Life insurance comes in a variety of different types but can be divided into two distinct categories--protection policies and investment policies. A protection policy is designed to provide a cash benefit when a certain event happens, such as death among others and typically in one lump sum payment to the beneficiary. An investment policy is to facilitate the growth of capital by paying premiums.
There are three basic parties to a life insurance policy—the insurer (insurance company) the insured and the policy holder. The policy holder and the insured are often the same person, but if a spouse buys a policy on their spouse then one spouse is the insured and one is the policy holder. The policy holder makes the premium payments to the insurer. When the insured party passes away, the beneficiary receives the proceeds of the policy. The policy holder designates who the beneficiary will be and in most cases, can change the beneficiary during the term of the policy.
Life insurance can be divided into two basic classes—temporary and permanent and subclasses—term, universal, whole life, variable, variable universal and endowment life insurance.
Temporary or term life insurance only provides coverage for a specific period of time for a specified premium. This policy is a protection policy only and does not accumulate a cash value. Term life insurance buys protection for the death of the insured and nothing further. Term insurance premiums are generally lower because the risk of death within the term is low.
Permanent life insurance is a policy that remains in effect until it pays out upon the death of the insured unless it is canceled due to non-payment. Permanent life insurance builds a cash value that reduces the risk to the insurance company over a period of time. There are three types of permanent life insurance—whole life, universal life and endowment.
Whole life insurance has a level premium throughout the contract and a cash value table that is guaranteed by the company. The death benefits, cash values, annual premiums and mortality and expense charges don't reduce the cash value in the policy making this type of life insurance advantageous. The chief disadvantage of whole life insurance is inflexibility and the rate of return not being as competitive as other savings alternatives.
Universal life insurance is a newer type of life insurance that provides full permanent coverage with some flexibility in premiums and a higher rate of return. This type of policy also creates a cash account which is increased with the premiums.
Endowment life insurance policies build up a cash value in the policy which equals the death benefit at a specific age, known as the endowment age. Endowment policies are typically more expensive than other types of life insurance policies because the premium period is shorter and the endowment date is earlier.
There are many types of life insurance policies for you to choose from, but these are the basic types. All life insurance policies have clauses and restrictions in them that could void them for pay-out, such as committing suicide would most often void the policy and no pay outs would be made to the beneficiary. Check with your insurance agent about the type of policy that is best for you.
Tuesday, November 20, 2007
Keeping Life insurance Beneficiaries Updated
After you’ve been approved for life insurance and have paid your annual premiums, you might prefer to put your policy out of your head. While death and taking care of your family after you are gone is something you’d rather not think about, consider how unfortunate it would be if you passed away and your spouse found your beneficiary was a special someone from before you met him or her.
It is very important you keep your beneficiaries updated to avoid confusion and litigation after you are gone. It is fairly simple and there is no cost, there’s really no reason not to update your beneficiaries each and every year.
Take into consideration the case of Carol Zerkle and Barbra Holycross who were involved in a court case in Ohio over Michael Holycross’s life insurance benefit. Michael was married to Carol from 1972 through 1993, when they divorced. In 1997, Michael married Barbra and they remained married until his death in 2003.
Michael had designated Carol as his life insurance beneficiary when they married in the 70s and it was never addressed in the divorce settlement in the 90s. Michael never updated his policy to include wife Barbra, probably assuming it would automatically be granted to his wife, not his former wife.
While the probate court heard Barbra’s complaint, they rules in Carol’s favor, citing two rulings. While one ruling spoke specifically to a spouse’s rights over an ex-spouse to death benefits (in Barbra’s favor), another specifically stated that the ruling could not be applied retroactively to insurance policies dating before 1990. After exhausting all appeals, Barbra was excluded from any claim to Michael’s life insurance benefit. Don’t let this happen to your loved one.
Updating your Beneficiary
Avoid the unfortunate situation Barbra found herself in by updating your life insurance beneficiary regularly. Start by dusting off your original insurance policy documents. Don’t remember the name of the insurance company? Try calling the insurance agent. If you purchased the policy through an employer, call their human resources department.
