "fleet policies" to cover all aircraft they own or operate.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <b><a href="http://wikipediaarticles.blogspot.com/2012/07/flood-insurance.html#more" target="_blank">Aviation insurance</a></b>,<a href="http://en.wikipedia.org/wiki/Aviation_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-79741882336113843762012-07-20T05:24:00.005-07:002012-07-20T05:25:24.061-07:00Flood insurance<b style="background-color: white;">Flood insurance</b><span style="background-color: white;"> denotes the specific </span><a href="http://en.wikipedia.org/wiki/Insurance" style="background-color: white;" title="Insurance">insurance</a><span style="background-color: white;"> coverage against property loss from </span><a href="http://en.wikipedia.org/wiki/Flood" style="background-color: white;" title="Flood">flooding</a><span style="background-color: white;">. To determine risk factors for specific properties, insurers will often refer to </span><a class="mw-redirect" href="http://en.wikipedia.org/wiki/Topographical_map" style="background-color: white;" title="Topographical map">topographical maps</a><span style="background-color: white;"> that denote </span><a href="http://en.wikipedia.org/wiki/Lowland" style="background-color: white;" title="Lowland">lowlands</a><span style="background-color: white;">, </span><a href="http://en.wikipedia.org/wiki/Floodplain" style="background-color: white;" title="Floodplain">floodplains</a><span style="background-color: white;"> and floodways that are susceptible to flooding.</span><br />
<br />
Nationwide, only 20% of American homes at risk for floods are covered
by flood insurance. Most private insurers do not insure against the
peril of flood due to the prevalence of <a href="http://en.wikipedia.org/wiki/Adverse_selection" title="Adverse selection">adverse selection</a>,
which is the purchase of insurance by persons most affected by the
specific peril of flood. In traditional insurance, insurers use the
economic law of large numbers to charge a relatively small fee to large
numbers of people in order to pay the claims of the small numbers of
claimants who have suffered a loss. Unfortunately, in flood insurance,
the numbers of claimants is larger than the available number of persons
interested in protecting their property from the peril, which means that
most private insurers view the probability of generating a profit from
providing flood insurance as being very remote. However, there are insurers such as Chubb, AIG/Chartis, Fireman's Fund
that do provice privatly written primary flood insurance for high value
homes and The Natural Catastrophe Insurance Program underwritten by Certain
Underwriters at Lloyd's which provides private primary flood insurance
on both low value and high value buildings.<br />
<a name='more'></a><br />
In certain flood-prone areas, the Federal Government requires flood
insurance to secure mortgage loans backed by federal agencies such as
the FHA and VA. However, the program has never worked as insurance,
because of adverse selection. It has never priced people out of living
in very risky areas by charging an appropriate premium, instead, too few
places are included in the must-insure category, and premiums are
artificially low." The lack of flood insurance can be detrimental to many homeowners who
may discover only after the damage has been done that their standard
insurance policies do not cover flooding.<br />
<br />
<b>Flooding is defined</b> by the National Flood Insurance Program as
a general and temporary condition of partial or complete inundation of
two or more acres of normally dry land area or two or more properties
(at least one of which is your property) from: Overflow of inland
waters, unusual and rapid accumulation or runoff of surface waters from
ANY SOURCE, and mudflows<span style="font-size: x-small;">。</span><br />
<span style="font-size: x-small;"><br /></span><br />
This can be brought on by landslides, a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Hurricane" title="Hurricane">hurricane</a>,
earthquakes, or other natural disasters that influence flooding, but
while a homeowner may, for example, have earthquake coverage, that
coverage may not cover floods as a result of earthquakes.<br />
<br />
<h2>
<span class="mw-headline" id="In_the_United_States">In the United States</span></h2>
Very few insurers in the US provide flood insurance coverage due to
the hazard of flood typically being confined to a few areas. As a
result, it is an unacceptable risk due to the inability to spread the
risk on a wide enough population to absorb the potential catastrophic
nature of the hazard. In response to this, the federal government
created the <a href="http://en.wikipedia.org/wiki/National_Flood_Insurance_Program" title="National Flood Insurance Program">National Flood Insurance Program</a> in 1968.<br />
<br />
The National Association of Insurance Commissioners (NAIC) found that
33 percent of U.S. heads of household still hold the false belief that
flood damage is covered by a standard homeowners policy. <a href="http://en.wikipedia.org/wiki/Federal_Emergency_Management_Agency" title="Federal Emergency Management Agency">FEMA</a>
states approximately 50% of low flood zone risk borrowers think they
are ineligible and cannot buy flood insurance. Anyone can buy flood
insurance as long as their community participates in the NFIP, even renters. However, unless one lives in a designated floodplain and
is required under the terms of a mortgage to purchase flood insurance,
flood insurance does not go into effect until 30 days after the policy
is first purchased.<br />
<br />
If you are eligible and you have a mortgage on your home, you are
required by law to purchase a separate flood insurance policy through a
private primary flood insurance company or through an insurance company
that acts as a distributor for the National Flood Insurance Program
(NFIP). Flood insurance may be available for residents of approximately
19,000 communities nationwide through the NFIP. Flood insurance may be
available through private primary flood insurance carriers in any of the
19,000 communities participating in the NFIP as well as other
communities that are not participating in the NFIP.<br />
<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/wikipedia-articleproperty-insurance.html" target="_blank">Flood insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Flood_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-31703609235863567742012-07-20T04:25:00.001-07:002012-07-20T04:29:23.100-07:00Wikipedia article:Property insurance<b>Property insurance</b> provides protection against most risks to <a href="http://en.wikipedia.org/wiki/Property" title="Property">property</a>, such as fire, theft and some weather damage. This includes specialized forms of <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a> such as fire insurance, <a href="http://en.wikipedia.org/wiki/Flood_insurance" title="Flood insurance">flood insurance</a>, <a href="http://en.wikipedia.org/wiki/Earthquake_insurance" title="Earthquake insurance">earthquake insurance</a>, <a href="http://en.wikipedia.org/wiki/Home_insurance" title="Home insurance">home insurance</a> or <a href="http://en.wikipedia.org/wiki/Boiler_insurance" title="Boiler insurance">boiler insurance</a>. Property is <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insured</a>
in two main ways—open perils and named perils. Open perils cover all
the causes of loss not specifically excluded in the policy. Common
exclusions on open peril policies include damage resulting from
earthquakes, floods, nuclear incidents, acts of terrorism and war. Named
perils require the actual cause of loss to be listed in the policy for
insurance to be provided. The more common named perils include such
damage-causing events as fire, lightning, explosion and theft.<br />
<br />
<h2>
<span class="mw-headline" id="Types_of_Coverage">Types of Coverage</span></h2>
There are three types of insurance coverage. Replacement cost
coverage pays the cost of replacing your property regardless of
depreciation or appreciation. Premiums for this type of coverage are
based on replacement cost values, and not based on actual cash value. <a href="http://en.wikipedia.org/wiki/Actual_cash_value" title="Actual cash value">Actual cash value</a>
coverage provides for replacement cost minus depreciation. Extended
replacement cost will pay over the coverage limit if the costs for
construction have increased. This generally will not exceed 25% of the
limit. When you obtain an insurance policy, the coverage limit
established is the maximum amount the insurance company will pay out in
case of loss of property. This amount will need to fluctuate if homes in your neighborhood are
rising; the amount needs to be in step with the actual value of your
home. In case of a fire, household content replacement is tabulated as a
percentage of the value of the home. In case of high value items, the
insurance company may ask to specifically cover these items separate
from the other household contents. One last coverage option is to have
alternative living arrangements included in a policy. If a fire leaves your home uninhabitable, the policy can help pay for a hotel or other living arrangements.<br />
<a name='more'></a><br />
<h2>
<span class="mw-headline" id="Property_Insurance_Claims">Property Insurance Claims</span></h2>
<div>
<span class="mw-headline"></span><br />
<h3>
<span class="mw-headline">
<span class="mw-headline" id="World_Trade_Center_case">World Trade Center case</span></span></h3>
<span class="mw-headline">
</span><br />
<div>
<span class="mw-headline"><span class="mw-headline">Following the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Terrorist" title="Terrorist">terrorist</a> attacks of <a class="mw-redirect" href="http://en.wikipedia.org/wiki/11_September_2001" title="11 September 2001">11 September 2001</a>, a jury deliberated insurance payouts for the destruction of the <a href="http://en.wikipedia.org/wiki/World_Trade_Center" title="World Trade Center">World Trade Center</a>. Leaseholder <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Larry_A._Silverstein" title="Larry A. Silverstein">Larry A. Silverstein</a>
sought more than $7 billion dollars in insurance money; he argued two
attacks had occurred at the WTC. Its insurers—including Chubb Corp. and
Swiss Reinsurance Co.—claimed the “coordinated” attack counted as a
single event. In December 2004, the <a href="http://en.wikipedia.org/wiki/Federal_jury" title="Federal jury">federal jury</a> decided in Silverstein’s favor.<br />
<br />
In May 2007, New York Gov. <a href="http://en.wikipedia.org/wiki/Eliot_Spitzer" title="Eliot Spitzer">Eliot Spitzer</a> announced more than $4.5 billion would be made available to rebuild the 16-acre (65,000 m<sup>2</sup>) WTC complex as part of a major insurance claims settlement.</span></span><br />
<span class="mw-headline"><span class="mw-headline"><br /></span></span><br />
<h3>
<span class="mw-headline">
<span class="mw-headline">
<span class="mw-headline" id="Post-Hurricane_Katrina_property_insurance_claims">Post-Hurricane Katrina property insurance claims</span></span></span></h3>
</div>
<span class="mw-headline">
</span></div>
<br />
In the wake of Hurricane Katrina, several thousand homeowners filed
lawsuits against their insurance companies accusing their insurers of
bad faith and failing to properly and promptly adjust their claims. Insurance companies changed their pricing policies after Katrina, with
most policyholders in New Orleans seeing their property insurance
premiums double after the storm, and deductibles increase by two, or even three, fold. The losses from Katrina severely impacted both the affordability and
coverage amounts provided by property insurance, even in regions that
were not impacted by the hurricane.<br />
<br />
<h3>
<span class="mw-headline" id="Florida_Consumer_Choice_Act">Florida Consumer Choice Act</span></h3>
On June 24, 2009, Fla. Gov. <a href="http://en.wikipedia.org/wiki/Charlie_Crist" title="Charlie Crist">Charlie Crist</a> vetoed the Consumer Choice Act (H.B. 1171). The <a href="http://en.wikipedia.org/wiki/Bill_%28proposed_law%29" title="Bill (proposed law)">bill</a> would have trumped state regulation, and allowed <a href="http://en.wikipedia.org/wiki/Florida" title="Florida">Florida</a>'s biggest insurance companies to establish their own rates. <a class="mw-redirect" href="http://en.wikipedia.org/wiki/State_Farm" title="State Farm">State Farm</a> Florida expressed its disappointment with Crist's <a href="http://en.wikipedia.org/wiki/Veto" title="Veto">veto</a>
of the bill the company said "would have given consumers more options
in their choice of a property insurer. It would have attracted more
capital to the property insurance market in <a href="http://en.wikipedia.org/wiki/Florida" title="Florida">Florida</a>." <a class="mw-redirect" href="http://en.wikipedia.org/wiki/State_Farm" title="State Farm">State Farm</a> had proposed a 47.1% property insurance rate increase for <a href="http://en.wikipedia.org/wiki/Florida" title="Florida">Florida</a> policyholders. As a result of Crist's move, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/State_Farm" title="State Farm">State Farm</a> plans to drop coverage for more than 700,000 homeowners by 2011.<br />
<br />
Ted Corless, who has represented large insurance carriers like <a href="http://en.wikipedia.org/wiki/Nationwide_Mutual_Insurance_Company" title="Nationwide Mutual Insurance Company">Nationwide</a>, remarked on <a class="mw-redirect" href="http://en.wikipedia.org/wiki/State_Farm" title="State Farm">State Farm</a>'s pullout from <a href="http://en.wikipedia.org/wiki/Florida" title="Florida">Florida</a> to an <a href="http://en.wikipedia.org/wiki/Orlando,_Florida" title="Orlando, Florida">Orlando</a> television news station:<br />
"I think that homeowners are really going to have to look out for themselves," Corless said.<br />
<br />
Five days following Crist's <a href="http://en.wikipedia.org/wiki/Veto" title="Veto">veto</a> of the Consumer Choice Act, Corless defended property insurance <a href="http://en.wikipedia.org/wiki/Deregulation" title="Deregulation">deregulation</a> on <a href="http://en.wikipedia.org/wiki/WFLA_%28AM%29" title="WFLA (AM)">WFLA</a>'s <i>AM Tampa Bay</i>,
when he pointed out, "If the blue-chip insurance companies wanted to
price themselves out of the market, then they'll go out of business."<br />
<br />
“The governor says he’s protecting the consumers’ choice but, in
reality, he’s making it for them,” Corless added. “In a free market, all
companies would be available to property owners and if a homeowner
doesn’t like the price, he or she moves on. This veto limits those
options and ties the hands of the blue-chip companies.<br />
<br />
In 2006, the average Florida annual insurance premium was $1,386 for a home owner, one of the highest in the country.<br />
<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/insurance-law.html" target="_blank">Property insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Property_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-8922811474310294772012-07-20T04:19:00.005-07:002012-07-20T04:20:44.713-07:00Insurance law<b>Insurance law</b> is the name given to practices of law surrounding <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a>, including <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Insurance_policies" title="Insurance policies">insurance policies</a>
and claims. It can be broadly broken into three categories - regulation
of the business of insurance; regulation of the content of insurance
policies, especially with regard to consumer policies; and regulation of
claim handling.<br />
<br />
<h2>
<span class="mw-headline" id="History">History</span></h2>
<div class="rellink relarticle mainarticle">
Main article: <a href="http://en.wikipedia.org/wiki/History_of_insurance" title="History of insurance">History of insurance</a></div>
<div class="rellink relarticle mainarticle">
<br /></div>
The earliest form of insurance is probably marine insurance, although
forms of mutuality (group self-insurance) existed before that. Marine
insurance originated with the merchants of the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Hanseatic_league" title="Hanseatic league">Hanseatic league</a> and the financiers of <a href="http://en.wikipedia.org/wiki/Lombardy" title="Lombardy">Lombardy</a>
in the 12th and 13th centuries, recorded in the name of Lombard Street
in the City of London, the oldest trading insurance market. In those
early days, insurance was intrinsically coupled with the expansion of
mercantilism, and exploration (and exploitation) of new sources of gold,
silver, spices, furs and other precious goods - including slaves - from
the New World. For these merchant adventurers, insurance was the "means
whereof it cometh to pass that upon the loss or perishing of any ship
there followeth not the undoing of any man, but the loss lighteth rather
easily upon many than upon a few... whereby all merchants, especially
those of the younger sort, are allured to venture more willingly and
more freely."<br />
<a name='more'></a><br />
The expansion of English maritime trade made London the centre of an
insurance market that, by the 18th century, was the largest in the
world. Underwriters sat in bars, or newly fashionable coffee-shops such
as that run by Edward Lloyd on Lombard Street, considering the details
of proposed mercantile "adventures" and indicating the extent to which
they would share upon the risks entailed by writing their "scratch" or
signature upon the documents shown to them.<br />
<br />
At the same time, eighteenth-century judge William Murray, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Lord_Mansfield" title="Lord Mansfield">Lord Mansfield</a>,
was developing the substantive law of insurance to an extent where it
has largely remained unchanged to the present day - at least insofar as
concerns commercial, non-consumer business - in the common-law
jurisdictions. Mansfield drew from "foreign authorities" and
"intelligent merchants"<br />
<br />
"Those leading principles which may be considered the common law of
the sea, and the common law of merchants, which he found prevailing
across the commercial world, and to which every question of insurance
was easily referrable. Hence the great celebrity of his judgments, and
hence the respect they command in foreign countries".<br />
<br />
By the 19th century membership of Lloyd's was regulated and in 1871,
the Lloyd's Act was passed, establishing the corporation of <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Lloyd%27s" title="Lloyd's">Lloyd's</a>
to act as a market place for members, or "Names". And in the early part
of the twentieth century, the collective body of general insurance law
was codified in 1906 into the Marine Insurance Act 1906, with the result
that, since that date, marine and non-marine insurance law have
diverged, although fundamentally based on the same original principles.<br />
<br />
<h2>
<span class="mw-headline" id="Principles_of_insurance">Principles of insurance</span></h2>
<a href="http://en.wikipedia.org/wiki/Common_law" title="Common law">Common law</a>
jurisdictions in former members of the British empire, including the
United States, Canada, India, South Africa, and Australia ultimately
originate with the law of England and Wales. What distinguishes common
law jurisdictions from their civil law counterparts is the concept of <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Judge-made_law" title="Judge-made law">judge-made law</a> and the principle of <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Stare_decisis" title="Stare decisis">stare decisis</a>
- the idea, at its simplest, that courts are bound by the previous
decisions of courts of the same or higher status. In the insurance law
context, this meant that the decisions of early commercial judges such
as Mansfield, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Lord_Eldon" title="Lord Eldon">Lord Eldon</a>
and Buller bound, or, outside England and Wales, were at the least
highly persuasive to, their successors considering similar questions of
law.<br />
<br />
At common law, the defining concept of a contract of commercial
insurance is of a transfer of risk freely negotiated between
counterparties of similar bargaining power, equally deserving (or not)
of the courts' protection. The underwriter has the advantage, by dint of
drafting the policy terms, of delineating the precise boundaries of
cover. The prospective insured has the equal and opposite advantage of
knowing the precise risk proposed to be insured in better detail than
the underwriter can ever achieve. Central to English commercial
insurance decisions, therefore, are the linked principles that the
underwriter is bound to the terms of his policy; and that the risk is as
it has been described to him, and that nothing material to his decision
to insure it has been concealed or misrepresented to him.<br />
<br />
In <a href="http://en.wikipedia.org/wiki/Civil_law_%28legal_system%29" title="Civil law (legal system)">civil law</a>
countries insurance has typically been more closely linked to the
protection of the vulnerable, rather than as a device to encourage
entrepreneurialism by the spreading of risk. Civil law jurisdictions -
in very general terms - tend to regulate the content of the insurance
agreement more closely, and more in the favour of the insured, than in
common law jurisdictions, where the insurer is rather better protected
from the possibility that the risk for which it has accepted a premium
may be greater than that for which it had bargained. As a result, most
legal systems worldwide apply common-law principles to the adjudication
of commercial insurance disputes, whereby it is accepted that the
insurer and the insured are more-or-less equal partners in the division
of the economic burden of risk.<br />
<br />
<h3>
<span class="mw-headline" id="Insurable_interest_and_indemnity">Insurable interest and indemnity</span></h3>
Most, and until 2005 all, common law jurisdictions require the
insured to have an insurable interest in the subject matter of the
insurance. An insurable interest is that legal or equitable relationship
between the insured and the subject matter of the insurance, separate
from the existence of the insurance relationship, by which the insured
would be prejudiced by the occurrence of the event insured against, or
conversely would take a benefit from its non-occurrence. Insurable
interest was long held to be morally necessary in insurance contracts to
distinguish them, as enforceable contracts, from unenforceable gambling
agreements (binding "in honour" only) and to quell the practice, in the
seventeenth and eighteenth centuries, of taking out life policies upon
the lives of strangers. The requirement for insurable interest was
removed in non-marine English law, possibly inadvertently, by the
provisions of the <a href="http://en.wikipedia.org/wiki/Gambling_Act_2005" title="Gambling Act 2005">Gambling Act 2005</a>.It remains a requirement in marine insurance law and other common law
systems, however; and few systems of law will allow an insured to
recover in respect of an event that has not caused the insured a genuine
loss, whether the insurable interest doctrine is relied upon, or
whether, as in common law systems, the courts rely upon the principle of
indemnity to hold that an insured may not recover more than his true
loss.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a> </b><span style="background-color: white;"><b><a href="http://wikipediaarticles.blogspot.com/2012/07/national-insurance.html" target="_blank">Insurance law</a></b></span><span style="background-color: white;">,</span><a href="http://en.wikipedia.org/wiki/Insurance_law" style="background-color: white;" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-91615117539743597302012-07-20T04:15:00.005-07:002012-07-20T04:16:49.840-07:00National Insurance<br />
<b>National Insurance</b> (<b>NI</b>) in the <a href="http://en.wikipedia.org/wiki/United_Kingdom" title="United Kingdom">United Kingdom</a>
is a system of contributions paid by workers and employers, towards the
cost of certain state benefits. It was initially a contributory system
of insurance against illness and unemployment, and later also provided
retirement pensions and other benefits. It was first introduced by the <a href="http://en.wikipedia.org/wiki/National_Insurance_Act_1911" title="National Insurance Act 1911">National Insurance Act 1911</a>, expanded by the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Labour_Government_1945%E2%80%931951" title="Labour Government 1945–1951">Labour government</a> in 1948 and has been subject to numerous amendments in subsequent years.<br />
<br />
The contributions component of the system currently consists of mandatory contributions, <i>National Insurance Contributions</i>
(NICs), paid by employees and employers on earnings, and by employers
on certain benefits-in-kind provided to employees. The self-employed
contribute partly by a fixed, weekly or monthly payment, and partly on a
percentage of net profits above a certain threshold. Individuals may
also make voluntary contributions, in order to fill a gap in their
contributions record and thus protect their entitlement to benefits.
