ALL ABOUT INSURANCE

What is insurance?

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. An insurer is a company selling the insurance. The insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

Principles of insurance

Commercially insurable risks typically share seven common characteristics.

A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004. The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.

Definite Loss. The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.

Accidental Loss. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.

Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.

Affordable Premium. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.

Calculable Loss. There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.

Limited risk of catastrophically large losses. The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurers appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

Indemnification

The technical definition of "indemnity" means to make whole again. There are two types of insurance contracts; 1) an "indemnity" policy and 2) a "pay on behalf" or "on behalf of" policy. The difference is significant on paper, but rarely material in practice. An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; i.e. a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000). Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language.

An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance 'policy'. Generally, an insurance contract includes, at a minimum, the following elements: the parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss events covered in the policy. When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a 'claim' against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the 'premium'. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims—in theory for a relatively few claimants—and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (i.e., reserves), the remaining margin is an insurer's profit.

Insurer’s business model

Profit = earned premium + investment income - incurred loss - underwriting expenses.

Insurers make money in two ways: (1) through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insureds.

The most complicated aspect of the insurance business is the underwriting of policies. Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them. Data is analyzed to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure. Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. Of course, from the insurer's perspective, some policies are winners (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are losers (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income).

An insurer's underwriting performance is measured in its combined ratio. The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the company's combined ratio. The combined ratio is a reflection of the company's overall underwriting profitability. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss. Insurance companies also earn investment profits on “float”. “Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out.

In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held. Naturally, the “float” method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or insurance cycle. Property and casualty insurers currently make the most money from their auto insurance line of business. Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing. Additionally, property losses in the US, due to natural catastrophes, have exacerbated this trend. Finally, claims and loss handling is the materialized utility of insurance. In managing the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, fraudulent insurance practices are a major business risk that must be managed and overcome.

History of insurance

In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbor, the other neighbor must help. Otherwise, neighbor will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread (for example countries in the territory of the former Soviet Union). Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants traveling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.

Achaemenian monarchs of Iran were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices. The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: " Whenever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much."[1] A thousand years later, the inhabitants of Rhodes invented the concept of the 'general average'. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage. The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

Toward the end of the seventeenth century, London's growing importance as a canter for trade increased demand for marine insurance. In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes. The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional Federal Charter (OFC)) for insurance similar to that which oversees state banks and national banks.

Types of insurance

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as "perils". An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are (non-exhaustive) lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set forth below. For example, auto insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from causing an accident). A homeowner's insurance policy in the US typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner's property. Business insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of professional liability insurance, also called professional indemnity insurance, which are discussed below under that name; and (b) the business owners policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverages that a homeowner needs.

Health Insurance
Health insurance policies will often cover the cost of private medical treatments if the National Health Service in the United Kingdom (NHS) or other publicly-funded health programs do not pay for them. It will often result in quicker health care where better facilities are available. Dental insurance, like medical insurance, is coverage for individuals to protect them against dental costs. In the US, dental insurance is often part of an employer's benefits package, along with health insurance. Most countries rely on public funding to ensure that all citizens have universal access to health care.

Disability Insurance
* Disability insurance policies provide financial support in the event the policyholder is unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgages and credit cards.
* Total permanent disability insurance insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.
* Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work.
* Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expense incurred because of a job-related injury.

Casualty Insurance
Casualty insurance insures against accidents, not necessarily tied to any specific property.
* Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
* Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.

Life Insurance
Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance. Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed. In many countries, such as the US and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death. In US, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. A combination of low-cost term life insurance and a higher-return tax-efficient retirement account may achieve better investment return.

Property Insurance
Property insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.

* Automobile insurance, known in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insured's vehicle itself. Throughout the United States auto insurance policy is required to legally operate a motor vehicle on public roads. In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to a no-fault system, which reduces or eliminates the ability to sue for compensation but provides automatic eligibility for benefits. Credit card companies insure against damage on rented cars. o Driving School Insurance insurance provides cover for any authorized driver whilst under going tuition, cover also unlike other motor policies provides cover for instructor liability where both the pupil and driving instructor are both equally liable in the event of a claim.

* Aviation insurance insures against hull, spares, deductible, hull wear and liability risks.

