Different Types of Insurance Companies

Before you decide to buy an insurance contract, you must take into consideration the strength and financial stability of the insurance company. The insurance plan provides protection for many years in the future, so the viability of the insurer is essential. Many insurance carriers have become insolvent over the past few years. Rating agencies can provide information about the financial viability of different types of insurance companies.

There are two main groups of insurance carriers: life insurance companies that sell pensions, annuities, life insurance and non-life general or property/casualty insurance companies. The life insurance quotes usually depend on personal factors like age, health condition, lifestyle and are long term. Non-life insurance policies provide coverage for a shorter period of time, and can be renewed after the term expires. They mainly focus on protecting against risks like floods, earthquakes and fire.

Captive insurance companies are limited purpose carriers, with the main objective of financial risks management for parent groups. They also represent commercial, tax, and economic advantages for their sponsors. There are different types of insurance companies: a “pure entity”, “mutual” captive and “association” captive. A captive can endorse their parents for public and product liability, motor and medical aid expenses, employee benefits, professional indemnity, property damage, public and product liability. The use of reinsurance can limit its exposure to risks.

Composite insurance companies sell both life and non-life insurance policies. These companies are classified as stock companies and mutual companies. Stock companies are owned by the stock holders while mutual carriers are owned by policy holders. Reinsurance companies sell policies to other companies, so they get protection from huge losses and reduce their risks. A few large companies with great reserves dominate the present market. Different types of insurance companies provide coverage only specific groups. A Fraternal Benefit Society has no capital stock, is organized for the benefit of its member and has no profits.

Domestic carriers are incorporated in the state they reside. A domestic company is formed under the laws of that state and is consider foreign in other states. A foreign company domiciled in one state is licensed to do business in other states. For example, a company located in California is domestic to the state of California and foreign to other states, but it can still do business in Nevada. A stock company is organized as a corporation owned by shareholders. The shareholders own the capital stock of the carrier and are traded on an organized exchange publicly. Excess earnings can be distributed as dividends.

Lloyds of London is a business underwriting insurance under the authorization of the English Parliament. It provides coverage for high risk or unusual items. This carrier operates similar to a stock exchange that matches buyers desire to secure insurance with sellers that can afford the exposure.