Contributions are collected by <a href="http://en.wikipedia.org/wiki/HM_Revenue_and_Customs" title="HM Revenue and Customs">HM Revenue and Customs</a> (HMRC) through the <a href="http://en.wikipedia.org/wiki/Pay-as-you-earn_tax" title="Pay-as-you-earn tax">PAYE</a> system, along with <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Income_Tax" title="Income Tax">Income Tax</a> and repayments of <a href="http://en.wikipedia.org/wiki/Student_loans_in_the_United_Kingdom" title="Student loans in the United Kingdom">Student Loans</a>.<br />
<br />
The benefit component comprises a number of <i>contributory benefits</i>
of availability and amount determined by the claimant's contribution
record and circumstances. Weekly income benefits and some lump-sum
benefits to participants upon death, retirement, unemployment, maternity
and disability are provided.<br />
<a name='more'></a><br />
Recent developments of the system have meant that National Insurance
provides a significant part of the government's revenue (£96.5 billion
in 2010-2011, 21.5% of the total collected by HMRC.)
National Insurance has also become more redistributive over time as its
structure has changed to remove the fixed upper contribution limits,
albeit with a much lower rate payable by employees on income above a
certain level. It has been mooted that the link between individual's
contribution record and the remaining contributory benefits will be
weakened further.<br />
<br />
<h2>
<span class="mw-headline" id="History">History</span></h2>
<div>
<span class="mw-headline">The current system of National Insurance has its roots in the <a href="http://en.wikipedia.org/wiki/National_Insurance_Act_1911" title="National Insurance Act 1911">National Insurance Act 1911</a>, which introduced the concept of benefits based on contributions paid by employed persons and their employer. The chosen means of recording the contributions required the employer
to buy special stamps from a Post Office and affix them to contribution
cards. The cards formed proof of entitlement to benefits and were given
to the employee when the employment ended, leading to the loss of a job
often being referred to as being <i>given your cards</i>, a phrase which endures to this day although the card itself no longer exists.<br />
<br />
Initially there were two schemes running alongside each other, one
for health and pension insurance benefits (administered by "approved
societies" including friendly societies and some trade unions) and the
other for unemployment benefit which was administered directly by
Government.<br />
<br />
After the Second World War, the Attlee government pressed ahead with the introduction of the <a href="http://en.wikipedia.org/wiki/Welfare_State" title="Welfare State">Welfare State</a>,
of which an expanded National Insurance scheme was a major component.
As part of this process, responsibility passed in 1948 to the new
Ministry of National Insurance. At that point a single stamp was
introduced which covered all the benefits of the new Welfare State.<br />
<br />
Stamp cards for class 1 (employed) contributions persisted until 1975
when these contributions finally ceased to be flat-rate and became
earnings related and were collected along with Income Tax under the PAYE
procedures. Older Britons continue to describe making NI contributions
as <i>paying their stamp</i>.<br />
<br />
As the system developed, the link between individual contributions and benefits was weakened.<br />
<br />
The <a href="http://en.wikipedia.org/wiki/National_Insurance_Fund" title="National Insurance Fund">National Insurance Fund</a> is nominally <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Hypothecation_%28taxation%29" title="Hypothecation (taxation)">hypothecated</a>,
and National Insurance payments cannot be used directly to fund general
government spending. However, surplus in the fund is invested in
government securities, and so is effectively lent to the government at
low rates of interest. National Insurance contributions are paid into
the various classes of National Insurance after deduction of monies
specifically allocated to the <a href="http://en.wikipedia.org/wiki/National_Health_Service" title="National Health Service">National Health Service</a>
(NHS). However a small percentage is transferred from the fund to the
NHS from certain of the smaller sub-classes. Thus the NHS is partially
funded from NI contributions but not from the NI Fund.<br />
<br />
In the early twenty-first century, governments sometimes announced
that income tax rates had not increased, while increasing revenue by
increasing the rates and scope of NI. The unfairness of a tax that is
levied on the wage income of all workers but not on dividend or interest
income has also been criticised: a low-paid worker must pay NI on his
income, while a wealthy owner of income-bearing assets does not.<br />
<br />
</span><br />
<h2>
<span class="mw-headline">
<span class="mw-headline" id="Contribution_classes">Contribution classes</span></span></h2>
<span class="mw-headline">
National insurance contributions (NICs) fall into a number of
classes. Class 1, 2 and 3 NICs paid are credited to an individual's NI
account, which determines eligibility for certain benefits - including
the state pension. Class 1A, 1B and 4 NIC do not count towards benefit
entitlements but must still be paid if due.<br />
</span></div>
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/title-insurance.html" target="_blank">National Insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/National_Insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-16478750216437967962012-07-20T04:04:00.000-07:002012-07-20T04:04:31.667-07:00Title insurance<br />
<b>Title Insurance</b> is a form of <a href="http://en.wikipedia.org/wiki/Indemnity" title="Indemnity">indemnity</a> <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a> predominantly found in the United States which insures against financial loss from defects in <a href="http://en.wikipedia.org/wiki/Title_%28property%29" title="Title (property)">title</a> to <a href="http://en.wikipedia.org/wiki/Real_property" title="Real property">real property</a>
and from the invalidity or unenforceability of mortgage liens. Title
insurance is principally a product developed and sold in the <a href="http://en.wikipedia.org/wiki/United_States" title="United States">United States</a>
as a result of an alleged comparative deficiency of the U.S. land
records laws. It is meant to protect an owner's or a lender's financial
interest in real property against loss due to title defects, <a href="http://en.wikipedia.org/wiki/Lien" title="Lien">liens</a> or other matters. It will defend against a <a href="http://en.wikipedia.org/wiki/Lawsuit" title="Lawsuit">lawsuit</a>
attacking the title as it is insured, or reimburse the insured for the
actual monetary loss incurred, up to the dollar amount of insurance
provided by the policy. The first title insurance company, the Law
Property Assurance and Trust Society, was formed in Pennsylvania in
1853. The vast majority of title insurance policies are written on land within the United States.<br />
<br />
Typically the real property interests insured are <a href="http://en.wikipedia.org/wiki/Fee_simple" title="Fee simple">fee simple</a> ownership or a <a href="http://en.wikipedia.org/wiki/Mortgage_law" title="Mortgage law">mortgage</a>. However, title insurance can be purchased to insure any interest in real property, including an <a href="http://en.wikipedia.org/wiki/Easement" title="Easement">easement</a>, <a href="http://en.wikipedia.org/wiki/Lease" title="Lease">lease</a> or <a href="http://en.wikipedia.org/wiki/Life_estate" title="Life estate">life estate</a>.<br />
<br />
There are two types of policies - owner and loan. Just as lenders require <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Fire_insurance" title="Fire insurance">fire insurance</a>
and other types of insurance coverage to protect their investment,
nearly all institutional lenders also require title insurance [a loan
policy] to protect their interest in the collateral of loans secured by
real estate. Some mortgage lenders, especially non-institutional
lenders, may not require title insurance. Buyers purchasing properties
for cash or with a mortgage lender often want title insurance [an owner
policy] as well. A loan policy provides no coverage or benefit for the
buyer/owner and so the decision to purchase an owner policy is
independent of the lender's decision to require a loan policy.<br />
<br />
Title insurance is available in many other countries, such as Canada,
Australia, the United Kingdom, Mexico, New Zealand, Japan, China, Korea
and throughout Europe. However, while a substantial number of
properties located in these countries are insured by U.S. title
insurers, they do not constitute a significant share of the real estate
transactions in those countries. They also do not constitute a large
share of U.S. title insurers' revenues. In many cases these are
properties to be used for commercial purposes by U.S. companies doing
business abroad, or properties financed by U.S lenders. The U.S.
companies involved buy title insurance to obtain the security of a U.S.
insurer backing up the evidence of title that they receive from the
other country's land registration system, and payment of legal defense
costs if the title is challenged.<br />
<a name='more'></a><br />
<h2>
<span class="mw-headline" id="History">History</span></h2>
Prior to the invention of title insurance, buyers in real estate
transactions bore sole responsibility for ensuring the validity of the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Land_title" title="Land title">land title</a> held by the seller. If the title were later deemed invalid or found to be fraudulent, the buyer lost his investment.<br />
<br />
In 1868, the case of <i><a class="new" href="http://en.wikipedia.org/w/index.php?title=Watson_v._Muirhead&action=edit&redlink=1" title="Watson v. Muirhead (page does not exist)">Watson v. Muirhead</a></i> was heard by the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Pennsylvania_Supreme_Court" title="Pennsylvania Supreme Court">Pennsylvania Supreme Court</a>. Plaintiff Watson had lost his investment in a real estate transaction as the result of a prior <a href="http://en.wikipedia.org/wiki/Lien" title="Lien">lien</a> on the property. Defendant Muirhead, the <a href="http://en.wikipedia.org/wiki/Conveyancer" title="Conveyancer">conveyancer</a>,
had discovered the lien prior to the sale but told Watson the title was
clear after his lawyer had (erroneously) determined that the lien was
not valid.<br />
The courts ruled that Muirhead (and others in similar situations) was
not liable for mistakes based on professional opinions. As a result, in
1874, the Pennsylvania legislature passed an act allowing for the
incorporation of title insurance companies.<br />
<br />
<a class="mw-redirect" href="http://en.wikipedia.org/wiki/Joshua_Morris" title="Joshua Morris">Joshua Morris</a>, a conveyancer in <a href="http://en.wikipedia.org/wiki/Philadelphia" title="Philadelphia">Philadelphia</a>, and several colleagues met on 28 March 1876 to incorporate the first title insurance company. The new firm, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Real_Estate_Title_Insurance_Company_of_Philadelphia" title="Real Estate Title Insurance Company of Philadelphia">Real Estate Title Insurance Company of Philadelphia</a>,
would "insure the purchasers of real estate and mortgages against
losses from defective titles, liens and encumbrances," and that "through
these facilities, transfer of real estate and real estate securities
can be made more speedily and with greater security than heretofore."<br />
<br />
Morris' aunt purchased the first policy, valued at $1,500, to cover a home on North 43rd Street in <a href="http://en.wikipedia.org/wiki/Philadelphia" title="Philadelphia">Philadelphia</a>.<sup class="reference" id="cite_ref-2"></sup><br />
<br />
<br />
<h2>
<span class="mw-headline" id="Reason_for_existence">Reason for existence</span></h2>
Title insurance exists in the U.S. in great part because of the way
U.S. land records laws are structured. Most of the industrialized world
uses <a href="http://en.wikipedia.org/wiki/Land_registration" title="Land registration">land registration</a>
systems for the transfer of land titles or interests in them. Under
these systems, the government makes the determination of title ownership
and encumbrances on the title based on the registration of the
instruments transferring or otherwise affecting the title in the
applicable government office. With only a few exceptions, the
government's determination is conclusive. Governmental errors lead to
monetary compensation to the person damaged by the error but that
aggrieved party usually cannot recover the property. The <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Torrens_Title" title="Torrens Title">Torrens Title</a> system is the basis for land registration systems in many countries.<br />
<br />
A few jurisdictions in the United States have adopted a form of this system, e.g., <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Minneapolis,_Minnesota" title="Minneapolis, Minnesota">Minneapolis, Minnesota</a> and <a href="http://en.wikipedia.org/wiki/Massachusetts" title="Massachusetts">Massachusetts</a>. However, for the most part, the states have opted for a system of
document recording in which no governmental official makes any
determination of who owns the title or whether the instruments
transferring it are valid.<br />
<br />
Greatly simplified, in the <a href="http://en.wikipedia.org/wiki/Recording_%28real_estate%29" title="Recording (real estate)">recording</a>
system, each time a land title transaction takes place, the parties
record the transfer instrument with a local government recorder located
in the jurisdiction (usually the county) where the land lies. The
government indexes the instrument by the names of the grantor
(transferor) and the grantee (transferee) and photographs it so any
member of the public can find and examine it. In general, if the
transferor then purports to transfer the property to someone else who
does not know he already transferred it to someone else, and the first
transfer was not recorded, that transfer is void with respect to the
second transferee and the second transferee owns the land.<br />
Under this system, to determine who has title, one must:<br />
<ul>
<li>Examine the indexes in the recorders' offices, pursuant to various rules established by state legislatures and courts</li>
<li>Scrutinize the recorded instruments</li>
<li>Determine how they affect the title under applicable law. The final
arbiters of title matters are the courts, which make decisions in suits
brought by disagreeing parties. Initially, the person who wanted to
understand the title would hire an abstractor to search for the
documents affecting title to the land in question, and an attorney to
opine on their meaning under the law; this is still normal in some
places. However, in most of the U.S., people have found this procedure
cumbersome and inefficient. If the abstractor or attorney makes a
substantial error, he compensates his client only to the limit of his
financial responsibility (including his liability insurance).
Furthermore, if the error was not due to his negligence, the abstractor
or attorney may not compensate the client at all. The opinions given by attorneys as to each title are not uniform, so
the client must spend time analyzing each one and has a risk of
misunderstanding it.</li>
</ul>
Title insurers use this recording system to produce an insurance policy for any purchaser or mortgagee of land. Title insurers <a href="http://en.wikipedia.org/wiki/Title_search" title="Title search">search</a>
the records of the recorders' offices and make a determination of who
owns the title and to what interests it is subject. The policies are
fairly uniform (a fact that greatly pleases lenders and others in the
real estate business) and the insurers carry, at a minimum, the
financial reserves required by insurance regulation to compensate their
insureds for valid claims they make under the policies. This is
especially important in large commercial real estate transactions where
many millions of dollars are invested assuming real estate titles are
valid. Under such a policy, the insurer also pays for the defense of its
insured in legal contests. In contrast, abstractors and attorneys have
no such obligation.<br />
Advocates of this system of property recording argue that a property
system which is inherently contingent provides a stronger guarantee of
private property rights over the long run than a registration system
which provides assurance of one's rights to private property.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/life-insurance.html" target="_blank">Title insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Title_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-3408536838814853522012-07-20T04:00:00.004-07:002012-07-20T04:01:59.214-07:00Life insurance<br />
<b>Life insurance</b> is a contract between an <a href="http://en.wikipedia.org/wiki/Insurance_policy" title="Insurance policy">insurance policy holder</a> and an <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurer</a>, where the insurer promises to pay a designated <a href="http://en.wikipedia.org/wiki/Beneficiary" title="Beneficiary">beneficiary</a> a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as <a href="http://en.wikipedia.org/wiki/Terminal_illness" title="Terminal illness">terminal illness</a> or <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Critical_illness" title="Critical illness">critical illness</a>
may also trigger payment. The policy holder typically pays a premium,
either regularly or as a lump sum. Other expenses (such as funeral
expenses) are also sometimes included in the premium.<br />
<br />
The advantage for the policy owner is "peace of mind", in knowing
that the death of the insured person will not result in financial
hardship for loved ones.<br />
Life policies are legal contracts and the terms of the contract
describe the limitations of the insured events. Specific exclusions are
often written into the contract to limit the liability of the insurer;
common examples are claims relating to suicide, fraud, war, riot and
civil commotion.<br />
Life-based contracts tend to fall into two major categories:<br />
<ul>
<li><a href="http://en.wikipedia.org/wiki/Safety" title="Safety">Protection</a>
policies – designed to provide a benefit in the event of specified
event, typically a lump sum payment. A common form of this design is
term insurance.</li>
<li><a href="http://en.wikipedia.org/wiki/Investment" title="Investment">Investment</a>
policies – where the main objective is to facilitate the growth of
capital by regular or single premiums. Common forms (in the US) are <a href="http://en.wikipedia.org/wiki/Whole_life_insurance" title="Whole life insurance">whole life</a>, <a href="http://en.wikipedia.org/wiki/Universal_life_insurance" title="Universal life insurance">universal life</a> and <a href="http://en.wikipedia.org/wiki/Variable_universal_life_insurance" title="Variable universal life insurance">variable life</a> policies.</li>
</ul>
<div>
<h3>
<span class="mw-headline" id="Parties_to_contract">Parties to contract</span></h3>
There is a difference between the insured and the policy owner,
although the owner and the insured are often the same person. For
example, if Joe buys a policy on his own life, he is both the owner and
the insured. But if Jane, his wife, buys a policy on Joe's life, she is
the owner and he is the insured. The policy owner is the guarantor and
he will be the person to pay for the policy. The insured is a
participant in the contract, but not necessarily a party to it. Also,
most companies allow the payer and owner to be different, e. g. a
grandparent paying premiums for a policy on a child, owned by a
grandchild.<br />
The beneficiary receives policy proceeds upon the insured person's
death. The owner designates the beneficiary, but the beneficiary is not a
party to the policy. The owner can change the beneficiary unless the
policy has an irrevocable beneficiary designation. If a policy has an
irrevocable beneficiary, any beneficiary changes, policy assignments, or
cash value borrowing would require the agreement of the original
beneficiary.<br />
<a name='more'></a><br />
In cases where the policy owner is not the insured (also referred to as the <i>celui qui vit</i> or CQV), insurance companies have sought to limit policy purchases to those with an <a href="http://en.wikipedia.org/wiki/Insurable_interest" title="Insurable interest">insurable interest</a>
in the CQV. For life insurance policies, close family members and
business partners will usually be found to have an insurable interest.