* Boiler insurance (also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery.

* Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage due to any cause (including the negligence of the insured) not otherwise expressly excluded.

* Crop insurance "Farmers use crop insurance to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease, for instance."

* Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage. Most earthquake insurance policies feature a high deductible. Rates depend on location and the probability of an earthquake, as well as the construction of the home.

* A fidelity bond is a form of casualty insurance that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

* Flood insurance protects against property loss due to flooding. Many insurers in the US do not provide flood insurance in some portions of the country. In response to this, the federal government created the National Flood Insurance Program which serves as the insurer of last resort.

* Home insurance or homeowners insurance: See "Property insurance".

* Marine insurance and marine cargo insurance cover the loss or damage of ships at sea or on inland waterways, and of the cargo that may be on them. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.

* Surety bond insurance is a three party insurance guaranteeing the performance of the principal. * Terrorism insurance provides protection against any loss or damage caused by terrorist activities.

* Volcano insurance is an insurance that covers volcano damage in Hawaii.

* Windstorm insurance is an insurance covering the damage that can be caused by hurricanes and tropical cyclones.

Liability Insurance
Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of willful or intentional acts by the insured. * Environmental liability insurance protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants. * Errors and omissions insurance: See "Professional liability insurance" under "Liability insurance". * Professional liability insurance, also called professional indemnity insurance, protects insured professionals such as architectural corporation and medical practice against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called malpractice insurance. Notaries public may take out errors and omissions insurance (E&O). Other potential E&O policyholders include, for example, real estate brokers, home inspectors, appraisers, and website developers. * Directors and officers liability insurance protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes incurred by directors and officers for which they are liable. In the industry, it is usually called "D&O" for short. * Prize indemnity insurance protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a basketball game, or a hole-in-one at a golf tournament.

Credit Insurance
Credit insurance repays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death. * Mortgage insurance insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name credit insurance more often is used to refer to policies that cover other kinds of debt.

Other types of Insurance

* Collateral protection insurance or CPI, insures property (primarily vehicles) held as collateral for loans made by lending institutions.
* Defense Base Act Workers' compensation or DBA Insurance insurance provides coverage for civilian workers hired by the government to perform contracts outside the US and Canada. DBA is required for all US citizens, US residents, US Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, Foreign Nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
* Expatriate insurance provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
* Financial loss insurance protects individuals and companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover the failure of a creditor to pay money it owes to the insured. This type of insurance is frequently referred to as "business interruption insurance." Fidelity bonds and surety bonds are included in this category, although these products provide a benefit to a third party (the "obligee") in the event the insured party (usually referred to as the "obligor") fails to perform its obligations under a contract with the obligee.
* Kidnap and ransom insurance
* Locked funds insurance is a little-known hybrid insurance policy jointly issued by governments and banks. It is used to protect public funds from tamper by unauthorized parties. In special cases, a government may authorize its use in protecting semi-private funds which are liable to tamper. The terms of this type of insurance are usually very strict. Therefore it is used only in extreme cases where maximum security of funds is required.
* Nuclear incident insurance covers damages resulting from an incident involving radioactive materials and is generally arranged at the national level. (For the United States, see the Price-Anderson Nuclear Industries Indemnity Act.)
* Pet insurance insures pets against accidents and illnesses - some companies cover routine/wellness care and burial, as well.
* Pollution Insurance, which consists of first-party coverage for contamination of insured property either by external or on-site sources. Coverage for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.
* Purchase insurance is aimed at providing protection on the products people purchase. Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance. Such insurance is normally very limited in the scope of problems that are covered by the policy.
* Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
* Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, lost of personal belongings, travel delay, personal liabilities, etc.