Contact your insurance company to request a change of beneficiary form. Every insurance company chooses their own form and steps to take in order to change the benefactor of their policies.
Complete the form, including finding witnesses and a notary public, if required. Most banks offer notary services for free or just a few dollars if you are an account holder. Office supply stores, shipping shops and some post offices offer notary services as well. Do NOT sign the form until you are instructed to by the notary, if a notary stamp is required.
Make a copy of the form before you submit it. You may have to send in the form by registered mail, you may be able to simply fax it in. Again, contact your insurer to find out how they prefer to receive your change of beneficiary form.
Confirm your insurance company has received and processed your request about a month after submitting it.
Keep a copy of all your insurance policies, wills and final wishes in a single file. Let your beneficiaries or estate delegate know where the file is and discuss your wishes.
It is very important you keep your beneficiaries updated to avoid confusion and litigation after you are gone. It is fairly simple and there is no cost, there’s really no reason not to update your beneficiaries each and every year.
Take into consideration the case of Carol Zerkle and Barbra Holycross who were involved in a court case in Ohio over Michael Holycross’s life insurance benefit. Michael was married to Carol from 1972 through 1993, when they divorced. In 1997, Michael married Barbra and they remained married until his death in 2003.
Michael had designated Carol as his life insurance beneficiary when they married in the 70s and it was never addressed in the divorce settlement in the 90s. Michael never updated his policy to include wife Barbra, probably assuming it would automatically be granted to his wife, not his former wife.
While the probate court heard Barbra’s complaint, they rules in Carol’s favor, citing two rulings. While one ruling spoke specifically to a spouse’s rights over an ex-spouse to death benefits (in Barbra’s favor), another specifically stated that the ruling could not be applied retroactively to insurance policies dating before 1990. After exhausting all appeals, Barbra was excluded from any claim to Michael’s life insurance benefit. Don’t let this happen to your loved one.
Updating your Beneficiary
Avoid the unfortunate situation Barbra found herself in by updating your life insurance beneficiary regularly. Start by dusting off your original insurance policy documents. Don’t remember the name of the insurance company? Try calling the insurance agent. If you purchased the policy through an employer, call their human resources department.
Contact your insurance company to request a change of beneficiary form. Every insurance company chooses their own form and steps to take in order to change the benefactor of their policies.
Complete the form, including finding witnesses and a notary public, if required. Most banks offer notary services for free or just a few dollars if you are an account holder. Office supply stores, shipping shops and some post offices offer notary services as well. Do NOT sign the form until you are instructed to by the notary, if a notary stamp is required.
Make a copy of the form before you submit it. You may have to send in the form by registered mail, you may be able to simply fax it in. Again, contact your insurer to find out how they prefer to receive your change of beneficiary form.
Confirm your insurance company has received and processed your request about a month after submitting it.
Keep a copy of all your insurance policies, wills and final wishes in a single file. Let your beneficiaries or estate delegate know where the file is and discuss your wishes.
Why choose Term Life Insurance?
Term life insurance is insurance that lasts for only a specified term, or period of time. This term can be short or long depending on your needs and the variety of policies available from the company from which you are buying a policy. There are many reasons that people should consider term life insurance as the perfect alternative, so let us explore some of those reasons below.
New Debt
If you are buying a car, a boat, or any other expensive investment, then you are adding to your monthly financial burden and that of your family. When you add these burdens, the emergency funds that you have in place for your family might not be enough to cover them through the new debt should something happen to you. This means that you should consider investing in a short term life insurance policy of only a couple of years. This kind of policy will help your family maintain their lifestyle and pay off the new debt should something happen to you before you have completely taken care of it. Consider this when buying anything from a horse to a jet ski, and you will have your family covered in case of an emergency.
This kind of reasoning for buying term life insurance is just as common sensical as taking an umbrella when you step out on a cloudy day. With luck, you will never need to use it, but it will always be there if the worst should happen and the storm breaks unexpectedly.
Buying a house falls under the category of new debt as well, but as it is unlikely that you will be paying of the house within, say, five years, you would ideally be considering a longer term policy for this kind of investment. A thirty year policy will help you protect your family, hopefully until the house is paid off and the debt is gone. This can also be taken care of with term life insurance.