The insurable interest requirement usually demonstrates that the
purchaser will actually suffer some kind of loss if the CQV dies. Such a
requirement prevents people from benefiting from the purchase of purely
speculative policies on people they expect to die. With no insurable
interest requirement, the risk that a purchaser would murder the CQV for
insurance proceeds would be great. In at least one case, an insurance
company which sold a policy to a purchaser with no insurable interest
(who later murdered the CQV for the proceeds), was found liable in court
for contributing to the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Wrongful_death" title="Wrongful death">wrongful death</a> of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).<br />
<br />
<br />
<h3>
<span class="mw-headline" id="Contract_terms">Contract terms</span></h3>
Special exclusions may apply, such as suicide clauses, whereby the policy becomes null and void if the insured commits <a href="http://en.wikipedia.org/wiki/Suicide" title="Suicide">suicide</a>
within a specified time (usually two years after the purchase date;
some states provide a statutory one-year suicide clause). Any
misrepresentations by the insured on the application may also be grounds
for nullification. Most US states specify a maximum contestability
period, often no more than two years. Only if the insured dies within
this period will the insurer have a legal right to contest the claim on
the basis of misrepresentation and request additional information before
deciding whether to pay or deny the claim.<br />
<br />
The face amount of the policy is the initial amount that the policy will pay at the death of the insured or when the policy <a href="http://en.wikipedia.org/wiki/Maturity_%28finance%29" title="Maturity (finance)">matures</a>,
although the actual death benefit can provide for greater or lesser
than the face amount. The policy matures when the insured dies or
reaches a specified age (such as 100 years old).<br />
<br />
<h3>
<span class="mw-headline" id="Costs.2C_insurability_and_underwriting">Costs, insurability and underwriting</span></h3>
The insurer (the life insurance company) calculates the policy prices
with intent to fund claims to be paid and administrative costs, and to
make a profit. The cost of insurance is determined using mortality
tables calculated by <a href="http://en.wikipedia.org/wiki/Actuary" title="Actuary">actuaries</a>.
Actuaries are professionals who employ actuarial science, which is
based on mathematics (primarily probability and statistics). Mortality
tables are statistically based tables showing expected annual mortality
rates. It is possible to derive life expectancy estimates from these
mortality assumptions. Such estimates can be important in taxation
regulation.<sup class="reference" id="cite_ref-2"></sup><br />
<br />
The three main variables in a mortality table are commonly age, gender, and use of <a href="http://en.wikipedia.org/wiki/Tobacco" title="Tobacco">tobacco</a>,
but more recently in the US, preferred class-specific tables have been
introduced. The mortality tables provide a baseline for the cost of
insurance, but in practice these mortality tables are used in
conjunction with the health and family history of the individual
applying for a policy to determine premiums and insurability. Mortality
tables currently in use by life insurance companies in the United States
are individually modified by each company using pooled industry
experience studies as a starting point. In the 1980s and 1990s, the SOA
1975–80 Basic Select & Ultimate tables were the typical reference
points, while the 2001 VBT and 2001 CSO tables were published more
recently. The newer tables include separate mortality tables for <a href="http://en.wikipedia.org/wiki/Smoking" title="Smoking">smokers</a> and non-smokers, and the CSO tables include separate tables for preferred classes.<br />
<br />
Recent US mortality tables predict that roughly 0.35 in 1,000
non-smoking males aged 25 will die during the first year of coverage
after underwriting.Mortality approximately doubles for every extra ten years of age, so
the mortality rate in the first year for underwritten non-smoking men is
about 2.5 in 1,000 people at age 65. Compare this with the US population male mortality rates of 1.3 per
1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking
status).<br />
<br />
The mortality of underwritten persons rises much more quickly than
the general population. At the end of 10 years the mortality of that 25
year-old, non-smoking male is 0.66/1000/year. Consequently, in a group
of one thousand 25-year-old males with a $100,000 policy, all of average
health, a life insurance company would have to collect approximately
$50 a year from each participant to cover the relatively few expected
claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per
death = $35 per policy). Other costs, such as administrative and sales
expenses, also need to be considered when setting the premiums. A 10
year policy for a 25-year-old non-smoking male with preferred medical
history may get offers as low as $90 per year for a $100,000 policy in
the competitive US life insurance market.<br />
<br />
Most of the revenue received by insurance companies consists of
premiums paid by policy holders, with some additional money being made
through the investment of some of the cash raised from premiums. Rates
charged for life insurance increase with the insurer's age because,
statistically, people are more likely to die as they get older. The
insurance company will investigate the health of an applicant for a
policy to assess the likelihood of incurring a claim, in the same way
that a bank would investigate an applicant for a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Bank_loan" title="Bank loan">loan</a> to assess the likelihood of a default. <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Group_Insurance" title="Group Insurance">Group Insurance</a> policies are an exception to this. This investigation and resulting evaluation of the risk is termed <a href="http://en.wikipedia.org/wiki/Underwriting" title="Underwriting">underwriting</a>. <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Medical_Underwriting" title="Medical Underwriting">Health</a>
and lifestyle questions are asked, with certain responses or
revelations possibly meriting further investigation. Life insurance
companies in the United States support the Medical Information Bureau
(MIB), which is a clearing house of information on persons who have applied
for life insurance with participating companies in the last seven years.
As part of the application, the insurer often requires the applicant's
permission to obtain information from their physicians.<br />
<br />
Underwriters will determine the purpose of insurance; the most common
being to protect the owner's family or financial interests in the event
of the insured's death. Other purposes include estate planning or, in
the case of cash-value contracts, investment for retirement planning.
Bank loans or buy-sell provisions of business agreements are another
acceptable purpose.<br />
<br />
Life insurance companies are never legally required underwrite or to provide coverage to anyone, with the exception of <a href="http://en.wikipedia.org/wiki/Civil_Rights_Act_of_1964" title="Civil Rights Act of 1964">Civil Rights Act</a>
compliance requirements. Insurance companies alone determine
insurability, and some people, for their own health or lifestyle
reasons, are deemed uninsurable. The policy can be declined or rated
(increasing the premium amount to compensate for a greater probability
of a claim).<br />
<br />
Many companies separate applicants into four general categories. These categories are <i>preferred best</i>, <i>preferred</i>, <i>standard</i>, and <i>tobacco</i>. Preferred best is reserved only for the healthiest individuals in the
general population. This may mean, that the proposed insured has no
adverse medical history, is not under medication for any condition, and
his family (immediate and extended) have no history of early-onset <a href="http://en.wikipedia.org/wiki/Cancer" title="Cancer">cancer</a>, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Diabetes" title="Diabetes">diabetes</a>, or other conditions. Preferred means that the proposed insured is currently under medication
for a medical condition and has a family history of particular
illnesses. Most people are in the standard category.<sup class="Template-Fact" style="white-space: nowrap;">[<i><a href="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources from February 2007">citation needed</span></a></i>]</sup>
Profession, travel history, and lifestyle factor into whether the
proposed insured will be granted a policy, and which category the
insured falls. For example, a person who would otherwise be classified
as preferred best may be denied a policy if he or she travels to a high
risk country. Underwriting practices can vary from insurer to insurer, encouraging competition.</div>
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/health-insurance.html" target="_blank">Life insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Life_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-10259743185114320352012-07-20T03:53:00.001-07:002012-07-20T03:54:28.845-07:00Health insurance<br />
<b>Health insurance</b> is <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a> against the risk of incurring medical expenses among individuals. By estimating the overall risk of <a href="http://en.wikipedia.org/wiki/Health_care" title="Health care">health care</a>
expenses among a targeted group, an insurer can develop a routine
finance structure, such as a monthly premium or payroll tax, to ensure
that money is available to pay for the health care benefits specified in
the insurance agreement. The benefit is administered by a central
organization such as a government agency, private business, or
not-for-profit entity.<br />
<br />
<br />
<h2>
<span class="mw-headline" id="Background">Background</span></h2>
A <a href="http://en.wikipedia.org/wiki/Health" title="Health">health</a> <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a> policy is:<br />
1) a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Insurance_contract" title="Insurance contract">contract</a>
between an insurance provider (e.g. an insurance company or a
government) and an individual or his/her sponsor (e.g. an employer or a
community organization). The contract can be renewable (e.g. annually,
monthly) or lifelong in the case of private insurance, or be mandatory
for all citizens in the case of national plans. The type and amount of
health care costs that will be covered by the health insurance provider
are specified in writing, in a member contract or "Evidence of Coverage"
booklet for private insurance, or in a national <a href="http://en.wikipedia.org/wiki/Health_policy" title="Health policy">health policy</a> for public insurance.<br />
<br />
2) Insurance coverage is provided by an employer-sponsored
self-funded ERISA plan. The company generally advertises that they have
one of the big insurance companies. However, in an ERISA case, that
insurance company "doesn't engage in the act of insurance", they just
administer it. Therefore ERISA plans are not subject to state laws.
ERISA plans are governed by federal law under the jurisdiction of the US
Department of Labor (USDOL). The specific benefits or coverage details
are found in the Summary Plan Description (SPD). An appeal must go
through the insurance company, then to the Employer's Plan Fiduciary. If
still required, the Fiduciary’s decision can be brought to the USDOL to
review for ERISA compliance, and then file a lawsuit in federal court.<br />
<a name='more'></a><br />
The individual insured person's obligations may take several forms:<br />
<ul>
<li>Premium: The amount the policy-holder or his sponsor (e.g. an employer) pays to the health plan to purchase health coverage.</li>
<li><a href="http://en.wikipedia.org/wiki/Deductible" title="Deductible">Deductible</a>: The amount that the insured must pay <a href="http://en.wikipedia.org/wiki/Out-of-pocket_expenses" title="Out-of-pocket expenses">out-of-pocket</a>
before the health insurer pays its share. For example, policy-holders
might have to pay a $500 deductible per year, before any of their health
care is covered by the health insurer. It may take several doctor's
visits or prescription refills before the insured person reaches the
deductible and the insurance company starts to pay for care however,
most policies do not apply co-pays for doctor's visits or prescriptions
against your deductible.</li>
<li><a class="mw-redirect" href="http://en.wikipedia.org/wiki/Co-payment" title="Co-payment">Co-payment</a>:
The amount that the insured person must pay out of pocket before the
health insurer pays for a particular visit or service. For example, an
insured person might pay a $45 co-payment for a doctor's visit, or to
obtain a prescription. A co-payment must be paid each time a particular
service is obtained.</li>
<li><a class="mw-redirect" href="http://en.wikipedia.org/wiki/Coinsurance" title="Coinsurance">Coinsurance</a>:
Instead of, or in addition to, paying a fixed amount up front (a
co-payment), the co-insurance is a percentage of the total cost that
insured person may also pay. For example, the member might have to pay
20% of the cost of a surgery over and above a co-payment, while the
insurance company pays the other 80%. If there is an upper limit on
coinsurance, the policy-holder could end up owing very little, or a
great deal, depending on the actual costs of the services they obtain.</li>
<li>Exclusions: Not all services are covered. The insured are generally
expected to pay the full cost of non-covered services out of their own
pockets.</li>
<li>Coverage limits: Some health insurance policies only pay for health
care up to a certain dollar amount. The insured person may be expected
to pay any charges in excess of the health plan's maximum payment for a
specific service. In addition, some insurance company schemes have
annual or lifetime coverage maximums. In these cases, the health plan
will stop payment when they reach the benefit maximum, and the
policy-holder must pay all remaining costs.</li>
<li>Out-of-pocket maximums: Similar to coverage limits, except that in
this case, the insured person's payment obligation ends when they reach
the out-of-pocket maximum, and health insurance pays all further covered
costs. Out-of-pocket maximums can be limited to a specific benefit
category (such as prescription drugs) or can apply to all coverage
provided during a specific benefit year.</li>
<li><a class="mw-redirect" href="http://en.wikipedia.org/wiki/Capitated_reimbursement" title="Capitated reimbursement">Capitation</a>: An amount paid by an insurer to a health care provider, for which the provider agrees to treat all members of the insurer.</li>
<li>In-Network Provider: (U.S. term) A health care provider on a list of
providers preselected by the insurer. The insurer will offer discounted
coinsurance or co-payments, or additional benefits, to a plan member to
see an in-network provider. Generally, providers in network are
providers who have a contract with the insurer to accept rates further
discounted from the "usual and customary" charges the insurer pays to
out-of-network providers.</li>
<li>Prior Authorization: A certification or authorization that an
insurer provides prior to medical service occurring. Obtaining an
authorization means that the insurer is obligated to pay for the
service, assuming it matches what was authorized. Many smaller, routine
services do not require authorization.</li>
<li><a class="mw-redirect" href="http://en.wikipedia.org/wiki/Explanation_of_Benefits" title="Explanation of Benefits">Explanation of Benefits</a>:
A document that may be sent by an insurer to a patient explaining what
was covered for a medical service, and how payment amount and patient
responsibility amount were determined.</li>
</ul>
Prescription drug plans are a form of insurance offered through some
health insurance plans. In the U.S., the patient usually pays a
copayment and the prescription drug insurance part or all of the balance
for drugs covered in the <a href="http://en.wikipedia.org/wiki/Formulary" title="Formulary">formulary</a>
of the plan. Such plans are routinely part of national health insurance
programs. For example in the province of Quebec, Canada, prescription
drug insurance is universally required as part of the public health
insurance plan, but may be purchased and administered either through
private or group plans, or through the public plan.<br />
<br />
Some, if not most, health care providers in the United States will
agree to bill the insurance company if patients are willing to sign an
agreement that they will be responsible for the amount that the
insurance company doesn't pay. The insurance company pays out of network
providers according to "reasonable and customary" charges, which may be
less than the provider's usual fee. The provider may also have a
separate contract with the insurer to accept what amounts to a
discounted rate or capitation to the provider's standard charges. It
generally costs the patient less to use an in-network provider.<br />
<br />
<br />
<h2>
<span class="mw-headline" id="Comparison">Comparison</span></h2>
<div class="rellink boilerplate seealso">
See also: <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Health_care_systems" title="Health care systems">Health care systems</a></div>
<div class="rellink boilerplate seealso">
<br /></div>
The Commonwealth Fund, in its annual survey, "Mirror, Mirror on the
Wall", compares the performance of the health care systems in Australia,
New Zealand, the United Kingdom, Germany, Canada and the U.S. Its 2007
study found that, although the U.S. system is the most expensive, it
consistently under-performs compared to the other countries. One difference between the U.S. and the other countries in the study is
that the U.S. is the only country without universal health insurance
coverage.<br />
<br />
The Commonwealth Fund completed its thirteenth annual health policy survey in 2010. A study of the survey "found significant differences in access, cost
burdens, and problems with health insurance that are associated with
insurance design". Of the countries surveyed, the results indicated that people in the
United States had more out-of-pocket expenses, more disputes with
insurance companies than other countries, and more insurance payments
denied; paperwork was also higher although Germany had similarly high
levels of paperwork.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/home-insurance.html" target="_blank">Health insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Health_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-28915321194726805072012-07-20T03:49:00.004-07:002012-07-20T03:49:56.858-07:00GAP insurance<br />
<b>GAP insurance</b> is also known as <i>Guaranteed Auto Protection</i> or <i>Guaranteed Asset Protection</i> and as GAP within the North American <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Financial_industry" title="Financial industry">financial industry</a>. GAP is the difference between the actual cash value of a vehicle minus all <a href="http://en.wikipedia.org/wiki/Deductible" title="Deductible">deductible</a> perils (if at fault) and <a href="http://en.wikipedia.org/wiki/Lien" title="Lien">liens</a> (especially in <a href="http://en.wikipedia.org/wiki/Canada" title="Canada">Canada</a>) and the <a href="http://en.wikipedia.org/wiki/Lease" title="Lease">lease</a>
or loan balance minus financed soft products (such as its own cost) or
negative equity on a trade. GAP coverage is mainly used on new and used
small vehicles (cars and trucks) and heavy trucks. Some financing
companies require it.<br />
<br />
GAP insurance covers the amount on a loan that is the difference between the asset value and the amount covered by another <a href="http://en.wikipedia.org/wiki/Insurance_policy" title="Insurance policy">insurance policy</a>. Some GAP policies also cover the deductible. This coverage is marketed for low <a href="http://en.wikipedia.org/wiki/Down_payment" title="Down payment">down payment</a>
loans, high interest rate loans and loans with 60 month or longer
terms. GAP insurance is typically offered by a finance company at time
of purchase. Most <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Auto_insurance" title="Auto insurance">auto insurance</a> companies offer this <a href="http://en.wikipedia.org/wiki/Coverage" title="Coverage">coverage</a> to consumers.<br />
<br />
There are two ways of getting GAP coverage. The first type is an insurance policy sold by a broker. The second type is a <a href="http://en.wikipedia.org/wiki/Waiver" title="Waiver">waiver</a>
agreement sold by a Finance & Insurance Manager. The first is
regulated by the insurance industry, the second is unregulated. In
either case coverage is usually the same and sold as a soft product
through the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Car_dealer" title="Car dealer">car dealership</a>.