Insurance financing vehicles
* Protected Self-Insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an Insurer so the maximum total cost of the program is known. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.
* Retrospectively Rated Insurance is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.
* Fraternal insurance is provided on a cooperative basis by fraternal benefit societies or other social organizations.
* Formal self insurance is the deliberate decision to pay for otherwise insurable losses out of one's own money. This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self insurance is usually used to pay for high-frequency, low-severity losses. Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.
* No-fault insurance is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.
* Reinsurance is a type of insurance purchased by insurance companies or self-insured employers to protect against unexpected losses. Financial reinsurance is a form of reinsurance that is primary used for capital management rather than to transfer insurance risk.
* Stop-loss insurance provides protection against catastrophic or unpredictable losses. It is purchased by organizations who do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.
* Social insurance can be many things to many people in many countries. But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), plus retirement savings, that mandates participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ensures that everyone can become a claimant when or if he/she needs to. Along the way this inevitably becomes related to other concepts such as the justice system and the welfare state. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others): o Social welfare provision o Social security o Social safety net o National Insurance o Social Security (United States) o Social Security debate (United States)

Insurance Companies

Insurance companies may be classified into two groups:
* Life insurance companies, which sell life insurance, annuities and pensions products.
* Non-life, General, or Property/Casualty insurance companies, which sell other types of insurance.

General insurance companies can be further divided into these sub categories.
* Standard Lines
* Excess Lines

In most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. The main reason for the distinction between the two types of company is that life, annuity, and pension 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 a shorter period, such as one year. In the United States, standard line insurance companies are your "main stream" insurers. These are the companies that typically insure your auto, home or business. They use pattern or "cookie-cutter" policies without variation from one person to the next. They usually have lower premiums than excess lines and can sell directly to individuals. They are regulated by state laws that can restrict the amount they can charge for insurance policies. Excess line insurance companies (aka Excess and Surplus) typically insure risks not covered by the standard lines market. They are broadly referred as being all insurance placed with non-admitted insurers. Non-admitted insurers are not licensed in the states where the risks are located. These companies have more flexibility and can react faster than standard insurance companies because they are not required to file rates and forms as do the "admitted" carriers do. However, they still have substantial regulatory requirements placed upon them. State laws generally require insurance placed with surplus line agents and brokers to not be available through standard licensed insurers. Insurance companies are generally 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. Other possible forms for an insurance company include reciprocals, in which policyholders 'reciprocate' in sharing risks, and Lloyds organizations.

Insurance companies are rated by various agencies such as A. M. Best. The ratings include the company's financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products. Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well. Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100 percent subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of an "association" captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices. The types of risk that a captive can underwrite for their parents include property damage, public and products liability, professional indemnity, employee benefits, employers liability, motor and medical aid expenses. The captive's exposure to such risks may be limited by the use of reinsurance.

Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:
* heavy and increasing premium costs in almost every line of coverage;
* difficulties in insuring certain types of fortuitous risk; * differential coverage standards in various parts of the world;
* rating structures which reflect market trends rather than individual loss experience;
* insufficient credit for deductibles and/or loss control efforts.

There are also companies known as 'insurance consultants'. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies. Similar to an insurance consultant, an 'insurance broker' also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client. Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have. The financial stability and strength of an insurance company should be a major consideration when purchasing an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). A number of independent rating agencies, such as Best's, Fitch, Standard & Poor's, and Moody's Investors Service, provide information and rate the financial viability of insurance companies.

LIST OF US INSURANCE COMPANIES

* American National Insurance Company
* American Automobile Association
* AIG
* Allstate
* American Family Insurance
* American Farmers and Ranchers Mutual (formerly Oklahoma Farmers Union Mututal)
* Amica
* Auto-Owners Insurance
* California Casualty Insurance
* CapitalOne
* Commerce Insurance Group
* COUNTRY Insurance & Financial Services
* Cuna Mutual Group
* Electric Insurance Company
* Esurance
* Expatriate Insurance
* Farm Bureau Insurance
* Farmers Insurance
* Frankenmuth Mutual Insurance Company
* GAINSCO Auto Insurance
* GMAC Insurance
* Geico
* The General
* GuideOne
* Hanover Insurance
* The Hartford
* Hastings Mutual Insurance Company
* Haulers Insurance Company
* Infinity Auto Insurance Company
* Liberty Mutual
* Nationwide Insurance
* National Interstate
* Metropolitan Life Insurance Company
* Mutual of Enumclaw
* OneBeacon Insurance Group
* Pekin Insurance
* Pemco
* Progressive
* Safeco
* Safeway Insurance Group
* Standard Insurance Company
* State Auto Insurance Companies
* Shelter Insurance Companies
* Solid Insurance Group
* State Farm Mutual Automobile Insurance Company
* The St. Paul Travelers Companies, Inc.
* Trustgard Insurance
* Unitrin Direct Auto Insurance
* USAA
* Wawanesa (California)
* Westfield Insurance