New Family Members
Hopefully the burden of a child was one that you expected and welcomed, and now that that child (or those children) is here, you will want to take care of them as best you can. Child rearing is expensive, and child care can put a single parent far behind on the monthly bills. If you have any special new additions to your family, perhaps it would be ideal to consider a life insurance policy of twenty to twenty five years to protect your family until the children are raised and gone (hopefully!) You will have the assurance that your family will be financially taken care of until the kids are grown and out of the house and your spouse only has him or herself to take care of.
This kind of policy is the kind that you will always hope never to use, but would never want to be without. There is nothing worse than losing a parent, unless it is to lose both parents because the survivor could not handle the burden alone. Term life insurance could protect them once you are gone and are no longer able to do so yourself.
New Debt
If you are buying a car, a boat, or any other expensive investment, then you are adding to your monthly financial burden and that of your family. When you add these burdens, the emergency funds that you have in place for your family might not be enough to cover them through the new debt should something happen to you. This means that you should consider investing in a short term life insurance policy of only a couple of years. This kind of policy will help your family maintain their lifestyle and pay off the new debt should something happen to you before you have completely taken care of it. Consider this when buying anything from a horse to a jet ski, and you will have your family covered in case of an emergency.
This kind of reasoning for buying term life insurance is just as common sensical as taking an umbrella when you step out on a cloudy day. With luck, you will never need to use it, but it will always be there if the worst should happen and the storm breaks unexpectedly.
Buying a house falls under the category of new debt as well, but as it is unlikely that you will be paying of the house within, say, five years, you would ideally be considering a longer term policy for this kind of investment. A thirty year policy will help you protect your family, hopefully until the house is paid off and the debt is gone. This can also be taken care of with term life insurance.
New Family Members
Hopefully the burden of a child was one that you expected and welcomed, and now that that child (or those children) is here, you will want to take care of them as best you can. Child rearing is expensive, and child care can put a single parent far behind on the monthly bills. If you have any special new additions to your family, perhaps it would be ideal to consider a life insurance policy of twenty to twenty five years to protect your family until the children are raised and gone (hopefully!) You will have the assurance that your family will be financially taken care of until the kids are grown and out of the house and your spouse only has him or herself to take care of.
This kind of policy is the kind that you will always hope never to use, but would never want to be without. There is nothing worse than losing a parent, unless it is to lose both parents because the survivor could not handle the burden alone. Term life insurance could protect them once you are gone and are no longer able to do so yourself.
Tuesday, September 25, 2007
Is Your Car Insurance Cheap Enough?
Are you getting cheap car insurance? This list will help you obtain cheap car insurance - not cheap in terms of quality but easy on your wallet! Get your car insurance policy and compare your savings with this list to see if you are getting all of the savings you are entitled to, or print it out and use it when getting a new policy or obtaining an online car insurance quote.
Top Ways to Change Your Current Car Insurance into Cheap Car Insurance:
Get Theft Devices: Most new cars have theft devices. Some are automatic and some have to be started at the touch of a button, but all usually get discounts on car insurance. Also, some states provide extra discounts for such things as window sketching.
Ask for a Multiple Car Discount: Did you know sometimes insuring two cars can be the same price as insuring one? If not the same price, insuring another car usually does not cost as much as you may think.
If you have two cars, it is very wise to check with your insurance agent, or while obtaining your online insurance quote, to make sure you can get this discount on your car insurance. Also, if you are planning to sell a second car, the cheap car insurance trick would be to keep that car on just liability to get your multiple car discount. Sometimes people are surprised when they call their car insurance company to take a car off of their insurance, only to find that their price did not go down but possibly increased!
Stick With Yearly Policies: Choosing a yearly policy can extend your savings on your car insurance. Purchasing a yearly policy instead of a six month policy gives you a rate that cannot be changed for one year vs. changing every six months.
Look Into Comprehensive Storage Coverage: If you are planning to store your car for any period of time, you can save on your car insurance by only keeping comprehensive coverage during the storage time. Since the car would be stored, it is very unlikely it will get in a collision or need the liability coverage.