Coverage is usually financed along with the lease/loan. Claims are
subject to a total loss. The total loss is usually determined by the
primary insurance company’s third-party <a href="http://en.wikipedia.org/wiki/Appraiser" title="Appraiser">appraiser</a>.<br />
<br />
Exclusions to GAP insurance vary by country or state. Some exclusions
include a maximum loss limit of $50,000 while others require a loan
term of less than 84 months. GAP is an optional purchase; however, many states in the US require
that a car dealership offer GAP at the point of purchase. States such as
Louisiana require that the purchaser sign a disclosure document as
proof. Although GAP is optional, some finance companies require GAP as a condition to obtaining a loan.<br />
<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/home-insurance.html" target="_blank">GAP insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Gap_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-70577783636884318132012-07-20T03:44:00.002-07:002012-07-20T03:47:18.413-07:00Home insurance<br />
<b>Home insurance</b>, also commonly called <b>hazard insurance</b> or <b>homeowner's insurance</b> (often abbreviated in the real estate industry as <b>HOI</b>), is the type of <a href="http://en.wikipedia.org/wiki/Property_insurance" title="Property insurance">property insurance</a> that covers private homes. It is an <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a>
policy that combines various personal insurance protections, which can
include losses occurring to one's home, its contents, loss of its use
(additional living expenses), or loss of other personal possessions of
the homeowner, as well as <a href="http://en.wikipedia.org/wiki/Legal_liability" title="Legal liability">liability</a>
insurance for accidents that may happen at the home or at the hands of
the homeowner within the policy territory. It requires that at least one
of the named insureds occupies the home. The dwelling policy (DP) is
similar, but used for residences which don't qualify for various
reasons, such as vacancy/non-occupancy, seasonal/secondary residence, or
age.<br />
<br />
It's a multiple-line insurance, meaning that it includes both <a href="http://en.wikipedia.org/wiki/Property_insurance" title="Property insurance">property insurance</a> and <a href="http://en.wikipedia.org/wiki/Liability_insurance" title="Liability insurance">liability</a>
coverage, with an indivisible premium, meaning that a single premium is
paid for all risks. Standard forms divide coverage into several
categories, and the coverage provided is typically a percentage of
Coverage A, which is coverage for the main dwelling.<br />
<br />
The cost of homeowner's insurance often depends on what it would cost
to replace the house and which additional riders—additional items to be
insured—are attached to the policy. The insurance policy itself is a
lengthy contract, and names what will and what will not be paid in the
case of various events. Typically, claims due to <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Floods" title="Floods">floods</a> or war (whose definition typically includes a <a href="http://en.wikipedia.org/wiki/Nuclear_exclusion_clause" title="Nuclear exclusion clause">nuclear explosion</a>
from any source), amongst other standard exclusions (like termites),
are excluded. Special insurance can be purchased for these
possibilities, including <a href="http://en.wikipedia.org/wiki/Flood_insurance" title="Flood insurance">flood insurance</a>. Insurance should be adjusted to reflect replacement cost, usually upon application of an inflation factor or a cost index.<br />
<br />
<a name='more'></a><br />
<br />
The home insurance policy is usually a term contract—a contract that
is in effect for a fixed period of time. The payment the insured makes
to the insurer is called the premium. The insured must pay the insurer
the premium each term. Most insurers charge a lower premium if it
appears less likely the home will be damaged or destroyed: for example,
if the house is situated next to a <a href="http://en.wikipedia.org/wiki/Fire_apparatus" title="Fire apparatus">fire station</a> or is equipped with fire sprinklers and fire alarms; if the house exhibits wind mitigation measures, such as <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Hurricane_shutters" title="Hurricane shutters">hurricane shutters</a>; or if the house has a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Security_system" title="Security system">security system</a> and has insurer-approved <a href="http://en.wikipedia.org/wiki/Lock" title="Lock">locks</a> installed.<sup class="reference" id="cite_ref-1"><a href="http://en.wikipedia.org/wiki/Home_insurance#cite_note-1">[2]</a></sup> <a href="http://en.wikipedia.org/wiki/Perpetual_insurance" title="Perpetual insurance">Perpetual insurance</a>, a type of home insurance without a fixed term, can also be obtained in certain areas.<br />
<br />
<h2>
<span class="mw-headline" id="In_the_United_States">In the United States</span></h2>
<div>
<span class="mw-headline">In the <a href="http://en.wikipedia.org/wiki/United_States" title="United States">United States</a>, most home buyers borrow money in the form of a <a href="http://en.wikipedia.org/wiki/Mortgage_loan" title="Mortgage loan">mortgage loan</a>,
and the mortgage lender always requires that the buyer purchase
homeowner's insurance as a condition of the loan, in order to protect
the bank if the home were to be destroyed. Anyone with an insurable
interest in the property should be listed on the policy. In some cases
the mortgagee will waive the need for the mortgagor to carry homeowner's
insurance if the value of the land exceeds the amount of the mortgage
balance. In a case like this even the total destruction of any buildings
would not affect the ability of the lender to be able to foreclose and
recover the full amount of the loan.<br />
<br />
Home insurance in the United States may differ from other countries; for example, in Britain, <a href="http://en.wikipedia.org/wiki/Subsidence" title="Subsidence">subsidence</a> and subsequent foundation failure is usually covered under an insurance policy. United States insurance companies used to offer foundation insurance,
which was reduced to coverage for damage due to leaks, and finally
eliminated altogether.<br />
<br />
</span><br />
<h3>
<span class="mw-headline">
<span class="mw-headline" id="History">History</span></span></h3>
<span class="mw-headline">
The first homeowners policy <i>per se</i> in the United States was
introduced in September 1950, but similar policies had existed in Great
Britain and certain areas of the United States. In the late forties US <a href="http://en.wikipedia.org/wiki/Insurance_law" title="Insurance law">insurance law</a> was reformed and during this process multiple line statutes were written, allowing homeowners policies to become legal.<br />
<br />
Prior to the 1950s, there were separate policies for the various
perils that could affect a home. A homeowner would have had to purchase
separate policies covering fire losses, theft, personal property, and
the like. During the 1950s, policy forms were developed allowing the
homeowner to purchase all the insurance they needed on one complete
policy. However, these policies varied by insurance company, and were
difficult to comprehend.<br />
<br />
The need for standardization grew so great that a private company based in <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Jersey_City" title="Jersey City">Jersey City</a>, <a href="http://en.wikipedia.org/wiki/New_Jersey" title="New Jersey">New Jersey</a>, <a href="http://en.wikipedia.org/wiki/Insurance_Services_Office" title="Insurance Services Office">Insurance Services Office</a>,
also known as the ISO, was formed in 1971 to provide risk information
and issued a simplified homeowners policy for resell to insurance
companies. These policies have been amended over the years.<br />
<br />
<br />
</span><br />
<h3>
<span class="mw-headline">
<span class="mw-headline" id="Policies">Policies</span></span></h3>
<span class="mw-headline">
Currently, the ISO has seven standardized homeowners insurance forms in general use:<br />
<dl>
<dt>HO1 – Basic Form Homeowner Policy</dt>
<dd>A basic policy form that provides coverage on a home against 11
listed perils; contents are generally included in this type of coverage,
but must be explicitly enumerated. The perils include fire or
lightning, windstorm or hail, vandalism or malicious mischief, theft,
damage from vehicles and aircraft, explosion riot or civil commotion,
glass breakage, smoke, volcanic eruption, and personal liability.
Exceptions include floods, earthquakes. Most states no longer offer this
type of coverage.</dd>
<dt>HO2 – Broad Form Homeowner Policy</dt>
<dd>A more advanced form that provides coverage on a home against 17
listed perils (including all 11 on the HO1). The coverage is usually a
"named perils" policy, which lists the events that would be covered.</dd>
<dt>HO3 – Special Form Homeowner Policy</dt>
<dd>The typical, most comprehensive form used for single-family homes.
The policy provides "all risk" coverage on the home with some perils
excluded, such as earthquake and flood. Contents are covered on a named
peril basis. (Note: "All Risk" is poorly termed as it is essentially
named exclusions (ie, if it is not specifically excluded, it is
covered))</dd>
<dt>HO4 – Renter's Insurance</dt>
<dd>The "Tenants" form is for renters. It covers personal property
against the same perils as the contents portion of the HO2 or HO3. An HO4 generally also includes liability coverage for personal injury or property damage inflicted on others.</dd>
<dt>HO5 - Premier Homeowner Policy</dt>
<dd>Covers the same as HO3 plus more. On this policy the contents are
covered on an open peril basis, therefore as long as the cause of loss
is not specifically excluded in the policy it will be covered for that
cause of loss. (can also be achieved by endorsing an HO15 to the HO3)</dd>
<dt>HO6 – Condominium Policy</dt>
<dd>The form for condominium owners.</dd>
<dt>HO8 – Older Houses</dt>
<dd>The "Modified Coverage" form is for the owner-occupied older home
whose replacement cost far exceeds the property's market value.</dd></dl>
</span></div>
Description above from the <a href="http://wikipediaarticles.blogspot.com/" style="font-weight: bold;" target="_blank">Wikipedia article</a> <a href="http://wikipediaarticles.blogspot.com/2012/07/vehicle-insurance.html" target="_blank"><b>Home insurance</b></a>,<a href="http://en.wikipedia.org/wiki/Home_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-68867524389932450072012-07-20T03:38:00.002-07:002012-07-20T03:47:34.474-07:00Vehicle insurance<b>Vehicle insurance</b> (also known as <b>auto insurance</b>, <b><a href="http://en.wikipedia.org/wiki/GAP_insurance" title="GAP insurance">GAP insurance</a></b>, <b>car insurance</b>, or <b>motor insurance</b>) is <a href="http://wikipediaarticles.blogspot.com/2012/07/marine-insurance.html" title="Insurance">insurance</a> purchased for <a href="http://en.wikipedia.org/wiki/Automobile" title="Automobile">cars</a>, <a href="http://en.wikipedia.org/wiki/Truck" title="Truck">trucks</a>, <a href="http://en.wikipedia.org/wiki/Motorcycle" title="Motorcycle">motorcycles</a>,
and other road vehicles. Its primary use is to provide financial
protection against physical damage and/or bodily injury resulting from <a href="http://en.wikipedia.org/wiki/Traffic_collision" title="Traffic collision">traffic collisions</a> and against <a href="http://en.wikipedia.org/wiki/Legal_liability" title="Legal liability">liability</a> that could also arise therefrom. The specific terms of vehicle insurance vary with legal <a href="http://en.wikipedia.org/wiki/Regulation" title="Regulation">regulations</a>
in each region. To a lesser degree vehicle insurance may additionally
offer financial protection against theft of the vehicle and posibly
damage to the vehicle, sustained from things other than traffic
collisions.<br />
<br />
<h2>
<span class="mw-headline" id="Public_policies">Public policies</span></h2>
In many jurisdictions it is compulsory to have vehicle insurance
before using or keeping a motor vehicle on public roads. Most
jurisdictions relate insurance to both the car and the driver, however
the degree of each varies greatly.<br />
Several jurisdictions have experimented with a "pay-as-you-drive"
insurance plan which is paid through a gasoline tax (petrol tax). This
would address issues of uninsured motorists and also charge based on the
miles (kilometres) driven, which could theoretically increase the
efficiency of the insurance, through streamlined collection.<br />
<br />
<h3>
<span class="mw-headline" id="Australia">Australia</span></h3>
In <a href="http://en.wikipedia.org/wiki/South_Australia" title="South Australia">South Australia</a>, Third Party Personal insurance from the <a class="new" href="http://en.wikipedia.org/w/index.php?title=Motor_Accident_Commission&action=edit&redlink=1" title="Motor Accident Commission (page does not exist)">Motor Accident Commission</a> is included in the <a href="http://en.wikipedia.org/wiki/Driver%27s_license" title="Driver's license">licence</a> registration fee for people over 17. A similar scheme applies in <a href="http://en.wikipedia.org/wiki/Western_Australia" title="Western Australia">Western Australia</a>.<br />
<br />
In <a href="http://en.wikipedia.org/wiki/VIC" title="VIC">Victoria</a>, Third Party Personal insurance from the <a href="http://en.wikipedia.org/wiki/Transport_Accident_Commission" title="Transport Accident Commission">Transport Accident Commission</a> is similarly included, through a levy, in the vehicle registration fee.<br />
<br />
<a name='more'></a><br />
<br />
In <a href="http://en.wikipedia.org/wiki/New_South_Wales" title="New South Wales">New South Wales</a>,
Compulsory Third Party Insurance (commonly known as CTP Insurance) is a
mandatory requirement and each individual car must be insured or the
vehicle will not be considered legal. Therefore, a motorist cannot drive
the vehicle until it is insured. A 'Green Slip,' another name by which CTP Insurance is commonly known due to the colour
of the pages which the form is printed on, must be obtained through one
of the five licenced insurers in New South Wales. Suncorp and Allianz
both hold two licences to issue CTP Greenslips - Suncorp under the GIO
and AAMI licences and Allianz under the Allianz and CIC/Allianz
licences. The remaining three licences to issue CTP Greenslips are held
by QBE, Zurich and IAL - NRMA. APIA now also supplies CTP but is only
for over 50's who are no longer working full time. A similar scheme
applies in the <a href="http://en.wikipedia.org/wiki/Australian_Capital_Territory" title="Australian Capital Territory">ACT</a>.<br />
<br />
In <a href="http://en.wikipedia.org/wiki/Queensland" title="Queensland">Queensland</a>,
CTP is a mandatory part of registration for a vehicle. There is choice
of insurer but price is government controlled in a tight band.<br />
These state based third party insurance schemes usually cover only
personal injury liability. Comprehensive vehicle insurance is sold
separately to cover property damage and cover can be for events such as
fire, theft, collision and other property damage.<br />
<br />
<h3>
<span class="mw-headline" id="Canada">Canada</span></h3>
Several <a href="http://en.wikipedia.org/wiki/Canada" title="Canada">Canadian</a> provinces (<a href="http://en.wikipedia.org/wiki/British_Columbia" title="British Columbia">British Columbia</a>, <a href="http://en.wikipedia.org/wiki/Saskatchewan" title="Saskatchewan">Saskatchewan</a>, <a href="http://en.wikipedia.org/wiki/Manitoba" title="Manitoba">Manitoba</a> and <a href="http://en.wikipedia.org/wiki/Quebec" title="Quebec">Quebec</a>) provide a <a href="http://en.wikipedia.org/wiki/Public_auto_insurance" title="Public auto insurance">public auto insurance</a>
system while in the rest of the country insurance is provided
privately. Basic auto insurance is mandatory throughout Canada with each
province's government determining which benefits are included as
minimum required auto insurance coverage and which benefits are options
available for those seeking additional coverage. Accident benefits
coverage is mandatory everywhere except for <a href="http://en.wikipedia.org/wiki/Newfoundland_and_Labrador" title="Newfoundland and Labrador">Newfoundland and Labrador</a>. All provinces in Canada have some form of <a href="http://en.wikipedia.org/wiki/No-fault_insurance" title="No-fault insurance">no-fault insurance</a>
available to accident victims. The difference from province to province
is the extent to which tort or no-fault is emphasized. International
drivers entering Canada are permitted to drive any vehicle their licence
allows for the 3 month period for which they are allowed to use their
international licence. International laws provide visitors to the
country with an International Insurance Bond (IIB) until this 3 month
period is over in which the international assailant must provide
themselves with Canadian Insurance. The IIB is reinstated every time the
international assailant enters the country. Damage to the driver's own
vehicle is optional - one notable exception to this is in <a href="http://en.wikipedia.org/wiki/Saskatchewan" title="Saskatchewan">Saskatchewan</a>, where <a href="http://en.wikipedia.org/wiki/Saskatchewan_Government_Insurance" title="Saskatchewan Government Insurance">SGI</a> provides collision coverage (less than a $1000 <a href="http://en.wikipedia.org/wiki/Deductible" title="Deductible">deductible</a>, such as a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Collision_damage_waiver" title="Collision damage waiver">collision damage waiver</a>)
as part of its basic insurance policy. In Saskatchewan, residents have
the option to have their auto insurance through a tort system but less
than 0.5% of the population have taken this option.<br />
<br />
<h3>
<span class="mw-headline" id="Germany">Germany</span></h3>
Since 1939, it has been compulsory to have third party personal
insurance before keeping a motor vehicle in all federal states of <a href="http://en.wikipedia.org/wiki/Germany" title="Germany">Germany</a>.
Besides, every vehicle owner is free to take out a comprehensive
insurance policy. All types of car insurances are provided by several
private insurers. The amount of insurance contribution is determined by
several criteria, like the region, the type of car or the personal way
of driving.<br />
<br />
The minimum coverage defined by Germany law for car liability insurance / third party personal insurance is:<br />
7.5 Million Euro for bodily injury (damage to people), 1 Million Euro
for property damage and 50,000 Euro for financial/fortune loss which is
in no direct or indirect coherence with bodily injury or property
damage. Indeed Insurance Companies usually offer all-in/combined single
limit insurances of 50 Million Euro or 100 Million Euro (about 141
Million Dollar) for bodily injury, property damage and other
financial/fortune loss (usually with a bodily injury coverage limitation
of 8 to 15 Million Euro for EACH bodily injured person).<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/marine-insurance.html" target="_blank">Vehicle insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Vehicle_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-34513143860092805872012-07-20T03:31:00.001-07:002012-07-20T03:47:53.698-07:00Marine insurance<b style="background-color: white;">Marine insurance</b><span style="background-color: white;"> covers the loss or damage of ships, cargo,
terminals, and any transport or cargo by which property is transferred,
acquired, or held between the points of origin and final destination..</span><br />
<br />
Cargo insurance — discussed here — is a sub-branch of marine
insurance, though Marine also includes Onshore and Offshore exposed
property (container terminals, ports, <a href="http://en.wikipedia.org/wiki/Oil_platform" title="Oil platform">oil platforms</a>, pipelines); Hull; Marine Casualty; and Marine Liability.<br />
<br />
<h2>
<span class="mw-headline" id="Origins_of_formal_marine_insurance" style="font-size: small;">Origins of formal marine insurance</span></h2>
Maritime insurance was the earliest well-developed kind of <a href="http://en.wikipedia.org/wiki/Insurance" title="Insurance">insurance</a>, with origins in the Greek and Roman maritime loan. Separate marine insurance contracts were developed in <a href="http://en.wikipedia.org/wiki/Genoa" title="Genoa">Genoa</a>
and other Italian cities in the fourteenth century and spread to
northern Europe. Premiums varied with intuitive estimates of the
variable risk from seasons and pirates.<br />
<br />
The modern origins of marine insurance law in English law were in the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Law_merchant" title="Law merchant">law merchant</a>, with the establishment in <a href="http://en.wikipedia.org/wiki/England" title="England">England</a> in 1601 of a specialized chamber of assurance separate from the other Courts. <a href="http://en.wikipedia.org/wiki/William_Murray,_1st_Earl_of_Mansfield" title="William Murray, 1st Earl of Mansfield">Lord Mansfield</a>, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Lord_Chief_Justice" title="Lord Chief Justice">Lord Chief Justice</a> in the mid-eighteenth century, began the merging of law merchant and <a href="http://en.wikipedia.org/wiki/Common_law" title="Common law">common law</a> principles. The establishment of <a href="http://en.wikipedia.org/wiki/Lloyd%27s_of_London" title="Lloyd's of London">Lloyd's of London</a>, competitor insurance companies, a developing infrastructure of specialists (such as <a href="http://en.wikipedia.org/wiki/Shipbroking" title="Shipbroking">shipbrokers</a>, <a href="http://en.wikipedia.org/wiki/Admiralty_law" title="Admiralty law">admiralty</a> lawyers, bankers, surveyors, loss adjusters, general average adjusters, <i>et al</i>), and the growth of the <a href="http://en.wikipedia.org/wiki/British_Empire" title="British Empire">British Empire</a>
gave English law a prominence in this area which it largely maintains
and forms the basis of almost all modern practice. The growth of the
London insurance market led to the standardization of policies and
judicial <a href="http://en.wikipedia.org/wiki/Precedent" title="Precedent">precedent</a> further developed marine insurance law. In 1906 the Marine Insurance Act was passed which <a href="http://en.wikipedia.org/wiki/Codification_%28law%29" title="Codification (law)">codified</a>
the previous common law; it is both an extremely thorough and concise
piece of work. Although the title of the Act refers to marine insurance,
the general principles have been applied to all non-life insurance.<br />
<a name='more'></a><br />
In the 19th century, Lloyd's and the Institute of London Underwriters
(a grouping of London company insurers) developed between them
standardized clauses for the use of marine insurance, and these have
been maintained since. These are known as the Institute Clauses because
the Institute covered the cost of their publication.<br />
<br />
Within the overall guidance of the Marine Insurance Act and the
Institute Clauses parties retain a considerable freedom to contract
between themselves.<br />
<br />
Marine insurance is the oldest type of insurance. Out of it grew non-marine insurance and <a href="http://en.wikipedia.org/wiki/Reinsurance" title="Reinsurance">reinsurance</a>.