LIST OF DISABILITY INSURANCE COMPANIES
* American Family Insurance * Mutual of America * Principal Financial Group * Standard Insurance Company * Unum * Berkshire Life * MetLife

LIST OF EXPATRIATE INSURANCE COMPANIES: * Clements International

LIST OF GENERAL LIABILITY INSURANCE COMPANIES: * American Family Insurance

LIST OF HEALTH INSURANCE COMPANIES: * American National Insurance Company * Aetna * Aflac * American Family Insurance * American Medical Security Life Insurance Company * Anthem * Assurant * Asuris Northwest Health * Blue Cross and Blue Shield Association * Celtic Insurance Co. * CIGNA * community first * Continental General * Fortis * Golden Rule Insurance Company * Group Health Inc. * Group Health Cooperative * Harvard Community Health Plan * HealthMarkets * Health Net of Arizona * Health Net of Oregon * HealthPartners * Health Plan of Nevada * Humana Inc. * Insurance Services of America * Intermountain Health Care * Kaiser Permanente * LifeWise Health Plan of Arizona * LifeWise Health Plan of Oregon * LifeWise Health Plan of Washington * Medica of Minnesota * Medical Mutual * Oxford Health Plans, Inc. * Principal Financial Group * Shelter Insurance Companies * UNICARE * UnitedHealthCare (UnitedHealth recently purchased Pacificare) * Vista Healthplan of South Florida * Wellpoint * College Health IPA * Acordia National

LIST OF LIFE INSURANCE COMPANIES: * AAA d.b.a. Western United * AAA Life Insurance Company * Aetna * AIG American General * Alfa Life Insurance * Allstate Insurance Company * American Family Insurance * American Farmers and Ranchers * American International Group * American National Insurance Company * Aon Corporation, formerly known as Combined Insurance Company of America * Auto-Owners Insurance * AXA * Bankers Life and Casualty Company * Banner Life * The Chesapeake Life Insurance Company * Farm Bureau Insurance * Farmers Insurance * First United American Life Insurance Company * Foresters * Garden State Life Insurance Company * Globe Life And Accident Insurance Company * Guardian Life Insurance Company * Jackson National Life * John Hancock Insurance, now a unit of Manulife Financial * The Hartford * Kansas City Life Insurance Company, Inc. * Lafayette Life Insurance Company * Liberty NationalLife Insurance Company * Mass Mutual Financial Group * MEGA Life and Health Insurance * Metropolitan Life Insurance Company * Minnesota Life Insurance Company * Modern Woodmen of America * Nationwide Insurance * New York Life * Northwestern Mutual Life Insurance Company * Old Mutual * Pacific Life Insurance * Primerica Life Insurance Company * Principal Financial Group * Protective Life Corporation * Prudential Financial * RBC * Sagicor USA, Inc., formerly known as American Founders Life * Shenendoah * The Standard (Also known as Standard Insurance Company) * Shelter Life Insurance Company * State Farm Insurance * Thrivent Financial for Lutherans, product of merger between Lutheran Brotherhood & Aid Association for Lutherans * Travelers Group, now somewhat part of Citigroup, other parts belong to The St. Paul Travelers Companies, Inc. * USAA * West Coast * Western & Southern * Western Reserve Life

LIST OF PET INSURANCE COMPANIES: * ASPCA Pet Health Insurance * Pets Health Plan * Hartville Pet Insurance * PetCare * Global Pet Insurance * Pets Best Pet Insurance * Veterinary Pet Insurance * Embrace Pet Insurance * Petplan USA Pet Insurance * PetFirst Healthcare Pet Insurance * Trupanion Pet Health Insurance

