How does facultative reinsurance differ from treaty reinsurance?

Unlike treaty reinsurance, which automatically covers a portfolio of risks, facultative reinsurance is arranged case-by-case. Each policy must be individually reviewed and approved by the reinsurer before coverage is granted.

Is on-demand insurance suitable for long-term coverage?

On-demand insurance is generally not designed for long-term coverage. It is best suited for short-term or occasional needs. For long-term coverage, traditional insurance plans are typically more cost-effective.

What happens if there is no insurable interest?

If there is no insurable interest, the insurance contract is considered void and unenforceable. This prevents people from taking advantage of insurance for profit rather than protection. For example, if a person insures a stranger’s life without an insurable interest, the insurer can reject the claim.

How does long-term disability insurance work?

If you develop a qualifying disability and meet the waiting period, your policy will pay a percentage of your pre-disability income until you recover or reach the policy’s benefit duration limit.

How does universal life insurance compare to term life insurance?

Universal life insurance provides lifelong coverage with cash value growth, while term life insurance offers temporary coverage for a set period at lower premiums.

Are defense costs included in the limit of liability?

This depends on whether the policy includes defense costs within the limit or offers defense outside the limits. If included, legal fees and settlements count toward the limit, potentially reducing the available coverage for indemnity. If outside the limit, the insurer covers legal costs separately from the claim amount.

How is ACV different from Replacement Cost Value (RCV)?

ACV accounts for depreciation and pays the current market value of the item, whereas RCV covers the full cost of replacing the item with a new one of similar kind and quality.

How does the NAIC regulate reinsurance?

The NAIC sets guidelines for reinsurance agreements, including risk-transfer standards, solvency rules, and collateral requirements.