Re-Check Your Mileage: This is a great way to get cheap car insurance: If you are really close to the "miles to work" break-off, you may want to check your mileage closely. When your car insurance company or insurance agent asks you "How many miles do you drive to work one way?" this is a crucial question that will designate you into a particular class. Each class can have significant differences in prices.
Look for a Group Discount: Many companies offer a discount on car insurance for being affiliated with certain organizations. These can range from credit unions, college sororities, or just having a certain credit card. Call your service center and ask them for a list of organization affiliations.
Lower Liability, Comprehensive, Collision, or Medical Payments Coverages: Of course, you can lower your basic coverages. Comprehensive and collision are probably the first to look at lowering by increasing your deductibles on your car insurance. Most vehicles that are on bank loans can have up to a $1000 deductible. Next, lowering your liability and medical payments could help, but only if you are having a hard time paying for your premium and is not recommended for general savings.
Make EFT Payments: Many car insurance companies are now charging up to $5.00 or more for mail payments, but sometimes nothing if you choose to have payments automatically deducted. And, sometimes the deductions can come from your credit card, so you don't have to worry if the money will be in your bank account when payment time comes.
Top Ways to Change Your Current Car Insurance into Cheap Car Insurance:
Get Theft Devices: Most new cars have theft devices. Some are automatic and some have to be started at the touch of a button, but all usually get discounts on car insurance. Also, some states provide extra discounts for such things as window sketching.
Ask for a Multiple Car Discount: Did you know sometimes insuring two cars can be the same price as insuring one? If not the same price, insuring another car usually does not cost as much as you may think.
If you have two cars, it is very wise to check with your insurance agent, or while obtaining your online insurance quote, to make sure you can get this discount on your car insurance. Also, if you are planning to sell a second car, the cheap car insurance trick would be to keep that car on just liability to get your multiple car discount. Sometimes people are surprised when they call their car insurance company to take a car off of their insurance, only to find that their price did not go down but possibly increased!
Stick With Yearly Policies: Choosing a yearly policy can extend your savings on your car insurance. Purchasing a yearly policy instead of a six month policy gives you a rate that cannot be changed for one year vs. changing every six months.
Look Into Comprehensive Storage Coverage: If you are planning to store your car for any period of time, you can save on your car insurance by only keeping comprehensive coverage during the storage time. Since the car would be stored, it is very unlikely it will get in a collision or need the liability coverage.
Re-Check Your Mileage: This is a great way to get cheap car insurance: If you are really close to the "miles to work" break-off, you may want to check your mileage closely. When your car insurance company or insurance agent asks you "How many miles do you drive to work one way?" this is a crucial question that will designate you into a particular class. Each class can have significant differences in prices.
Look for a Group Discount: Many companies offer a discount on car insurance for being affiliated with certain organizations. These can range from credit unions, college sororities, or just having a certain credit card. Call your service center and ask them for a list of organization affiliations.
Lower Liability, Comprehensive, Collision, or Medical Payments Coverages: Of course, you can lower your basic coverages. Comprehensive and collision are probably the first to look at lowering by increasing your deductibles on your car insurance. Most vehicles that are on bank loans can have up to a $1000 deductible. Next, lowering your liability and medical payments could help, but only if you are having a hard time paying for your premium and is not recommended for general savings.
Make EFT Payments: Many car insurance companies are now charging up to $5.00 or more for mail payments, but sometimes nothing if you choose to have payments automatically deducted. And, sometimes the deductions can come from your credit card, so you don't have to worry if the money will be in your bank account when payment time comes.
Safety Insurance Group
Auto insurers can be great businesses to own, as evidenced by the fortune Buffett made buying and holding GEICO. Here's a look at the unique story of Safety Insurance Group (SAFT).
Safety has about 11% share of the Massachusetts automobile insurance market. It has been profitable every year since inception in 1979, with high returns on equity and strong combined ratios in recent years. The company pays a healthy dividend, now yielding 3%. Senior management also owned 7% of the stock at year end '06.
Despite a history of market leadership and profitability, SAFT shares are trading at 5.1 times trailing earnings, 1.05 times book value, and about 41% below their 52 week high. These numbers make the stock suspiciously cheap.