LIST OF PROPERTY AND CASUALTY INSURANCE COMPANIES: * ACE USA * Acuity * Allstate * Alfa Mutual Insurance * American Family Insurance * American National Property and Casualty * American International Group * Assurant Specialty Property * Argonaut Group, Inc. * Auto-Owners Insurance * BISYS Commercial Insurance Services, Inc. * Bliss & Glennon, Inc. * Chubb Corporation * Church Mutual * Cincinnati Financial Corporation * Commerce Insurance Group * CNA Financial Corporation * Farm Bureau Insurance * Farmers Insurance * Fireman's Fund Insurance Company * FM Global * Frankenmuth Mutual Insurance Company * Great American Insurance Company * Hanover Insurance * The Hartford * Hastings Mutual Insurance Company * Harleysville Insurance Company * HomeInsurance.com * Infinity Property & Casualty * Liberty Mutual * Manulife Financial * Markel Corporation * Nationwide Insurance * NLC Insurance Companies * OneBeacon Insurance Group * Penn National Insurance * Philadelphia Insurance * The St. Paul Travelers Companies, Inc. * Safeway Insurance Group * Secura * Sentry Insurance * Shelter Insurance Companies * State Auto Insurance Companies * State Farm Insurance * Southern Farm Bureau * Union Standard Insurance * United Automobile Insurance Company * USAA * Wausau Insurance Companies * West Bend Mutual Insurance Company * Westfield Insurance * Zenith Insurance Company * Zurich Insurance Services * Island Insurance * The Phoenix Group

LIST OF RENTER INSURANCE COMPANIES: * American Family Insurance * American Bankers Insurance Company of Florida * Assurant Specialty Property * Balboa Insurance * State Farm Insurance

LIST OF TRAVEL INSURANCE COMPANIES: * American Family Insurance * ASSIST-CARD

LIST OF WORKERS' COMPENSATION INSURANCE COMPANIES: * ACE * Amerisafe * Liberty Mutual * Missouri Employers Mutual * Penn National Insurance * State Accident Insurance Fund (Oregon) * State Compensation Insurance Fund (California) * Zenith Insurance