It traditionally formed the majority of business underwritten at
Lloyd's. Nowadays, Marine insurance is often grouped with Aviation and
Transit (cargo) risks, and in this form is known by the acronym "MAT".<br />
<br />
<br />
<h2>
<span class="mw-headline" id="Practice">Practice</span></h2>
The Marine Insurance Act includes, as a schedule, a standard policy
(known as the "SG form"), which parties were at liberty to use if they
wished. Because each term in the policy had been tested through at least
two centuries of judicial precedent, the policy was extremely thorough.
However, it was also expressed in rather archaic terms. In 1991, the
London market produced a new standard policy wording known as the MAR 91
form and using the Institute Clauses. The MAR form is simply a general
statement of insurance; the Institute Clauses are used to set out the
detail of the insurance cover. In practice, the policy document usually
consists of the MAR form used as a cover, with the Clauses stapled to
the inside. Typically each clause will be stamped, with the stamp
overlapping both onto the inside cover and to other clauses; this
practice is used to avoid the substitution or removal of clauses.<br />
<br />
Because marine insurance is typically underwritten on a subscription basis, the MAR form begins: <i>We, the Underwriters, agree to bind ourselves each for his own part and not one for another [...]</i>. In legal terms, liability under the policy is <a href="http://en.wikipedia.org/wiki/Joint_and_several_liability" title="Joint and several liability"><b>several</b> and not <b>joint</b></a>,
i.e., the underwriters are all liable together, but only for their
share or proportion of the risk. If one underwriter should default, the
remainder are not liable to pick his share of the claim.<br />
<br />
Typically, marine insurance is split between the vessels and the
cargo. Insurance of the vessels is generally known as "Hull and
Machinery" (H&M). A more restricted form of cover is "Total Loss
Only" (TLO), generally used as a reinsurance, which only covers the
total loss of the vessel and not any partial loss.<br />
<br />
Cover may be on either a "voyage" or "time" basis. The "voyage" basis
covers transit between the ports set out in the policy; the "time"
basis covers a period of time, typically one year, and is more common.<br />
<br />
<br />
<h2>
<span class="mw-headline" id="Protection_and_indemnity">Protection and indemnity</span></h2>
<div class="rellink relarticle mainarticle">
Main article: <a href="http://en.wikipedia.org/wiki/Protection_and_indemnity_insurance" title="Protection and indemnity insurance">Protection and indemnity insurance</a></div>
<div class="rellink relarticle mainarticle">
<br /></div>
A marine policy typically covered only three-quarter of the insured's
liabilities towards third parties. The typical liabilities arise in
respect of collision with another ship, known as "running down"
(collision with a fixed object is an "harbour"), and wreck removal (a
wreck may serve to block a harbour, for example).<br />
<br />
In the 19th century, shipowners banded together in <a href="http://en.wikipedia.org/wiki/Mutual_insurance" title="Mutual insurance">mutual underwriting clubs</a> known as <a href="http://en.wikipedia.org/wiki/Protection_and_indemnity_insurance" title="Protection and indemnity insurance">Protection and Indemnity Clubs</a>
(P&I), to insure the remaining one-quarter liability amongst
themselves. These Clubs are still in existence today and have become the
model for other specialized and noncommercial marine and non-marine
mutuals, for example in relation to oil pollution and nuclear risks.<br />
Clubs work on the basis of agreeing to accept a shipowner as a member
and levying an initial "call" (premium). With the fund accumulated,
reinsurance will be purchased; however, if the loss experience is
unfavourable one or more "supplementary calls" may be made. Clubs also
typically try to build up reserves, but this puts them at odds with
their mutual status.<br />
<br />
Because liability regimes vary throughout the world, insurers are usually careful to limit or exclude American <a href="http://en.wikipedia.org/wiki/Merchant_Marine_Act_of_1920" title="Merchant Marine Act of 1920">Jones Act</a> liability.<br />
<br />
<br />
<h2>
<span class="mw-headline" id="Actual_total_loss_and_constructive_total_loss">Actual total loss and constructive total loss</span></h2>
These two terms are used to differentiate the degree of proof where a
vessel or cargo has been lost. An actual total loss occurs where the
damages or cost of repair clearly equal or exceed the value of the
property. A constructive total loss is a situation where the cost of
repairs plus the cost of salvage equal or exceed the value.<br />
<br />
The use of these terms is contingent on there being property
remaining to assess damages, which is not always possible in losses to
ships at sea or in total theft situations. In this respect, marine
insurance differs from non-marine insurance, where the insured is
required to prove his loss. Traditionally, in law, marine insurance was
seen as an insurance of "the adventure", with insurers having a stake
and an interest in the vessel and/or the cargo rather than simply an
interest in the financial consequences of the subject-matter's survival.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article </a></b> <span style="color: #0000ee;"><b><u><a href="http://wikipediaarticles.blogspot.com/2012/07/wikipedia-articleinsurance.html" target="_blank">Marine insurance</a></u></b></span>,<a href="http://en.wikipedia.org/wiki/Marine_insurance" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-31372569963158389492012-07-13T09:35:00.001-07:002012-07-20T03:48:06.693-07:00Wikipedia article:Subprime lendingIn <a href="http://en.wikipedia.org/wiki/Finance" title="Finance">finance</a>, <b>subprime lending</b> (also referred to as <b>near-prime</b>, <b>non-prime</b>, and <b>second-chance lending</b>) means making <a href="http://en.wikipedia.org/wiki/Loan" title="Loan">loans</a>
to people who may have difficulty maintaining the repayment schedule.
These loans are characterized by higher interest rates and less
favorable terms in order to compensate for higher credit risk.<sup class="reference" id="cite_ref-0"></sup><br />
<sup class="reference" id="cite_ref-0"></sup><br />
Proponents of subprime lending maintain that the practice extends
credit to people who would otherwise not have access to the credit
market. Professor Harvey S. Rosen of <a href="http://en.wikipedia.org/wiki/Princeton_University" title="Princeton University">Princeton University</a>
explained, "The main thing that innovations in the mortgage market have
done over the past 30 years is to let in the excluded: the young, the
discriminated-against, the people without a lot of money in the bank to
use for a down payment."<sup class="reference" id="cite_ref-1"></sup><br />
<sup class="reference" id="cite_ref-1"><br /></sup><br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Defining_subprime_risk">Defining subprime risk</span></span></h2>
The term subprime refers to the credit quality of particular
borrowers, who have weakened credit histories and a greater risk of loan
default than prime borrowers.<sup class="reference" id="cite_ref-2"></sup>As people become economically active, records are created relating to
their borrowing, earning and lending history. This is called a <a href="http://en.wikipedia.org/wiki/Credit_rating" title="Credit rating">credit rating</a>, and although covered by <a href="http://en.wikipedia.org/wiki/Privacy_law" title="Privacy law">privacy laws</a>
the information is readily available to people with a need to know (in
some countries, loan applications specifically allow the lender to
access such records). Subprime borrowers have credit ratings that might
include:<br />
<ul>
<li>limited debt experience (so the lender's assessor simply does not know, and assumes the worst), or</li>
<li>no possession of property <a href="http://en.wikipedia.org/wiki/Asset" title="Asset">assets</a> that could be used as <a href="http://en.wikipedia.org/wiki/Collateral_%28finance%29" title="Collateral (finance)">security</a> (for the lender to sell in case of default)</li>
<li>excessive debt (the known income of the individual or family is
unlikely to be enough to pay living expenses + interest + repayment),</li>
<li>a history of late or sometimes missed payments (morose debt<sup class="Template-Fact" style="white-space: nowrap;">[<i><a href="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources from June 2011">citation needed</span></a></i>]</sup>) so that the loan period had to be extended,</li>
<li>failures to pay debts completely (default debt), and</li>
<li>any legal judgments such as "orders to pay" or <a href="http://en.wikipedia.org/wiki/Bankruptcy" title="Bankruptcy">bankruptcy</a> (sometimes known in Britain as <a class="mw-redirect" href="http://en.wikipedia.org/wiki/County_Court_Judgement" title="County Court Judgement">county court judgements</a> or CCJs).</li>
</ul>
Lenders' standards for determining risk categories may also consider
the size of the proposed loan, and also take into account the way the
loan and the repayment plan is structured, if it is a conventional <a href="http://en.wikipedia.org/wiki/Installment_loan" title="Installment loan">repayment loan</a>, a <a href="http://en.wikipedia.org/wiki/Mortgage_loan" title="Mortgage loan">mortgage loan</a>, an <a href="http://en.wikipedia.org/wiki/Endowment_mortgage" title="Endowment mortgage">endowment mortgage</a>, an <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Interest_only_loan" title="Interest only loan">interest only loan</a>, a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Standard_repayment" title="Standard repayment">standard repayment</a> loan, an <a href="http://en.wikipedia.org/wiki/Amortizing_loan" title="Amortizing loan">amortized loan</a>, a <a href="http://en.wikipedia.org/wiki/Credit_card" title="Credit card">credit card</a>
limit or some other arrangement. The originator is also taken into
consideration. Because of this, it was possible for a loan to a borrower
with "prime" characteristics (e.g. high credit score, low debt) to be
classified as subprime.<br />
<a name='more'></a><br />
<h2>
<a href="http://wikipediaarticles.blogspot.com/2012/07/wikipedia-articlestudent-loan.html"><span style="font-size: small;"><span class="mw-headline" id="Student_loans">Student loans</span></span></a></h2>
In some countries student loans are considered
subprime, perhaps because of school drop-outs. In America, the amount
of student loan debt recently surpassed credit card debt. In other
countries such loans are <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Underwritten" title="Underwritten">underwritten</a>
by governments or sponsors. Many student loans are structured in
special ways because of the difficulty of predicting students' future
earnings. These structures may be in the form of <a href="http://en.wikipedia.org/wiki/Soft_loan" title="Soft loan">soft loans</a>, <a href="http://en.wikipedia.org/wiki/Income-Sensitive_Repayment" title="Income-Sensitive Repayment">income-sensitive repayment</a> loans, <a href="http://en.wikipedia.org/wiki/Income-Contingent_Repayment" title="Income-Contingent Repayment">income-contingent repayment</a>
loans and so on. Because student loans provide repayment records for
credit rating, and may also indicate their earning potential, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Student_loan_default" title="Student loan default">student loan default</a> can cause serious problems later in life as an individual wishes to make a substantial purchase on credit such as <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Auto_loan" title="Auto loan">purchasing a vehicle</a>
or buying a house, since defaulters are likely to be classified as
subprime, which means the loan may be refused or more difficult to
arrange and certainly more expensive than for someone with a perfect
repayment record.<br />
<sup class="reference" id="cite_ref-3"><br /></sup><br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="United_States">United States</span></span></h2>
Although there is no single, standard definition, in the <a href="http://en.wikipedia.org/wiki/United_States" title="United States">United States</a> subprime loans are usually classified as those where the borrower has a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/FICO_score" title="FICO score">FICO score</a> below 640. The term was popularized by the media during the <a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis" title="Subprime mortgage crisis">subprime mortgage crisis</a> or "credit crunch" of 2007. Those loans which do not meet <a href="http://en.wikipedia.org/wiki/Fannie_Mae" title="Fannie Mae">Fannie Mae</a> or <a href="http://en.wikipedia.org/wiki/Freddie_Mac" title="Freddie Mac">Freddie Mac</a> <a href="http://en.wikipedia.org/wiki/Underwriting" title="Underwriting">underwriting</a> guidelines for prime mortgages are called "non-conforming" loans.<br />
A borrower with an outstanding record of repayment on time and in
full will get what is called an A-paper loan. Borrowers with
less-than-perfect credit 'scores' might be rated as meriting an A-minus,
B-paper, C-paper or D-paper loan, with interest payments progressively
increased for less reliable payers to allow the company to 'share the
risk' of default equitably among all its borrowers. The value of U.S.
subprime mortgages was estimated at $1.3 trillion as of March 2007,<sup class="reference" id="cite_ref-4"><a href="http://en.wikipedia.org/wiki/Sub_prime_lending#cite_note-4"></a></sup> with over 7.5 million first-<a href="http://en.wikipedia.org/wiki/Lien" title="Lien">lien</a> subprime mortgages outstanding.<sup class="reference" id="cite_ref-5"></sup><br />
<sup class="reference" id="cite_ref-5"><br /></sup><br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Subprime_crisis">Subprime crisis</span></span></h2>
<div class="rellink relarticle mainarticle">
</div>
<div class="rellink relarticle mainarticle">
Main article: <a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis" title="Subprime mortgage crisis">Subprime mortgage crisis</a></div>
<div class="rellink relarticle mainarticle">
</div>
The <a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis" title="Subprime mortgage crisis">subprime mortgage crisis</a>
arose from 'bundling' American subprime and American regular mortgages
which were traditionally isolated from, and sold in a separate market
from <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Prime_loan" title="Prime loan">prime loans</a>. These 'bundles' of mixed (prime and subprime) mortgages were the basis <a href="http://en.wikipedia.org/wiki/Asset-backed_security" title="Asset-backed security">asset-backed securities</a>
so the 'probable' rate of return looked superb (since subprime lenders
pay higher premiums, and the loans were anyway secured against saleable
real-estate, and so, theoretically 'could not fail'). Many mortgages had
a low interest for the first year, and poorer buyers 'swapped'
regularly at first, but finally such borrowers began to default in large
numbers. The inflated <a href="http://en.wikipedia.org/wiki/Real_estate_bubble" title="Real estate bubble">house-price bubble</a>
burst, property valuations plummeted and the real rate of return on
investment could not be estimated, and so confidence in these
instruments collapsed, and all were considered to be almost worthless <a href="http://en.wikipedia.org/wiki/Toxic_asset" title="Toxic asset">toxic assets</a>, regardless of their actual composition or performance.<br />
<br />
To avoid high initial mortgage payments, many subprime borrowers took out <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Adjustable-rate_mortgages" title="Adjustable-rate mortgages">adjustable-rate mortgages</a>
(or ARMs) that give them a lower initial interest rate. But with
potential annual adjustments of 2% or more per year, these loans can end
up costing much more. So a $500,000 loan at a 4% interest rate for 30
years equates to a payment of about $2,400 a month. But the same loan at
10% for 27 years (after the adjustable period ends) equates to a
payment of $4,220. A 6-percentage-point increase (from 4% to 10%) in the
rate caused slightly more than a 75% increase in the payment.<sup class="reference" id="cite_ref-6"><a href="http://en.wikipedia.org/wiki/Sub_prime_lending#cite_note-6">[7]</a></sup>
This is even more apparent when the lifetime cost of the loan is
considered (though most people will want to refinance their loans
periodically). The total cost of the above loan at 4% is $864,000, while
the higher rate of 10% would incur a lifetime cost of $1,367,280.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Credit" target="_blank"><b>Subprime lending</b></a>,<a href="http://en.wikipedia.org/wiki/Sub_prime_lending" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-68567826747991808082012-07-13T09:29:00.000-07:002012-07-13T09:31:16.208-07:00Wikipedia article:Social Credit<b>Social credit</b> is an economic philosophy developed by <a href="http://en.wikipedia.org/wiki/C._H._Douglas" title="C. H. Douglas">C. H. Douglas</a> (1879–1952), a British engineer, who wrote a book by that name in 1924. Social Credit is described by Douglas<sup class="reference" id="cite_ref-0"></sup> as "the policy of a philosophy"; he called his philosophy "practical Christianity". This philosophy is <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Interdisciplinary" title="Interdisciplinary">interdisciplinary</a> in nature, encompassing the fields of economics, <a href="http://en.wikipedia.org/wiki/Political_science" title="Political science">political science</a>, history, accounting and <a href="http://en.wikipedia.org/wiki/Physics" title="Physics">physics</a>. Assuming the only safe place for power is in many hands, social credit is a <a href="http://en.wikipedia.org/wiki/Distributism" title="Distributism">distributive</a>
philosophy, and its policy is to disperse power to individuals. Social
Credit philosophy is best summed by Douglas when he said, "Systems were
made for men, and not men for systems, and the interest of man which is <a href="http://en.wikipedia.org/wiki/Personal_development" title="Personal development">self-development</a>, is above all systems, whether theological, political or economic."<sup class="reference" id="cite_ref-1"></sup>
Douglas said that Social Crediters want to build a new civilization
based upon absolute economic security for the individual—where “...they
shall sit every man under his vine and under his <a href="http://en.wikipedia.org/wiki/Figs_in_the_Bible" title="Figs in the Bible">fig tree</a>; and none shall make them afraid.<sup class="reference" id="cite_ref-2"></sup><sup class="reference" id="cite_ref-3"></sup>
In other words, Douglas did not seek to build a utopia, but to set the
conditions upon which each individual can build their own utopia.<sup class="reference" id="cite_ref-The_Necessity_for_a_National_rather_than_an_International_Financial_System_4-0"></sup><br />
<sup class="reference" id="cite_ref-The_Necessity_for_a_National_rather_than_an_International_Financial_System_4-0"></sup><br />
It was while he was reorganising the work at Farnborough during World
War I that Douglas noticed that the weekly total costs of goods
produced was greater than the sums paid out to workers for wages,
salaries and dividends. This seemed to contradict the theory put forth
by classic <a href="http://en.wikipedia.org/wiki/Ricardian_economics" title="Ricardian economics">Ricardian economics</a>,
that all costs are distributed simultaneously as purchasing power.
Troubled by the seeming disconnect between the way money flowed and the
objectives of industry ("delivery of goods and services", in his view),
Douglas set out to apply engineering methods to the economic system.<br />
<br />
Douglas collected data from over a hundred large British businesses
and found that in every case, except that of companies heading for
bankruptcy, the sums paid out in salaries, wages and dividends were
always less than the total costs of goods and services produced each
week: the workers were not paid enough to buy back what they had made.