I need to do some more research before I can state with confidence why the valuation is so low, but my guess is that the unusually onerous regulatory environment in Massachusetts is to blame. Safety can neither choose the risks it takes nor how to price those risks.
Some of the regulations Massachusetts has in place include a "take all comers" policy which prohibits insures from denying coverage based on an applicant's driving record or other underwriting criteria.
You might think that insurers would be allowed offset the "take all comers" risk through shrewd product pricing, but that's not the case. The State Commissioner of Insurance sets the premiums which insurance companies are obligated to use. Effective April of this year, rates will be decreased 11.7%. This follows a decrease of 8.7% in 2006 and a decrease of 1.7% in 2005. That's right--decrease.
Not surprisingly, lowered premiums have put profits under pressure. Net income for 4th quarter 2006 and 1st quarter 2007 were below the comparable prior year quarters. That said, Safety still managed to increase book value by over 25% in 2006 and maintain profitability and market leadership.
It seems the company does a decent job of navigating some tough waters--waters few others choose to swim. Safety's 10K reports, "Many large national private passenger automobile insurance writers, such as State Farm, Allstate, Progressive, Berkshire Hathaway [GEICO], and Farmers, write very little or no private passenger automobile insurance business in Massachusetts." I suppose one can debate whether this is a pro (entrenched leadership, less competition) or con (indication of market's unattractiveness) for Safety's stock.
My goal here is to highlight an interesting story and not to make a stock recommendation. I'm undecided myself. Whether or not five times earnings and a hair over book value make it worthwhile to own a Massachusetts auto insurer is a tough call. If you have any comments that can help flesh out the SAFT story, please post.
Safety has about 11% share of the Massachusetts automobile insurance market. It has been profitable every year since inception in 1979, with high returns on equity and strong combined ratios in recent years. The company pays a healthy dividend, now yielding 3%. Senior management also owned 7% of the stock at year end '06.
Despite a history of market leadership and profitability, SAFT shares are trading at 5.1 times trailing earnings, 1.05 times book value, and about 41% below their 52 week high. These numbers make the stock suspiciously cheap.
I need to do some more research before I can state with confidence why the valuation is so low, but my guess is that the unusually onerous regulatory environment in Massachusetts is to blame. Safety can neither choose the risks it takes nor how to price those risks.
Some of the regulations Massachusetts has in place include a "take all comers" policy which prohibits insures from denying coverage based on an applicant's driving record or other underwriting criteria.
You might think that insurers would be allowed offset the "take all comers" risk through shrewd product pricing, but that's not the case. The State Commissioner of Insurance sets the premiums which insurance companies are obligated to use. Effective April of this year, rates will be decreased 11.7%. This follows a decrease of 8.7% in 2006 and a decrease of 1.7% in 2005. That's right--decrease.
Not surprisingly, lowered premiums have put profits under pressure. Net income for 4th quarter 2006 and 1st quarter 2007 were below the comparable prior year quarters. That said, Safety still managed to increase book value by over 25% in 2006 and maintain profitability and market leadership.
It seems the company does a decent job of navigating some tough waters--waters few others choose to swim. Safety's 10K reports, "Many large national private passenger automobile insurance writers, such as State Farm, Allstate, Progressive, Berkshire Hathaway [GEICO], and Farmers, write very little or no private passenger automobile insurance business in Massachusetts." I suppose one can debate whether this is a pro (entrenched leadership, less competition) or con (indication of market's unattractiveness) for Safety's stock.
My goal here is to highlight an interesting story and not to make a stock recommendation. I'm undecided myself. Whether or not five times earnings and a hair over book value make it worthwhile to own a Massachusetts auto insurer is a tough call. If you have any comments that can help flesh out the SAFT story, please post.
Car Insurance Premium
Many factors affect the premium you will pay for auto insurance. Each is a statistically based risk for a specific population. The higher the risk associated with a person, the more he or she is likely to pay for coverage. We have elaborated on some of the risk factors below, but there are numerous others, including driver's gender, miles driven per year, purpose for using the vehicle (commuting to work, using for work, leisure only), etc.