ABOUT ORANGE COUNTY Orange County is a county in Southern California, United States. Its county seat is Santa Ana. According to the 2000 Census, its population was 2,846,289, making it the second most populous county in the state of California, and the fifth most populous in the United States. The state of California estimates its population as of 2007 to be 3,098,121 people, dropping its rank to third, behind San Diego County. Thirty-four incorporated cities are located in Orange County; the newest is Aliso Viejo. Unlike many other large centers of population in the United States, Orange County uses its county name as its source of identification whereas other places in the country are identified by the large city that is closest to them. This is because there is no defined center to Orange County like there is in other areas which have one distinct large city. Five Orange County cities have populations exceeding 170,000 while no cities in the county have populations surpassing 360,000. Seven of these cities are among the 200 largest cities in the United States. Orange County is also famous as a tourist destination, as the county is home to such attractions as Disneyland and Knott's Berry Farm, as well as sandy beaches for swimming and surfing, yacht harbors for sailing and pleasure boating, and extensive area devoted to parks and open space for golf, tennis, hiking, kayaking, cycling, skateboarding, and other outdoor recreation. It is at the center of Southern California's Tech Coast, with Irvine being the primary business hub. The average price of a home in Orange County is $541,000. Orange County is the home of a vast number of major industries and service organizations. As an integral part of the second largest market in America, this highly diversified region has become a Mecca for talented individuals in virtually every field imaginable. Indeed the colorful pageant of human history continues to unfold here; for perhaps in no other place on earth is there an environment more conducive to innovative thinking, creativity and growth than this exciting, sun bathed valley stretching between the mountains and the sea in Orange County. Orange County was Created March 11 1889, from part of Los Angeles County, and, according to tradition, so named because of the flourishing orange culture. Orange, however, was and is a commonplace name in the United States, used originally in honor of the Prince of Orange, son-in-law of King George II of England. Incorporated: March 11, 1889 Legislative Districts: * Congressional: 38th-40th, 42nd & 43 * California Senate: 31st-33rd, 35th & 37 * California Assembly: 58th, 64th, 67th, 69th, 72nd & 74 County Seat: Santa Ana County Information: Robert E. Thomas Hall of Administration 10 Civic Center Plaza, 3rd Floor, Santa Ana 92701 Telephone: (714)834-2345 Fax: (714)834-3098 County Government Website: http://www.oc.ca.gov CITIES OF ORANGE COUNTY CALIFORNIA: City of Aliso Viejo, 92653, 92656, 92698 City of Anaheim, 92801, 92802, 92803, 92804, 92805, 92806, 92807, 92808, 92809, 92812, 92814, 92815, 92816, 92817, 92825, 92850, 92899 City of Brea, 92821, 92822, 92823 City of Buena Park, 90620, 90621, 90622, 90623, 90624 City of Costa Mesa, 92626, 92627, 92628 City of Cypress, 90630 City of Dana Point, 92624, 92629 City of Fountain Valley, 92708, 92728 City of Fullerton, 92831, 92832, 92833, 92834, 92835, 92836, 92837, 92838 City of Garden Grove, 92840, 92841, 92842, 92843, 92844, 92845, 92846 City of Huntington Beach, 92605, 92615, 92646, 92647, 92648, 92649 City of Irvine, 92602, 92603, 92604, 92606, 92612, 92614, 92616, 92618, 92619, 92620, 92623, 92650, 92697, 92709, 92710 City of La Habra, 90631, 90632, 90633 City of La Palma, 90623 City of Laguna Beach, 92607, 92637, 92651, 92652, 92653, 92654, 92656, 92677, 92698 City of Laguna Hills, 92637, 92653, 92654, 92656 City of Laguna Niguel, 92607, 92677 City of Laguna Woods, 92653, 92654 City of Lake Forest, 92609, 92630, 92610 City of Los Alamitos, 90720, 90721 City of Mission Viejo, 92675, 92690, 92691, 92692, 92694 City of Newport Beach, 92657, 92658, 92659, 92660, 92661, 92662, 92663 City of Orange, 92856, 92857, 92859, 92861, 92862, 92863, 92864, 92865, 92866, 92867, 92868, 92869 City of Placentia, 92870, 92871 City of Rancho Santa Margarita, 92688, 92679 City of San Clemente, 92672, 92673, 92674 City of San Juan Capistrano, 92675, 92690, 92691, 92692, 92693, 92694 City of Santa Ana, 92701, 92702, 92703, 92704, 92705, 92706, 92707, 92708, 92711, 92712, 92725, 92728, 92735, 92799 City of Seal Beach, 90740 City of Stanton, 90680 City of Tustin, 92780, 92781, 92782 City of Villa Park, 92861, 92867 City of Westminster, 92683, 92684, 92685 City of Yorba Linda, 92885, 92886, 92887 Noteworthy communities Some of the communities that exist within city limits are listed below: * Anaheim Hills, Anaheim * Balboa Island, Newport Beach * Corona del Mar, Newport Beach * Crystal Cove/Pelican Hill, Newport Beach * Capistrano Beach, Dana Point * El Modena, Orange * French Park, Santa Ana * Floral Park, Santa Ana * Foothill Ranch, Lake Forest * Monarch Beach, Dana Point * Nellie Gail, Laguna Hills * Northwood, Irvine * Woodbridge, Irvine * Newport Coast, Newport Beach * Olive, Orange * Portola Hills, Lake Forest * San Joaquin Hills, Laguna Niguel * San Joaquin Hills, Newport Beach * Santa Ana Heights, Newport Beach * Tustin Ranch, Tustin * Talega, San Clemente * West Garden Grove, Garden Grove * Yorba Hills, Yorba Linda * Mesa Verde, Costa Mesa Unincorporated communities These communities are outside of the city limits in unincorporated county territory: * Coto de Caza * El Modena * Ladera Ranch * Las Flores * Midway City * Orange Park Acres * Rossmoor * Silverado Canyon * Sunset Beach * Surfside * Trabuco Canyon * Tustin Foothills Adjacent counties to Orange County Are: * Los Angeles County, California - north, west * San Bernardino County, California - northeast * Riverside County, California - east * San Diego County, California - southeast

ALL ABOUT CALIFORNIA

The State of California is a state located in the western Pacific region of the United States and was the 31st admitted to the Union. It is the most populous state of the United States. It is bordered by Oregon to the north, Nevada to the east, and Arizona to the southeast in the United States, as well as Baja California in Mexico to the south. California's capital city is Sacramento, with the four largest cities being Los Angeles, San Diego, San Jose, and San Francisco. California is known for its diverse climate and geography, as well as ethnically diverse population. The state has 58 counties.