He published his observations and conclusions in an article in the <i>English Review</i>
where he suggested: "That we are living under a system of accountancy
which renders the delivery of the nation's goods and services to itself a
technical impossibility."<sup class="reference" id="cite_ref-5"></sup>
He later formalized this observation in his A+B theorem. The theorem
divides a company's payments into two categories: A = income, and B =
payments to other organizations. Prices equal A+B, but income only
equals A in any cycle of production and consumption. Since income (A) is
always less than total prices (A+B), he believed the theorem
demonstrated that people's income is always insufficient to buy back all
of production: the consequence of which is ever increasing debt.<br />
<a name='more'></a><br />
Douglas proposed to eliminate this gap between total prices and total
incomes by augmenting consumers' purchasing power through a National
Dividend and a Compensated Price Mechanism. According to Douglas, the
true purpose of <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Production,_costs,_and_pricing" title="Production, costs, and pricing">production</a> is <a href="http://en.wikipedia.org/wiki/Consumption_%28economics%29" title="Consumption (economics)">consumption</a>,
and production must serve the genuine, freely expressed interests of
consumers. Each citizen is to have a beneficial, not direct, inheritance
in the communal <a href="http://en.wikipedia.org/wiki/Capital_%28economics%29" title="Capital (economics)">capital</a>
conferred by complete and dynamic access to the fruits of industry
(consumer goods) assured by the National Dividend and Compensated Price.<sup class="reference" id="cite_ref-Douglas_CP.26D_6-0"></sup> Consumers, fully provided with adequate <a href="http://en.wikipedia.org/wiki/Purchasing_power" title="Purchasing power">purchasing power</a>, will establish the policy of <a href="http://en.wikipedia.org/wiki/Manufacturing" title="Manufacturing">production</a> through exercise of their monetary vote.<sup class="reference" id="cite_ref-Douglas_CP.26D_6-1"></sup> In this view, the term <a href="http://en.wikipedia.org/wiki/Economic_democracy" title="Economic democracy">economic democracy</a> does not mean <a href="http://en.wikipedia.org/wiki/Workers%27_control" title="Workers' control">worker control</a> of industry.<sup class="reference" id="cite_ref-Douglas_CP.26D_6-2"></sup> Removing the policy of production from <a href="http://en.wikipedia.org/wiki/Financial_institution" title="Financial institution">banking institutions</a>, government, and industry, Social Credit envisages an "<a href="http://en.wikipedia.org/wiki/Aristocracy" title="Aristocracy">aristocracy</a> of producers, serving and <a href="http://en.wikipedia.org/wiki/Accreditation" title="Accreditation">accredited</a> by a democracy of consumers."<sup class="reference" id="cite_ref-Douglas_CP.26D_6-3"></sup><br />
<sup class="reference" id="cite_ref-Douglas_CP.26D_6-3"></sup><br />
The policy proposals of social credit attracted widespread interest
in the decades between the world wars of the twentieth century because
of their relevance to economic conditions of the time. Douglas called
attention to the excess of production capacity over consumer purchasing
power, an observation that was also made by <a href="http://en.wikipedia.org/wiki/John_Maynard_Keynes" title="John Maynard Keynes">John Maynard Keynes</a> in his book, <i><a href="http://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money" title="The General Theory of Employment, Interest and Money">The General Theory of Employment, Interest and Money</a></i>.<sup class="reference" id="cite_ref-Keynes_General_Theory_7-0"></sup>
While Douglas shared some of Keynes' criticisms of classical economics,
his unique remedies were disputed and even rejected by most economists
and bankers of the time. Remnants of Social Credit still exist within <a href="http://en.wikipedia.org/wiki/Social_Credit_Party" title="Social Credit Party">social credit parties</a> throughout the world, but not in the purest form originally advanced by Major C. H. Douglas.<br />
<br />
<h3>
<span style="font-size: small;"><span class="mw-headline" id="Factors_of_Production_and_Value">Factors of Production and Value</span></span></h3>
<br />
Douglas disagreed with <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Classical_economists" title="Classical economists">classical economists</a> who divided the <a href="http://en.wikipedia.org/wiki/Factors_of_production" title="Factors of production">factors of production</a> into only <a href="http://en.wikipedia.org/wiki/Land_%28economics%29" title="Land (economics)">land</a>, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Labour_%28economics%29" title="Labour (economics)">labour</a> and <a href="http://en.wikipedia.org/wiki/Physical_capital" title="Physical capital">capital</a>. While Douglas did not deny these factors in production, he believed the “<a href="http://en.wikipedia.org/wiki/Cultural_heritage" title="Cultural heritage">cultural inheritance of society</a>”
was the primary factor. Cultural inheritance is defined as the
knowledge, technique and processes that have been handed down to us
incrementally from the origins of civilization. Consequently, mankind
does not have to keep “<a href="http://en.wikipedia.org/wiki/Reinventing_the_wheel" title="Reinventing the wheel">reinventing the wheel</a>”. “We are merely the administrators of that cultural inheritance, and to that extent the cultural inheritance is the <a href="http://en.wikipedia.org/wiki/Property" title="Property">property</a> of all of us, without exception.”<sup class="reference" id="cite_ref-8"></sup> <a href="http://en.wikipedia.org/wiki/Adam_Smith" title="Adam Smith">Adam Smith</a>, <a href="http://en.wikipedia.org/wiki/David_Ricardo" title="David Ricardo">David Ricardo</a> and <a href="http://en.wikipedia.org/wiki/Karl_Marx" title="Karl Marx">Karl Marx</a> claimed that <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Labour_theory_of_value" title="Labour theory of value">labour creates all value</a>.
While Douglas did not deny that all costs are ultimately due to labour
charges of some sort (past or present), he denied that the present
labour of the world creates all wealth. Douglas was careful to
distinguish between <a href="http://en.wikipedia.org/wiki/Value_%28economics%29" title="Value (economics)">value</a>, <a href="http://en.wikipedia.org/wiki/Historical_cost" title="Historical cost">costs</a> and <a href="http://en.wikipedia.org/wiki/Price" title="Price">prices</a>.
He claimed that one of the factors leading to a misdirection of thought
in terms of the nature and function of money was economists' obsession
over values and their relation to prices and incomes.<sup class="reference" id="cite_ref-9"></sup>While Douglas recognized <a href="http://en.wikipedia.org/wiki/Use_value" title="Use value">"value in use"</a>
as a legitimate theory of values, he also claimed that values were
subjective and not capable of being measured in an objective manner.
Thus, he rejected the idea that the role of money is to act as a
standard, or measure, of value. Douglas believed that the role of money
is to act as a medium of communication by which consumers direct the
distribution of production.<br />
<br />
<h3>
<span style="font-size: small;"><span class="mw-headline" id="Economic_Sabotage">Economic Sabotage</span></span></h3>
<br />
Closely associated with the concept of our cultural inheritance is
the social credit theory of economic sabotage. While Douglas believed
the cultural heritage factor of production is primary in increasing
wealth, he also believed that economic sabotage is the primary factor
decreasing it. The word wealth derives from the Old English word <i>wela</i>,
or "well-being", and Douglas believed that all production should
increase personal well-being. Therefore, production that does not
directly increase personal well-being is waste, or economic sabotage.<br />
<blockquote>
"The economic effect of charging all the waste in industry to the
consumer so curtails his purchasing power that an increasing percentage
of the product of industry must be exported. The effect of this on the
worker is that he has to do many times the amount of work which should
be necessary to keep him in the highest standard of living, as a result
of an artificial inducement to produce things he does not want, which he
cannot buy, and which are of no use to the attainment of his internal
standard of well-being."<sup class="reference" id="cite_ref-dl.lib.brown.edu_10-0"></sup></blockquote>
By modern methods of accounting, the consumer is forced to pay for
all the costs of production, including waste. The economic effect of
charging the consumer with all waste in industry is that the consumer is
forced to do much more work than is necessary. Douglas believed that
wasted effort could be directly linked to confusion in regards to the
purpose of the economic system, and the belief that the economic system
exists to provide employment in order to distribute goods and services.<br />
<blockquote>
"But it may be advisable to glance at some of the proximate causes
operating to reduce the return for effort ; and to realise the origin of
most of the specific instances, it must be borne in mind that the
existing economic system distributes goods and services through the same
agency which induces goods and services, i.e., payment for work in
progress. In other words, if production stops, distribution stops, and,
as a consequence, a clear incentive exists to produce useless or
superfluous articles in order that useful commodities already existing
may be distributed. This perfectly simple reason is the explanation of
the increasing necessity of what has come to be called economic
sabotage ; the colossal waste of effort which goes on in every walk of
life quite unobserved by the majority of people because they are so
familiar with it ; a waste which yet so over-taxed the ingenuity of
society to extend it that the climax of war only occurred in the moment
when a culminating exhibition of organised sabotage was necessary to
preserve the system from spontaneous combustion."<sup class="reference" id="cite_ref-11"></sup></blockquote>
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Credit"><b>Social Credit</b></a>,<a href="http://en.wikipedia.org/wiki/Social_Credit" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-90590063343493437862012-07-13T09:23:00.001-07:002012-07-13T09:24:40.808-07:00Settlement (finance)<b>Settlement</b> of securities is a <a href="http://en.wikipedia.org/wiki/Business_process" title="Business process">business process</a> whereby <a href="http://en.wikipedia.org/wiki/Security_%28finance%29" title="Security (finance)">securities</a> or interests in securities are delivered, usually against (<a href="http://en.wikipedia.org/wiki/Delivery_versus_payment" title="Delivery versus payment">in simultaneous exchange for</a>) <a href="http://en.wikipedia.org/wiki/Payment" title="Payment">payment</a> of money, to fulfill <a href="http://en.wikipedia.org/wiki/Contract" title="Contract">contractual</a> obligations, such as those arising under securities trades.<br />
<br />
In the U.S., the <a href="http://en.wikipedia.org/wiki/Settlement_date" title="Settlement date">settlement date</a>
for marketable stocks is usually 3 business days after the trade is
executed, and for listed options and government securities it is usually
1 day after the execution.<br />
<br />
As part of performance on the delivery obligations entailed by the
trade, settlement involves the delivery of securities and the
corresponding payment.<br />
<br />
A number of risks arise for the parties during the settlement interval, which are managed by the process of <a href="http://en.wikipedia.org/wiki/Clearing_%28finance%29" title="Clearing (finance)">clearing</a>,
which follows trading and precedes settlement. Clearing involves
modifying those contractual obligations so as to facilitate settlement,
often by <a href="http://en.wikipedia.org/wiki/Netting" title="Netting">netting</a> and <a href="http://en.wikipedia.org/wiki/Novation" title="Novation">novation</a>.<br />
<br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Nature_of_settlement">Nature of settlement</span></span></h2>
Settlement involves the delivery of securities from one party to
another. Delivery usually takes place against payment, but some
deliveries are made without a corresponding payment (sometimes referred
to as a <i>free delivery</i>). Examples of a delivery without payment
are the delivery of securities collateral against a loan of securities,
and a delivery made pursuant to a <a href="http://en.wikipedia.org/wiki/Margin_%28finance%29#Margin_call" title="Margin (finance)">margin call</a>.<br />
<br />
<a name='more'></a><h3>
<span style="font-size: small;"><span class="mw-headline" id="Traditional_.28physical.29_settlement">Traditional (physical) settlement</span></span></h3>
Prior to modern financial market technologies and methods such as <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Central_Securities_Depository" title="Central Securities Depository">depositories</a>
and securities held in electronic form, securities settlement had
involved the physical movement of paper instruments, or certificates and
transfer forms. Payment was usually made by paper <a href="http://en.wikipedia.org/wiki/Cheque" title="Cheque">check</a> upon receipt by the <a class="extiw" href="http://en.wiktionary.org/wiki/registrar" title="wikt:registrar">registrar</a> or <a href="http://en.wikipedia.org/wiki/Transfer_agent" title="Transfer agent">transfer agent</a>
of properly negotiated certificates and other requisite documents.
Physical settlement securities still exist in modern markets today
mostly for private (restricted or unregistered) securities as opposed to
those of publicly (exchange) traded securities, however payment of
money today is typically made via <a href="http://en.wikipedia.org/wiki/Electronic_funds_transfer" title="Electronic funds transfer">electronic funds transfer</a> (in the U.S., a bank <a href="http://en.wikipedia.org/wiki/Wire_transfer" title="Wire transfer">wire transfer</a> made through the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Federal_Reserve" title="Federal Reserve">Federal Reserve</a>'s <a href="http://en.wikipedia.org/wiki/Fedwire" title="Fedwire">Fedwire</a>
system). Physical/paper settlement involves higher risks, inasmuch as
paper instruments, certificates, and transfer forms are subject to risks
electronic media are not more or less such as loss, theft, counterfeit,
and forgery (see <a href="http://en.wikipedia.org/wiki/Indirect_holding_system" title="Indirect holding system">indirect holding system</a>).<br />
<br />
The U.S. securities markets experienced what became known as "the
paper crunch," as settlement delays threatened to disrupt the operations
of the securities markets which led to the formation of electronic
settlement via a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Central_Securities_Depository" title="Central Securities Depository">Central Securities Depository</a>, specifically <a class="mw-redirect" href="http://en.wikipedia.org/wiki/The_Depository_Trust_Company" title="The Depository Trust Company">the Depository Trust Company</a> (<a href="http://en.wikipedia.org/wiki/DTC" title="DTC">DTC</a>), and ultimately its parent, the <a href="http://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation" title="Depository Trust & Clearing Corporation">Depository Trust & Clearing Corporation</a>. In the <a href="http://en.wikipedia.org/wiki/United_Kingdom" title="United Kingdom">United Kingdom</a>,
the weakness of paper-based settlement was exposed by a programme of
privatisation of nationalised industries in the 1980s, and the <a href="http://en.wikipedia.org/wiki/Big_Bang_%28financial_markets%29" title="Big Bang (financial markets)">Big Bang of 1986</a>
led to an explosion in the volume of trades, and settlement delays
became significant. In the market crash of 1987, many investors sought
to limit their losses by selling their securities, but found that the
failure of timely settlement left them exposed.<br />
<br />
<h3>
<span style="font-size: small;"><span class="mw-headline" id="Electronic_settlement">Electronic settlement</span></span></h3>
<br />
The electronic settlement system came about largely as a result of <i>Clearance and Settlement Systems in the World's Securities Markets</i>, a major report in 1989 by the Washington-based think tank, the <a href="http://en.wikipedia.org/wiki/Group_of_Thirty" title="Group of Thirty">Group of Thirty</a>.
This report made nine recommendations with a view to achieving more
efficient settlement. This was followed up in 2003 with a report, <a class="external text" href="http://www.group30.org/rpt_12.shtml" rel="nofollow">Clearing and Settlement: A Plan of Action</a>, with 20 recommendations.<br />
<br />
In an electronic settlement system, electronic settlement takes place
between participants. If a non-participant wishes to settle its
interests, it must do so through a participant acting as a custodian.
The interests of participants are recorded by <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Credit_%28accounting%29" title="Credit (accounting)">credit</a>
entries in securities accounts maintained in their names by the
operator of the system. It permits both quick and efficient settlement
by removing the need for paperwork, and the simultaneous delivery of
securities with the payment of a corresponding cash sum (called <a href="http://en.wikipedia.org/wiki/Delivery_versus_payment" title="Delivery versus payment">delivery versus payment</a>, or DVP) in the agreed upon currency.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Credit" target="_blank"><b>Settlement (finance)</b></a>,<a href="http://en.wikipedia.org/wiki/Settlement_%28finance%29" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-40176219915685243222012-07-13T09:20:00.001-07:002012-07-13T09:20:13.885-07:00Wikipedia article:Revolving credit<b>Revolving credit</b> is a type of <a class="new" href="http://en.wikipedia.org/w/index.php?title=Debit_%28finance%29&action=edit&redlink=1" title="Debit (finance) (page does not exist)">credit</a> that does not have a fixed number of payments, in contrast to <a href="http://en.wikipedia.org/wiki/Installment_credit" title="Installment credit">installment credit</a>. Examples of revolving credits used by consumers include <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Credit_cards" title="Credit cards">credit cards</a>.
Corporate revolving credit facilities are typically used to provide
liquidity for a company's day-to-day operations. They were first
introduced by the <a href="http://en.wikipedia.org/wiki/Strawbridge%27s" title="Strawbridge's">Strawbridge and Clothier Department Store</a>.<sup class="reference" id="cite_ref-0"><span></span><span></span></sup><br />
<sup class="reference" id="cite_ref-0"><span><br /></span></sup><br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Typical_characteristics">Typical characteristics</span></span></h2>
<ul>
<li>Case study is required</li>
<li>The borrower may use or withdraw funds up to a pre-approved credit limit.</li>
<li>The amount of available credit decreases and increases as funds are borrowed and then repaid.</li>
<li>The credit may be used repeatedly.</li>
<li>The borrower makes payments based only on the amount they've actually used or withdrawn, plus interest.</li>
<li>The borrower may repay over time (subject to any minimum payment requirement), or in full at any time.</li>
<li>In some cases, the borrower is required to pay a fee to the lender
for any money that is undrawn on the revolver; this is especially true
of corporate bank loan revolving credit facilities.</li>
</ul>
A revolving loan facility provides a borrower with a maximum
aggregate amount of capital, available over a specified period of time.
