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Wednesday, March 09, 2005

Types of Insurance Companies

Insurance companies may be classified as:

Life insurance companies, who sell life insurance, annuities and pensions products. Non-life or general insurance companies, who sell other types of insurance. In most countries, life and non-life insurers are subject to different regulations, tax and accounting rules. The main reason for the distinction between the two types of company is that life business is very long term in nature - coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers shorter periods, such as one year.

Insurance companies are also often classified as either mutual or stock companies. This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders, while stockholders, (who may or may not own policies) own stock insurance companies.

Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks, and protects them from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves.

There are also companies which are known as Insurance Brokers. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies.

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