Before becoming a part of the United States, Alta California was colonized by the Spanish Empire in 1769. After Mexican independence in 1821, Alta California remained as part of Mexico until 1846, when it was the independent California Republic for one brief week. Following the conclusion of the Mexican-American war of 1848, California was annexed by the United States and was admitted to the Union as the thirty-first state on September 9, 1850.

California is the third largest state by area in the US; its size gives it a diverse geography, which ranges from sandy and rocky beaches of the Pacific coast, to the rugged snowcapped Sierra Nevada mountains in the east, to desert areas in the southeast and the forests of the northwest. The center portion of the state is dominated by the Central Valley, one of the most productive agricultural areas in the world and the largest of any US state. The Sierra Nevada mountains contain Yosemite Valley, famous for its glacially-carved domes, and Sequoia National Park, home to the giant sequoia trees, the largest living organisms on Earth. The state is home to Mount Whitney, the highest point in the contiguous United States,[2] as well as the second lowest and hottest place in the Western Hemisphere, Death Valley. Many of the trees located in the California White Mountains are the oldest in the world; one Bristlecone pine has an age of 4,700 years.

The California Gold Rush began in 1848, dramatically changing California to accommodate an influx of population and an economic boom. The early 20th century was marked by Los Angeles becoming the center of the entertainment industry, in addition to the growth of a large tourism sector in the state. Along with California's prosperous agricultural industry, other industries include aerospace, petroleum, and computer and information technology. California ranks among the top ten largest economies in the world, and were it a separate country, it would be 34th amongst the most populous countries, just behind Poland, as well as the 6th World's largest economy.

California borders the Pacific Ocean, Oregon, Nevada, Arizona, and the Mexican state of Baja California. With an area of 160,000 mi² (411,000 km²) it is the third largest state in the United States in size, after Alaska and Texas.

California's geography is rich, complex, and varied. In the middle of the state lies the California Central Valley, bounded by the coastal mountain ranges in the west, the Sierra Nevada to the east, the Cascade Range in the north and the Tehachapi Mountains in the south. The Central Valley is California's agricultural heartland and grows approximately one-third of the nation's food.[5] Divided in two by the Sacramento-San Joaquin River Delta, the northern portion, the Sacramento Valley serves as the watershed of the Sacramento River, while the southern portion, the San Joaquin Valley is the watershed for the San Joaquin River; both areas derive its name from the rivers that transit them. With dredging, the Sacramento and the San Joaquin Rivers have remained sufficiently deep that several inland cities are seaports. The Sacramento-San Joaquin Bay Delta serves as a critical water supply hub for the state. Water is routed through an extensive network of canals and pumps out of the delta, that traverse nearly the length of the state, including the Central Valley Project, and the State Water Project. Water from the Sacramento-San Joaquin Bay Delta provides drinking water for nearly 23 million people, almost two-thirds of the state's population, and provides water to farmers on the west side of the San Joaquin Valley. The Channel Islands are located off the southern coast.

The Sierra Nevada (Spanish for "snowy range") include the highest peak in the contiguous forty-eight states, Mount Whitney, at 14,505 ft (4,421 m), Yosemite National Park, and the deep freshwater lake, Lake Tahoe, the largest lake in the state by volume. To the east of the Sierra Nevada are Owens Valley and Mono Lake, an essential migratory bird habitat. In the western part of the state is Clear Lake, the largest freshwater lake by area entirely in California. Though Lake Tahoe is larger, it is divided by the California/Nevada border. The Sierra Nevada falls to Arctic temperatures in winter and has several dozen small glaciers, including Palisade Glacier, the southernmost glacier in the United States.

About 35% of the state's total surface area is covered by forests, and California's diversity of pine species is unmatched by any other state. California contains more forestland than any other state except Alaska. In the south is a large inland salt lake, the Salton Sea. Deserts in California make up about 25% of the total surface area. The south-central desert is called the Mojave; to the northeast of the Mojave lies Death Valley, which contains the lowest, hottest point in North America, Badwater Flat. The distance from the lowest point of Death Valley to the peak of Mount Whitney is less than 200 miles (322 km). Indeed, almost all of southeastern California is arid, hot desert, with routine extreme high temperatures during the summer.