However, unlike a term loan, the revolving loan facility allows the
borrower to drawdown, repay and re-draw loans advanced to it of the
available capital during the term of the facility. Each loan is borrowed
for a set period of time, usually one, three or six months, after which
time it is technically repayable. Repayment of a revolving loan is
achieved either by scheduled reductions in the total amount of the
facility over time, or by all outstanding loans being repaid on the date
of termination. A revolving loan made to refinance another revolving
loan which matures on the same date as the drawing of the second
revolving loan is known as a "rollover loan", if made in the same
currency and drawn by the same borrower as the first revolving loan. The
conditions to be satisfied for drawing a rollover loan are typically
less onerous than for other loans.<sup class="reference" id="cite_ref-1"><span></span><span></span></sup><br />
A revolving loan facility is a particularly flexible financing tool
as it may be drawn by a borrower by way of straightforward loans, but it
is also possible to incorporate different types of financial
accommodation within it - for example, it is possible to incorporate a
letter of credit facility, swingline facility or overdraft facility
within the terms of a revolving credit facility. This is often achieved
by creating a sublimit within the overall revolving facility, allowing a
certain amount of the lenders' commitment to be drawn in the form of
these different facilities.<sup class="reference" id="cite_ref-2"><span></span><span></span></sup><br />
<sup class="reference" id="cite_ref-0"><span><br /></span></sup><br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Credit" target="_blank"><b>Revolving credit</b></a>,<a href="http://en.wikipedia.org/wiki/Revolving_credit" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-72981687925870137522012-07-13T09:16:00.000-07:002012-07-13T09:16:57.196-07:00Wikipedia article:Predatory lending<b>Predatory lending</b> describes unfair, deceptive, or fraudulent practices of some <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Lenders" title="Lenders">lenders</a>
during the loan origination process. While there are no legal
definitions in the United States for predatory lending, an audit report
on predatory lending from the office of inspector general of the <a href="http://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation" title="Federal Deposit Insurance Corporation">FDIC</a> broadly defines predatory lending as <i>"imposing unfair and abusive loan terms on borrowers.</i> Though there are laws against many of the specific practices commonly
identified as predatory, various federal agencies use the term as a
catch-all term for many specific illegal activities in the <a href="http://en.wikipedia.org/wiki/Loan" title="Loan">loan</a> industry. Predatory lending should not be confused with <a href="http://en.wikipedia.org/wiki/Predatory_mortgage_servicing" title="Predatory mortgage servicing">predatory mortgage servicing</a>
which is used to describe the unfair, deceptive, or fraudulent
practices of lenders and servicing agents during the loan or mortgage
servicing process, post loan origination.<br />
<br />
One less contentious definition of the term is "the practice of a
lender deceptively convincing borrowers to agree to unfair and abusive
loan terms, or systematically violating those terms in ways that make it
difficult for the borrower to defend against."<sup class="reference" id="cite_ref-1"></sup> Other types of lending sometimes also referred to as predatory include <a href="http://en.wikipedia.org/wiki/Payday_loan" title="Payday loan">payday loans</a>, <a href="http://en.wikipedia.org/wiki/Credit_card" title="Credit card">credit cards</a> or other forms of <a href="http://en.wikipedia.org/wiki/Consumer_debt" title="Consumer debt">consumer debt</a>, and overdraft loans, when the interest rates are considered unreasonably high.<sup class="reference" id="cite_ref-2"></sup>
Although predatory lenders are most likely to target the less educated,
the poor, racial minorities, and the elderly, victims of predatory
lending are represented across all demographics.<br />
<br />
Predatory lending typically occurs on loans backed by some kind of <a href="http://en.wikipedia.org/wiki/Collateral_%28finance%29" title="Collateral (finance)">collateral</a>, such as a car or house, so that if the borrower <a href="http://en.wikipedia.org/wiki/Default_%28finance%29" title="Default (finance)">defaults</a> on the loan, the lender can repossess or foreclose and profit by selling the <a href="http://en.wikipedia.org/wiki/Repossession" title="Repossession">repossessed</a> or <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Foreclosed" title="Foreclosed">foreclosed</a>
property. Lenders may be accused of tricking a borrower into believing
that an interest rate is lower than it actually is, or that the
borrower's ability to pay is greater than it actually is. The lender, or
others as agents of the lender, may well profit from repossession or
foreclosure upon the collateral.<br />
<br />
<a name='more'></a><br />
<h2>
<span class="mw-headline" id="Abusive_or_unfair_lending_practices" style="font-size: small;">Abusive or unfair lending practices</span></h2>
There are many lending practices which have been called abusive and
labeled with the term "predatory lending." There is a great deal of
dispute between lenders and consumer groups as to what exactly
constitutes "unfair" or "predatory" practices, but the following are
sometimes cited.<br />
<ul>
<li><b>Unjustified <a href="http://en.wikipedia.org/wiki/Risk-based_pricing" title="Risk-based pricing">risk-based pricing</a>.</b>
This is the practice of charging more (in the form of higher interest
rates and fees) for extending credit to borrowers identified by the
lender as posing a greater credit risk. The lending industry argues that
risk-based pricing is a legitimate practice; since a greater percentage
of loans made to less creditworthy borrowers can be expected to go into
default, higher prices are necessary to obtain the same yield on the
portfolio as a whole. Some consumer groups argue that higher prices paid
by more vulnerable consumers cannot always be justified by increased
credit risk.</li>
</ul>
<ul>
<li><b>Single-premium <a href="http://en.wikipedia.org/wiki/Payment_protection_insurance" title="Payment protection insurance">credit insurance</a>.</b>
This is the purchase of insurance which will pay off the loan in case
the homebuyer dies. It is more expensive than other forms of insurance
because it does not involve any medical checkups, but customers almost
always are not shown their choices, because usually the lender is not
licensed to sell other forms of insurance. In addition, this insurance
is usually financed into the loan which causes the loan to be more
expensive, but at the same time encourages people to buy the insurance
because they do not have to pay up front.</li>
</ul>
<ul>
<li><b>Failure to present the loan price as negotiable.</b>
Many lenders will negotiate the price structure of the loan with
borrowers. In some situations, borrowers can even negotiate an outright
reduction in the interest rate or other charges on the loan. Consumer
advocates argue that borrowers, especially unsophisticated borrowers,
are not aware of their ability to negotiate and might even be under the
mistaken impression that the lender is placing the borrower's interests
above its own. Thus, many borrowers do not take advantage of their
ability to negotiate.</li>
</ul>
<ul>
<li><b>Failure to clearly and accurately disclose terms and conditions</b>,
particularly in cases where an unsophisticated borrower is involved.
Mortgage loans are complex transactions involving multiple parties and
dozens of pages of legal documents. In the most egregious of predatory
cases, lenders or brokers have been not only misled borrowers but also
actually altered documents after they have been signed.</li>
</ul>
<ul>
<li><b>Short-term loans with disproportionally high fees</b>, such as <a href="http://en.wikipedia.org/wiki/Payday_loan" title="Payday loan">payday loans</a>, credit card late fees, checking account overdraft fees, and <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Tax_Refund_Anticipation_Loan" title="Tax Refund Anticipation Loan">Tax Refund Anticipation Loans</a>,
where the fee paid for advancing the money for a short period of time
works out to an annual interest rate significantly in excess of the
market rate for high-risk loans. The originators of such loans dispute
that the fees are interest.</li>
</ul>
<ul>
<li><b><a class="new" href="http://en.wikipedia.org/w/index.php?title=Servicing_agent&action=edit&redlink=1" title="Servicing agent (page does not exist)">Servicing agent</a> and <a href="http://en.wikipedia.org/wiki/Securitization" title="Securitization">securitization</a> abuses.</b>
The mortgage servicing agent is the entity that receives the mortgage
payment, maintains the payment records, provides borrowers with account
statements, imposes late charges when the payment is late, and pursues
delinquent borrowers. A securitization is a financial transaction in
which assets, especially debt instruments, are pooled and securities
representing interests in the pool are issued. Most loans are subject to
being bundled and sold, and the rights to act as servicing agent sold,
without the consent of the borrower. A federal statute requires notice
to the borrower of a change in servicing agent, but does not protect the
borrower from being held delinquent on the <a href="http://en.wikipedia.org/wiki/Promissory_note" title="Promissory note">note</a>
for payments made to the servicing agent who fails to forward the
payments to the owner of the note, especially if that servicing agent
goes bankrupt, and borrowers who have made all payments on time can find
themselves being foreclosed on and becoming unsecured creditors of the
servicing agent.
Foreclosures can sometimes be conducted without proper notice to the
borrower. In some states (see Texas Rule of Civil Procedure 746), there
is no defense against eviction, forcing the borrower to move and incur
the expense of hiring a lawyer and finding another place to live while
litigating the claim of the "new owner" to own the house, especially
after it is resold one or more times. When the debtor demands, under the
<a href="http://en.wikipedia.org/wiki/Best_evidence_rule" title="Best evidence rule">best evidence rule</a>,
that the current claimed note owner produce the original note with the
debtor's signature on it, the note owner typically is unable or
unwilling to do so, and tries to establish his claim with an affidavit
that it is the owner, without proving it is the "holder in due course",
the traditional standard for a debt claim, and the courts often allow
them to do that. In the meantime, the note continues to be traded, its
physical whereabouts difficult to discover.</li>
</ul>
<h2>
<span class="mw-headline" id="Disputes_over_predatory_lending" style="font-size: small;">Disputes over predatory lending</span></h2>
The organization <a href="http://en.wikipedia.org/wiki/Association_of_Community_Organizations_for_Reform_Now" title="Association of Community Organizations for Reform Now">ACORN</a> claimed that predatory loans are usually made in poor and minority neighborhoods where better loans are not readily available. Organizations such as <a href="http://en.wikipedia.org/wiki/AARP" title="AARP">AARP</a>, <a href="http://en.wikipedia.org/wiki/Inner_City_Press" title="Inner City Press">Inner City Press</a>, and ACORN have worked to stop what they describe as predatory lending. ACORN has targeted specific companies such as <a href="http://en.wikipedia.org/wiki/HSBC_Finance" title="HSBC Finance">HSBC Finance</a> and <a href="http://en.wikipedia.org/wiki/H%26R_Block" title="H&R Block">H&R Block</a>, successfully forcing them to change their practices.<br />
<br />
On the other side of the issue are various subprime lending advocates, such as the <a class="new" href="http://en.wikipedia.org/w/index.php?title=National_Home_Equity_Mortgage_Association&action=edit&redlink=1" title="National Home Equity Mortgage Association (page does not exist)">National Home Equity Mortgage Association</a>
(NHEMA), which say many practices commonly called "predatory,"
particularly the practice of risk-based pricing, are not actually
predatory, and that many laws aimed at reducing "predatory lending"
significantly restrict the availability of mortgage finance to
lower-income borrowers. Such parties consider <i>predatory lending</i> a pejorative term.<br />
<br />
Some <a href="http://en.wikipedia.org/wiki/Subprime_lending" title="Subprime lending">subprime lending</a> practices have raised concerns about <a href="http://en.wikipedia.org/wiki/Mortgage_discrimination" title="Mortgage discrimination">mortgage discrimination</a> on the basis of race. African Americans and other minorities are being disproportionately led to <a href="http://en.wikipedia.org/wiki/Subprime_lending" title="Subprime lending">sub-prime mortgages</a> with higher interest rates than their white counterparts.
Even when median income levels were comparable, home buyers in minority
neighborhoods were more likely to get a loan from a subprime lender,
though not necessarily a sub-prime loan.<br />
<br />
In addition, studies by leading consumer groups have concluded that
women have become a key component to the subprime mortgage crunch.
Professor <a href="http://en.wikipedia.org/wiki/Anita_Hill" title="Anita Hill">Anita F. Hill</a>
wrote that a large percentage of first-time home buyers were women, and
that loan officers took advantage of the lack of financial knowledge of
many female loan applicants. Consumers believe that they are protected by consumer protection laws,
when their lender is really operating wholly outside the laws. Refer to
15 U.S.C. 1601 and 12 C.F.R. 226.<br />
<br />
Media investigations have disclosed that mortgage lenders used
bait-and-switch salesmanship and fraud to take advantage of borrowers
during the home-loan boom. In February 2005, for example, reporters <a href="http://en.wikipedia.org/wiki/Michael_Hudson_%28reporter%29" title="Michael Hudson (reporter)">Michael Hudson</a> and Scott Reckard broke a story in the Los Angeles Times about “boiler room” sales tactics at <a href="http://en.wikipedia.org/wiki/Ameriquest_Mortgage" title="Ameriquest Mortgage">Ameriquest Mortgage</a>,
the nation’s largest subprime lender. Hudson and Reckard cited
interviews and court statements by 32 former Ameriquest employees who
said the company had abused its customers and broken the law, “deceiving
borrowers about the terms of their loans, forging documents, falsifying
appraisals and fabricating borrowers' income to qualify them for loans
they couldn't afford.Ameriquest later agreed to pay a $325 million predatory lending settlement with state authorities across the nation.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Credit" target="_blank"><b>Predatory lending</b></a>,<a href="http://en.wikipedia.org/wiki/Predatory_lending" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-35840683103492423922012-07-13T09:08:00.001-07:002012-07-13T09:08:35.923-07:00Wikipedia article:Payday loanA <b>payday loan</b> (also called a <b>payday advance</b>) is a small, short-term, <a href="http://en.wikipedia.org/wiki/Loan" title="Loan">loan</a> secured against a customer's next pay check.<sup class="reference" id="cite_ref-0"><span></span><span></span></sup> The loans are also sometimes referred to as <b><a href="http://en.wikipedia.org/wiki/Cash_advance" title="Cash advance">cash advances</a></b>, though that term can also refer to cash provided against a prearranged line of credit such as a <a href="http://en.wikipedia.org/wiki/Credit_card" title="Credit card">credit card</a>. Pay day advance loans rely on the consumer having previous payroll and employment records. <a href="http://en.wikipedia.org/wiki/Legislation" title="Legislation">Legislation</a> regarding payday loans varies widely between different countries and, within the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/USA" title="USA">USA</a>, between different states.<br />
<br />
To prevent <a href="http://en.wikipedia.org/wiki/Usury" title="Usury">usury</a> (unreasonable and excessive rates of interest), some <a href="http://en.wikipedia.org/wiki/Jurisdiction" title="Jurisdiction">jurisdictions</a> limit the <a href="http://en.wikipedia.org/wiki/Annual_percentage_rate" title="Annual percentage rate">annual percentage rate</a>
(APR) that any lender, including payday lenders, can charge. Some
jurisdictions outlaw payday lending entirely, and some have very few
restrictions on payday lenders. Due to the extremely short-term nature
of payday loans, the difference between nominal APR and effective APR
(EAR) can be substantial, because EAR takes <a href="http://en.wikipedia.org/wiki/Compound_interest" title="Compound interest">compounding</a> into account. For a $15 charge on a $100 2-week payday loan, the <a href="http://en.wikipedia.org/wiki/Annual_percentage_rate" title="Annual percentage rate">annual percentage rate</a>
is 26 × 15% = 390%; the usefulness of an annual rate (such as an APR)
has been debated because APRs are designed to enable consumers to
compare the cost of long-term credit and may not be meaningful in cases
where the loan will be outstanding for only a few weeks. Likewise, an
"effective" rate (such as an EAR — <img alt="(1.15^{26} - 1) \times 100% = 3,685%" class="tex" src="http://upload.wikimedia.org/wikipedia/en/math/d/4/f/d4f6732229dc07120ac091e72fff482a.png" />)
may have even more limited value because payday loans do not permit
interest compounding; the principal amount remains the same, regardless
of how long the loan is outstanding. Nevertheless, careful scrutiny of
the particular measure of loan cost quoted is necessary to make
meaningful comparisons.<br />
<br />
<a name='more'></a><br />
Payday loans carry substantial risk to the lender; they have a default rate of 10-20%,<sup class="reference" id="cite_ref-1"><span></span><span></span></sup> and according to one study, defaults cost payday lenders around a quarter of their annual revenue.<br />
<br />
<sup class="reference" id="cite_ref-2"><span></span><span></span></sup>
<br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="The_loan_process">The loan process</span></span></h2>
The basic loan process involves a lender providing a short-term
unsecured loan to be repaid at the borrower's next pay day. Typically,
some verification of employment or income is involved (via <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Pay_stub" title="Pay stub">pay stubs</a> and bank statements), but some lenders may omit this. Individual companies and <a href="http://en.wikipedia.org/wiki/Franchising" title="Franchising">franchises</a> have their own underwriting criteria.<br />
<br />
In the traditional retail model, borrowers visit a payday lending
store and secure a small cash loan, with payment due in full at the
borrower's next paycheck. The borrower writes a <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Postdated" title="Postdated">postdated check</a> to the lender in the full amount of the loan plus fees. On the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Maturity_date" title="Maturity date">maturity date</a>,
the borrower is expected to return to the store to repay the loan in
person. If the borrower does not repay the loan in person, the lender
may redeem the check. If the account is short on funds to cover the
check, the borrower may now face a bounced check fee from their <a href="http://en.wikipedia.org/wiki/Bank" title="Bank">bank</a>
in addition to the costs of the loan, and the loan may incur additional
fees and/or an increased interest rate as a result of the failure to
pay.<br />
<br />
In the more recent innovation of online payday loans, consumers complete the loan application online (or in some instances via <a href="http://en.wikipedia.org/wiki/Fax" title="Fax">fax</a>, especially where documentation is required). The loan is then transferred by <a class="extiw" href="http://en.wiktionary.org/wiki/direct_deposit" title="wiktionary:direct deposit">direct deposit</a>
to the borrower's account, and the loan repayment and/or the finance
charge is electronically withdrawn on the borrower's next payday.
