The insurance industry is filled with hundreds of different policies. Some policies such as life and health insurance are important to have. Others are not as important, and not surprisingly, not as well known too.
Some of these insurance policies are niche in nature. Others are just simply downright bizarre.
(1) Footballers Insurance
Most companies that go out there to purchase an important asset for millions of dollars would also buy an insurance policy to protect their investment.
It shouldn’t come as a surprise that football clubs buy insurance to protect their best players. For example, Real Madrid has a £78 million (S$150 million) insurance policy on Gareth Bale while Cristiano Ronaldo has a £103 million (S$198 million) policy.
Buying these policies make perfect sense. Both players cost the club a lot of money to purchase. In addition to their unquestionable footballing talents, their commercial value arising from endorsement (particularly for Ronaldo) is also worth a lot to the club. Hence ensuring that the players are properly insured is a way to protect the club’s downside risk.
If an injury does occur to either Ronaldo or Bale, it’s the insurance companies that may be holding their breath even longer than the club itself.
(2) Jennifer Lopez’ Butt
At the peak of her career, Jennifer Lopez was a Hollywood a-lister known for her acting and singing talent. She also had a great body, which was most definitely a plus point for her career.
To hedge her body against any unforeseen circumstances that may hinder her career, Jennifer Lopez insured her butt for USD$27 million (USD$ 37 million). As the saying goes, you got to insure your most important assets in your life.
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(3) Credit Default Swap
This is actually an insurance policy that most people should never ever know about. However, thanks to effect of the credit default swap that led to the 2008 global financial crisis, some of us know about it.
Credit default swaps were created as an insurance policy to help financial institutions better manages their risk exposure. What it does is allow financial institutions that have acquired bonds or sovereign debt to insure themselves against the risk of these debts going into default.
Rather than to use these credit default swaps as a risk management tool, financial institutions started to use it for speculative purposes in order to increase their profit margin. It got to the point where buyers of these credit default swaps were not even debt holders themselves. They merely bought these swaps in the hope that the underlying asset (i.e. the debt own by another company) would go into default.
(4) “Known Price” Life Insurance
Max-Herve George is one of the very few known people, maybe the only one left in the world, who hold what is called a “known price” life insurance.
How this “known price” life insurance works is that it allows customers to switch their portfolio based on last week’s price. For example, if the US market did well last week compared to the Japan market, policyholders (or holder, since Max-Herve George appears to be the only one known person in the world who still owns this policy) can opt to switch his investment to the US market based on the previous price, and not the current market price.
On hindsight, this appears to be a ridiculous contract that is terribly written, since it allows a clear arbitrage opportunity for anyone who has sufficient information and was able to act upon it on time. The underwriting for this life insurance was done by L’Abeille Vie back in the late 1980s. Subsequently, the company was bought over by Aviva, who not surprisingly are now in a legal dispute with Max-Herve George over the contract.
(5) Pet Insurance
In the past, the idea behind insurance is to cover human lives. These days however, the purchases of insurance for pets are becoming increasingly common. Pet owners want the best healthcare for their pets. Technological advancement in healthcare has also expanded the range of treatments for pets that were previously not available. These treatment may help a pet that is ill, but would also cost quite a fair bit of money, and hence, the need to purchase insurance.
What are some other types of unique insurance policies that you know about? Share with us your comments on our Facebook page.
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