Along the California coast are several major metropolitan areas, including Greater Los Angeles, the San Francisco Bay Area, and San Diego.

By 2007, California's population has reached 37,700,000, making it the most populated state, and is the 13th fastest-growing state. This includes a natural increase since the last census of 1,909,368 people (that is 3,375,297 births minus 1,465,929 deaths) and an increase due to net migration of 774,198 people into the state. Immigration from outside the United States resulted in a net increase of 1,724,790 people, and migration within the country produced a net decrease of 950,592.[10] According to the Sacramento News & Review, California's population will increase to 50 million people by 2025.[11]

California is the second most populous state in the Western Hemisphere, exceeded only by São Paulo State, Brazil. More than 12 percent of US citizens live in California and its population is greater than that of all but 34 countries of the world. California has eight of the top 50 US cities in terms of population. Los Angeles is the nation's second-largest city with a population of 3,849,378 people, followed by San Diego (8th), San Jose (10th), San Francisco (14th), Long Beach (34th), Fresno (36th), Sacramento (37th) and Oakland (44th). Los Angeles County has held the title of most populous county for decades, and is more populous than 42 US states. The center of population of California is at the town of Buttonwillow in Kern County.

As of 2005, The gross state product (GSP) is about $1.62 trillion, the largest in the United States. California is responsible for 13% of the United States gross domestic product (GDP). As of 2005, California's GDP is larger than all but seven countries in the world (and all but eight countries by Purchasing Power Parity).

California is also the home of several significant economic regions, such as Hollywood (entertainment), the California Central Valley (agriculture), the Silicon Valley and Tech Coast (computers and high tech), and wine producing regions, such as the Napa Valley, Sonoma Valley and Southern California's Santa Barbara and Paso Robles areas.

The predominant industry, more than twice as large as the next, is agriculture, (including fruit, vegetables, dairy, and wine). This is followed by aerospace; entertainment, primarily television by dollar volume, although many movies are still made in California; music production and recording studios; light manufacturing, including computer hardware and software; and the mining of borax. Oil drilling has played a significant role in the development of the state.

Per capita personal income was $38,956 as of 2006, ranking 11th in the nation.[24] Per capita income varies widely by geographic region and profession. The Central Valley is the most impoverished, with migrant farm workers making less than minimum wage. Recently, the San Joaquin Valley was characterized as one of the most economically depressed regions in the US, on par with the region of Appalachia.[25]

Many coastal cities include some of the wealthiest per-capita areas in the US The high-technology sectors in Northern California, specifically Silicon Valley, in Santa Clara and San Mateo counties, are currently emerging from economic downturn caused by the dot.com bust, which caused the loss of over 250,000 jobs in Northern California alone. As of spring 2005, economic growth has resumed in California at 4.3%.[26]

California levies a 9.3% maximum variable rate income tax, with 6 tax brackets. It collects about $40 billion per year in income taxes. California's combined state, county and local sales tax rate is from 7.25 to 8.75%.[27] The rate varies throughout the state at the local level. In all, it collects about $28 billion in sales taxes per year. All real property is taxable annually, the tax based on the property's fair market value at the time of purchase. This tax does not increase based on a rise in real property values (see Proposition 13). California collects $33 billion in property taxes per year.

The state of California has 478 incorporated cities and towns, of which 456 are cities and 22 are towns. Under California law, the terms "city" and "town" are explicitly interchangeable; the name of an incorporated municipality in the state can either by "City of (Name)" or "Town of (Name)." Please find the list below:

The majority of these cities and towns are within one of five metropolitan areas. Sixty-eight percent of California's population lives in its three largest metropolitan areas, Greater Los Angeles, the San Francisco Bay Area and the Riverside-San Bernardino Area also know as the Inland Empire. Although smaller, the other two large population centers are the San Diego and the Sacramento metro areas. California is home to the largest county in the contiguous United States by area, San Bernardino County.