According to one source, many payday lenders operating on the internet
do not verify income.<sup class="reference" id="cite_ref-Guardian_2008-05-08_3-0"><span></span><span></span></sup><br />
<sup class="reference" id="cite_ref-Guardian_2008-05-08_3-0"><span> </span></sup>
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Loan"><b>Payday loan</b></a><a href="http://wikipediaarticles.blogspot.com/search/label/Loan" target="_blank"><b></b></a>,<a href="http://en.wikipedia.org/wiki/Payday_loan" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-54430613114448263682012-07-13T09:03:00.001-07:002012-07-13T09:04:31.195-07:00Wikipedia article:Line of creditA <b>line of credit</b> is any <a href="http://en.wikipedia.org/wiki/Credit_%28finance%29" title="Credit (finance)">credit</a> source extended to a government, business or <a href="http://en.wikipedia.org/wiki/Personal_finance" title="Personal finance">individual</a> by a <a href="http://en.wikipedia.org/wiki/Bank" title="Bank">bank</a> or other <a href="http://en.wikipedia.org/wiki/Financial_institution" title="Financial institution">financial institution</a>. A line of credit may take several forms, such as <a href="http://en.wikipedia.org/wiki/Overdraft" title="Overdraft">overdraft</a> protection, demand <a href="http://en.wikipedia.org/wiki/Loan" title="Loan">loan</a>, special purpose, <a href="http://en.wikipedia.org/wiki/Export" title="Export">export</a> packing credit, term loan, discounting, purchase of commercial bills, traditional <a href="http://en.wikipedia.org/wiki/Revolving_credit" title="Revolving credit">revolving</a> <a href="http://en.wikipedia.org/wiki/Credit_card" title="Credit card">credit card</a> account, etc. It is effectively a bank account that can readily be tapped at the borrower's discretion. <a href="http://en.wikipedia.org/wiki/Interest" title="Interest">Interest</a>
is paid only on money actually withdrawn, although the borrower may be
required to pay an unused line fee, often an annualized percentage fee
on the money not withdrawn. Lines of credit can be secured by <a href="http://en.wikipedia.org/wiki/Collateral_%28finance%29" title="Collateral (finance)">collateral</a> or unsecured.<br />
<br />
Lines of credit are often extended by banks, financial institutions
and other licensed consumer lenders to creditworthy customers (though
certain <b>special purpose lines of credit</b> may not have creditworthiness requirements) to address <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Liquidity" title="Liquidity">liquidity</a> problems; such a line of credit is often called a <b>personal line of credit</b>. The term is also used to mean the <a href="http://en.wikipedia.org/wiki/Credit_limit" title="Credit limit">credit limit</a> of a customer, that is, the maximum amount of credit a customer is allowed.<br />
<br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Cash_credit">Cash credit</span></span></h2>
A cash credit is a short-term cash loan to a company. A bank provides
this type of funding, but only after the required security is given to
secure the loan. Once a security for repayment has been given, the
business that receives the loan can continuously draw from the bank up
to a certain specified amount.<br />
<br />
<h3>
<span style="font-size: small;"><span class="mw-headline" id="Cash_Credit_in_India">Cash Credit in India</span></span></h3>
<br />
In India, banks offer Cash Credit accounts to businesses to finance their ' <b>Working Capital '</b>
requirements [ requirements to buy raw materials or ' Current Assets ',
as opposed to machinery or buildings, which would be called ' Fixed
Assets ' ] . The cash credit account is similar to current accounts as
it is a running account [ i.e. payable on demand ] with cheque book
facility. But unlike ordinary current accounts, which are supposed to be
overdrawn only occasionally, the cash credit account is supposed to be
overdrawn almost continuously. The extent of overdrawing is limited to
the <b>Cash Credit Limit</b> that is sanctioned by the bank. This
sanction is based on an assessment of the maximum working capital
requirement of the organisation less the margin . The organisation
finances the margin amount from its own funds.<br />
<br />
Generally, Cash Credit account is secured by a charge on the Current
assets [ inventory ] of the organisation. The kind of charge created can
be either Pledge or Hypothecation.<br />
<br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Special_purpose_line_of_credit">Special purpose line of credit</span></span></h2>
A relatively recent credit product has arisen due to economic trends
and the impact the economy has had on individuals in general, but
specifically for disadvantaged individuals due to special circumstances,
affiliations, gender, or external bias. Lenders of many types have
explored providing targeted services to select groups. However, most
successful attempts have been done by consumer lending entities
(licensed and unlicensed) that are generally filling a niche credit
service abandoned by the traditional providers. These are credit
services that, based on one or more pre-defined criteria, may qualify a
borrower for their credit services.<br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Credit" target="_blank"><b>Line of credit</b></a>,<a href="http://en.wikipedia.org/wiki/Line_of_credit" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-17152558624958863142012-07-13T08:59:00.001-07:002012-07-13T08:59:19.625-07:00Equity (finance)In <a href="http://en.wikipedia.org/wiki/Accountancy" title="Accountancy">accounting</a> and <a href="http://en.wikipedia.org/wiki/Finance" title="Finance">finance</a>, <b>equity</b> is the residual claim or interest of the most junior class of investors in <a href="http://en.wikipedia.org/wiki/Asset" title="Asset">assets</a>, after all <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Liabilities" title="Liabilities">liabilities</a> are paid. If liability exceeds assets, <a href="http://en.wikipedia.org/wiki/Negative_equity" title="Negative equity">negative equity</a> exists. In an accounting context, <b>Shareholders' equity</b>
(or stockholders' equity, shareholders' funds, shareholders' capital or
similar terms) represents the remaining interest in assets of a
company, spread among individual <a href="http://en.wikipedia.org/wiki/Shareholder" title="Shareholder">shareholders</a> of <a href="http://en.wikipedia.org/wiki/Common_stock" title="Common stock">common</a> or <a href="http://en.wikipedia.org/wiki/Preferred_stock" title="Preferred stock">preferred stock</a>.<br />
<br />
At the start of a <a href="http://en.wikipedia.org/wiki/Business" title="Business">business</a>, <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Owner" title="Owner">owners</a> put some funding into the business to finance <a href="http://en.wikipedia.org/wiki/Business_operations" title="Business operations">operations</a>. This creates a liability on the business in the shape of <a href="http://en.wikipedia.org/wiki/Share_capital" title="Share capital">capital</a> as the business is a separate entity from its owners. Businesses can be considered, for <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Accounting" title="Accounting">accounting</a> purposes, sums of <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Liabilities" title="Liabilities">liabilities</a> and <a href="http://en.wikipedia.org/wiki/Asset" title="Asset">assets</a>; this is the <a href="http://en.wikipedia.org/wiki/Accounting_equation" title="Accounting equation">accounting equation</a>. After liabilities have been accounted for the positive remainder is deemed the owner's interest in the business.<br />
<br />
This definition is helpful in understanding the <a href="http://en.wikipedia.org/wiki/Liquidation" title="Liquidation">liquidation</a> process in case of <a href="http://en.wikipedia.org/wiki/Bankruptcy" title="Bankruptcy">bankruptcy</a>. At first, all the secured <a href="http://en.wikipedia.org/wiki/Creditor" title="Creditor">creditors</a>
are paid against proceeds from assets. Afterward, a series of
creditors, ranked in priority sequence, have the next claim/right on the
residual proceeds. Ownership equity is the last or <a href="http://en.wikipedia.org/wiki/Residual_claimant" title="Residual claimant">residual claim</a>
against assets, paid only after all other creditors are paid. In such
cases where even creditors could not get enough money to pay their
bills, nothing is left over to reimburse owners' equity. Thus owners'
equity is reduced to zero. Ownership equity is also known as risk
capital or liable capital.<br />
<br />
<a name='more'></a><br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Equity_investments">Equity investments</span></span></h2>
An equity investment generally refers to the buying and holding of shares of <a href="http://en.wikipedia.org/wiki/Stock" title="Stock">stock</a> on a <a href="http://en.wikipedia.org/wiki/Stock_market" title="Stock market">stock market</a> by individuals and firms in anticipation of income from <a href="http://en.wikipedia.org/wiki/Dividend" title="Dividend">dividends</a> and <a href="http://en.wikipedia.org/wiki/Capital_gain" title="Capital gain">capital gains</a>,
as the value of the stock rises. Typically equity holders receive
voting rights, meaning that they can vote on candidates for the board of
directors (shown on a <a href="http://en.wikipedia.org/wiki/Proxy_statement" title="Proxy statement">proxy statement</a>
received by the investor) as well as certain major transactions, and
residual rights, meaning that they share the company's profits, as well
as recover some of the company's assets in the event that it folds,
although they generally have the lowest priority in recovering their
investment. It may also refer to the acquisition of equity (ownership)
participation in a private (unlisted) company or a <a href="http://en.wikipedia.org/wiki/Startup_company" title="Startup company">startup company</a>. When the investment is in infant companies, it is referred to as <a href="http://en.wikipedia.org/wiki/Venture_capital" title="Venture capital">venture capital</a> investing and is generally regarded as a higher risk than investment in listed going-concern situations.<br />
<br />
The equities held by private individuals are often held as <a href="http://en.wikipedia.org/wiki/Mutual_fund" title="Mutual fund">mutual funds</a> or as other forms of <a href="http://en.wikipedia.org/wiki/Collective_investment_scheme" title="Collective investment scheme">collective investment scheme</a>,
many of which have quoted prices that are listed in financial
newspapers or magazines; the mutual funds are typically managed by
prominent fund management firms, such as <a href="http://en.wikipedia.org/wiki/Schroders" title="Schroders">Schroders</a>, <a href="http://en.wikipedia.org/wiki/Fidelity_Investments" title="Fidelity Investments">Fidelity Investments</a> or <a href="http://en.wikipedia.org/wiki/The_Vanguard_Group" title="The Vanguard Group">The Vanguard Group</a>. Such holdings allow individual investors to obtain the <a href="http://en.wikipedia.org/wiki/Diversification_%28finance%29" title="Diversification (finance)">diversification</a> of the fund(s) and to obtain the skill of the professional <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Fund_manager" title="Fund manager">fund managers</a>
in charge of the fund(s). An alternative, which is usually employed by
large private investors and pension funds, is to hold shares directly;
in the institutional environment many clients who own <a href="http://en.wikipedia.org/wiki/Portfolio_%28finance%29" title="Portfolio (finance)">portfolios</a> have what are called <a href="http://en.wikipedia.org/wiki/Segregated_fund" title="Segregated fund">segregated funds</a>, as opposed to or in addition to the pooled mutual fund alternatives.<br />
<br />
A calculation can be made to assess whether an equity is over or
underpriced, compared with a long-term government bond. This is called
the <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Yield_Gap" title="Yield Gap">Yield Gap</a> or Yield Ratio. It is the ratio of the <a href="http://en.wikipedia.org/wiki/Dividend" title="Dividend">dividend</a> yield of an equity and that of the long-term bond.<br />
<br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Accounting">Accounting</span></span></h2>
In <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Financial_accounting" title="Financial accounting">financial accounting</a>, equity capital is the owners' interest on the <a href="http://en.wikipedia.org/wiki/Asset" title="Asset">assets</a> of the enterprise after deducting all its <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Liabilities" title="Liabilities">liabilities</a>.<sup class="reference" id="cite_ref-0"><span></span><span></span></sup> It appears on the <a href="http://en.wikipedia.org/wiki/Balance_sheet" title="Balance sheet">balance sheet</a> / <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Statement_of_financial_position" title="Statement of financial position">statement of financial position</a>,<sup class="reference" id="cite_ref-1"><span></span><span></span></sup> one of the four primary <a href="http://en.wikipedia.org/wiki/Financial_statement" title="Financial statement">financial statements</a>.<br />
Ownership equity includes both tangible and intangible items (such as brand names and reputation / goodwill).<br />
<br />
<a href="http://en.wikipedia.org/wiki/Account_%28accountancy%29" title="Account (accountancy)">Accounts</a> listed under ownership equity include (<a class="external text" href="http://finance.yahoo.com/q/bs?s=C&annual" rel="nofollow">example</a>):<br />
<ul>
<li><a href="http://en.wikipedia.org/wiki/Share_capital" title="Share capital">Share capital</a> (<a href="http://en.wikipedia.org/wiki/Common_stock" title="Common stock">common stock</a>)</li>
<li><a href="http://en.wikipedia.org/wiki/Preferred_stock" title="Preferred stock">Preferred stock</a></li>
<li><a href="http://en.wikipedia.org/wiki/Capital_surplus" title="Capital surplus">Capital surplus</a></li>
<li><a href="http://en.wikipedia.org/wiki/Retained_earnings" title="Retained earnings">Retained earnings</a></li>
<li><a href="http://en.wikipedia.org/wiki/Treasury_stock" title="Treasury stock">Treasury stock</a></li>
<li><a class="mw-redirect" href="http://en.wikipedia.org/wiki/Stock_options" title="Stock options">Stock options</a></li>
<li><a href="http://en.wikipedia.org/wiki/Reserve_%28accounting%29" title="Reserve (accounting)">Reserve</a> </li>
</ul>
<h3>
<span style="font-size: small;"><span class="mw-headline" id="Book_value">Book value</span></span></h3>
The <a href="http://en.wikipedia.org/wiki/Book_value" title="Book value">book value</a> of equity will change in the case of the following events:<br />
<ul>
<li>Changes in the firm's assets relative to its liabilities. For
example, a profitable firm receives more cash for its products than the
cost at which it produced these goods, and so in the act of making a
profit, it is increasing its assets.</li>
<li>Depreciation - Equity will decrease, for example, when machinery
depreciates, which is registered as a decline in the value of the asset,
and on the liabilities side of the firm's balance sheet as a decrease
in shareholders' equity.</li>
<li>Issue of new equity in which the firm obtains new capital increases the total shareholders' equity.</li>
<li><a href="http://en.wikipedia.org/wiki/Share_repurchase" title="Share repurchase">Share repurchases</a>,
in which a firm gives back money to its investors, reducing on the
asset side its financial assets, and on the liability side the
shareholders' equity. For practical purposes (except for its tax
consequences), share repurchasing is similar to a dividend payment, as
both consist of the firm giving money back to investors. Rather than
giving money to all shareholders immediately in the form of a dividend
payment, a share repurchase reduces the number of shares (increases the
size of each share) in future income and distributions.</li>
<li>Dividends paid out to <a href="http://en.wikipedia.org/wiki/Preferred_stock" title="Preferred stock">preferred stock</a> owners are considered an expense to be subtracted from <a href="http://en.wikipedia.org/wiki/Net_income" title="Net income">net income</a><sup class="Template-Fact" style="white-space: nowrap;">[<i><a href="http://en.wikipedia.org/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources from April 2007">citation needed</span></a></i>]</sup>(from the point of view of the common share owners).</li>
<li>Other reasons - Assets and liabilities can change without any effect
being measured in the Income Statement under certain circumstances; for
example, changes in accounting rules may be applied retroactively.
Sometimes assets bought and held in other countries get translated back
into the reporting currency at different exchange rates, resulting in a
changed value. </li>
</ul>
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Credit"><b>Equity (finance)</b></a>,<a href="http://en.wikipedia.org/wiki/Equity_%28finance%29#Real_estate_equity" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0tag:blogger.com,1999:blog-7394046320234602929.post-50756744803035773482012-07-13T08:45:00.000-07:002012-07-13T08:50:48.687-07:00Wikipedia article:Student loanA <b>student loan</b> is designed to help students pay for university
tuition, books, and living expenses. It may differ from other types of
loans in that the interest rate may be substantially lower and the
repayment schedule may be deferred while the student is still in
education. It also differs in many countries in the strict laws
regulating re-negotiating and bankruptcy.<br />
<br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="Australia">Australia</span></span></h2>
Tertiary student places in <a href="http://en.wikipedia.org/wiki/Australia" title="Australia">Australia</a> are usually funded through the <a href="http://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia" title="Tertiary education fees in Australia">HECS-HELP scheme</a>.
This funding is in the form of loans that are not normal debts. They
are repaid over time via a supplementary tax, using a sliding scale
based on taxable income. As a consequence, loan repayments are only made
when the former student has income to support the repayments. The debt
does not attract normal interest, but grows with CPI inflation.
Discounts are available for early repayment. The scheme is available to
citizens and permanent humanitarian <a href="http://en.wikipedia.org/wiki/Visa_%28document%29" title="Visa (document)">visa</a> holders. Means-tested scholarships for living expenses are also available. Special assistance is available to <a href="http://en.wikipedia.org/wiki/Indigenous_Australians" title="Indigenous Australians">indigenous</a> students.<br />
<br />
There has been criticism that the HECS-HELP scheme creates an
incentive for people to leave the country after graduation, because
those who do not file an Australian tax return do not make any
repayments.<br />
<br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="United_Kingdom">United Kingdom</span></span></h2>
<div class="rellink relarticle mainarticle">
Main article: <a href="http://en.wikipedia.org/wiki/Student_loans_in_the_United_Kingdom" title="Student loans in the United Kingdom">Student loans in the United Kingdom</a></div>
<a name='more'></a><br />
Student loans in the <a href="http://en.wikipedia.org/wiki/United_Kingdom" title="United Kingdom">United Kingdom</a> are primarily provided by the state-owned <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Student_Loans_Company" title="Student Loans Company">Student Loans Company</a>.
Interest begins to accumulate on each loan payment as soon as the
student receives it, but repayment is not required until the start of
the next <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Tax_year" title="Tax year">tax year</a> after the student completes (or abandons) their education.<br />
Since 1998, repayments have been collected by <a class="mw-redirect" href="http://en.wikipedia.org/wiki/HMRC" title="HMRC">HMRC</a>
via the tax system, and are calculated based on the borrower's current
level of income. If the borrower's income is below a certain threshold
(£15,000 per <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Tax_year" title="Tax year">tax year</a> for 2011/2012), no repayments are required, though interest continues to accumulate.<br />
<br />
Loans are cancelled if the borrower dies or becomes permanently
unable to work. Depending on when the loan was taken out and which part
of the UK the borrower is from, they may also be cancelled after a
certain period of time, or when the borrower reaches a certain age.<br />
<br />
<h2>
<span style="font-size: small;"><span class="mw-headline" id="United_States">United States</span></span></h2>
<div class="rellink relarticle mainarticle">
Main article: <a href="http://en.wikipedia.org/wiki/Student_loans_in_the_United_States" title="Student loans in the United States">Student loans in the United States</a></div>
<div class="rellink relarticle mainarticle">
</div>
In the United States, there are two types of student loans: federal loans <a href="http://en.wikipedia.org/wiki/Government-sponsored_enterprise" title="Government-sponsored enterprise">sponsored by the federal government</a> and <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Private_student_loans" title="Private student loans">private student loans</a>. The overwhelming majority of student loans are federal loans.
Federal loans can be "subsidized" or "unsubsidized". Interest does not
accrue on subsidized loans while the students are in school. Student
loans may be offered as part of a total <a class="mw-redirect" href="http://en.wikipedia.org/wiki/Financial_aid" title="Financial aid">financial aid</a> package that may also include grants, scholarships, and/or work study opportunities.<br />
<br />
Prior to 2010, federal loans were also divided between direct
loans--originated and funded by the federal government--and guaranteed
loans, originated and held by private lenders but guaranteed by the
government. The guaranteed lending program was eliminated in 2010
because of a widespread perception that the government guarantees
boosted student lending companies' profits but did not benefit students
by reducing student loan costs.<br />
<br />
Federal Student loans are generally less expensive than private
student loans. However, the federal student lending program still
generates billions of dollars in profit for the government each year,
because the interest payments exceed the government's own borrowing
costs, loan losses, and administrative costs. Losses on student loans
are extremely low, even when students default, in part because these
loans cannot be discharged in bankruptcy unless repaying the loan would
create an "undue hardship" for the student borrower and his or her
dependents.<sup class="reference" id="cite_ref-Simkovic_1-3"></sup><sup class="reference" id="cite_ref-Pottow_4-0"><a href="http://en.wikipedia.org/wiki/Student_loan#cite_note-Pottow-4"></a></sup>
In 2005, the bankruptcy laws were changed so that private educational
loans also could not be readily discharged. Supporters of this change
claimed that it would reduce student loan interest rates.<br />
<br />
<h3>
<span style="font-size: small;"><span class="mw-headline" id="Income-Based_Repayment">Income-Based Repayment</span></span></h3>
<br />
The <a href="http://en.wikipedia.org/wiki/Income-Based_Repayment" title="Income-Based Repayment">Income-Based Repayment</a>
plan is an alternative to paying back student loans, which allow the
borrower to pay back the loan based on how much he/she makes, and not
based how much money is actually owed.<sup class="reference" id="cite_ref-5"></sup> However, income based repayment does not apply to private loans.<br />
<br />
IBR plans generally cap loan payments at 10 percent of the student
borrower's income. Interest accrues and the balance continues to build.
However, after a certain number of years, the balance of the loan is
forgiven. This period is 10 years if the student borrower works in the
public sector (government or a nonprofit) and 25 years if the student
works at a for-profit. Debt forgiveness is treated as taxable income.<br />
<br />
Scholars have criticized IBR plans on the grounds that they create
moral hazard and suffer from adverse selection. That is, IBR may
encourage student borrowers who could have obtained high-wage jobs to
take low wage jobs with good benefits and minimal work hours to reduce
their loan payments, thereby driving up the cost of the IBR program.
And, if IBR programs are optional, only students who expect to have low
wages will opt into the program. Historically, a number of IBR programs
have collapsed because of these problems.<sup class="reference" id="cite_ref-Simkovic_1-4"></sup><sup class="reference" id="cite_ref-8"><a href="http://en.wikipedia.org/wiki/Student_loan#cite_note-8"></a></sup><br />
<br />
Description above from the <b><a href="http://wikipediaarticles.blogspot.com/" target="_blank">Wikipedia article</a></b> <a href="http://wikipediaarticles.blogspot.com/search/label/Loan" target="_blank"><b>Student loan</b></a>,<a href="http://en.wikipedia.org/wiki/Student_loan" target="_blank">More</a>Zhu.http://www.blogger.com/profile/02010966940348069931noreply@blogger.com0