Age
Statistically, drivers under the age of 25 are at greater risk of being in an accident than those over age 25. Drivers between the ages of 50 and 65 generally have the safest records.
Gender
Women are statistically safer drivers, but that trend is changing as more female drivers get on the road.
Marital Status
A married person will pay less than a single person with an identical driving record.
You can think about these factors and determine what you can do to change them in your situation. You may be able to save on insurance based upon these decisions:
Geography
Where you live makes a difference. Folks living in areas with little or no traffic are likely to spend less on insurance than those living in congested cities or suburbs because areas with a lot of traffic tend to see more accidents. Some neighborhoods also have a higher rate of vehicle thefts, which can result in a higher premium.
Driving Violations
Having an accident or moving violations on your record (speeding tickets, DWI, reckless driving, etc.) put you at a higher risk for accidents and will likely mean a higher premium. Some insurance companies will penalize you for your record for as many as five years from when the incident occurred. However, keep in mind, as your record improves, your premium will get lower.
Vehicle Type
A cheap car will cost less to insure than that status symbol SUV sitting on 24" rims.
Accident Claims
A driving record that is clean and free of accidents will hold far better for you than lots of tickets and/or accidents.
Credit Rating
Many insurance companies view having a poor, or even no credit history as suggestive of higher risk and thus, charge you a higher premium. Monitor your to see if you can get a better score. A better credit score will save on insurance premiums.
Occupation
Insurers have statistically found a correlation between your occupation and risk. For instance, a newspaper delivery person is most likely a higher risk than the personal banker sitting at their desk all day.
Education
A higher education can save on your premiums.
Driving distance to work
Miles driven each year
Years of driving experience
Business use of the vehicle
Whether or not you currently have auto insurance and how high are your limits
Theft protection devices (often results in discounts)
Multiple cars and drivers (another opportunity for discounts)
What can I do right now to make sure I have the lowest premium?
Shop around and compare quotes from different insurers. CarInsurance.com puts many insurance companies on one site so you can compare them in one place. Carriers base their premiums on their claims experiences, which naturally differ. One company may see your area as a higher risk than others may. Another may charge more because of your occupation. Shopping at makes it easier because you can quickly see multiple companies and their rates for your particular situation. Where do I go for quotes?
One stop can take care of it all. Go to where you can receive multiple quotes, pick the best price, and then purchase. Get covered immediately on-line or over the phone. It REALLY is the easiest way to purchase car insurance. Enter your zip code above.
Customer Said:
Easier than going to an agency....faster too!
Shannon K.
Holiday, FL
Thank you for reading about factors that affect your car insurance premium... Please see if we can save you money with a car insurance quote!
Disclaimer: This article is for information purposes. It should not be interpreted as a recommendation to buy or sell any insurance product, or to provide financial or legal advice. This information is provided for information purposes only.
Articles written by CarInsurance.com have a copyright and cannot be reproduced or republished in any way or form without the written consent from CarInsurance.com. You may use our RSS feed with an active link to our site.
Age
Statistically, drivers under the age of 25 are at greater risk of being in an accident than those over age 25. Drivers between the ages of 50 and 65 generally have the safest records.
Gender
Women are statistically safer drivers, but that trend is changing as more female drivers get on the road.
Marital Status
A married person will pay less than a single person with an identical driving record.
You can think about these factors and determine what you can do to change them in your situation. You may be able to save on insurance based upon these decisions:
Geography
Where you live makes a difference. Folks living in areas with little or no traffic are likely to spend less on insurance than those living in congested cities or suburbs because areas with a lot of traffic tend to see more accidents. Some neighborhoods also have a higher rate of vehicle thefts, which can result in a higher premium.
Driving Violations
Having an accident or moving violations on your record (speeding tickets, DWI, reckless driving, etc.) put you at a higher risk for accidents and will likely mean a higher premium. Some insurance companies will penalize you for your record for as many as five years from when the incident occurred. However, keep in mind, as your record improves, your premium will get lower.
Vehicle Type
A cheap car will cost less to insure than that status symbol SUV sitting on 24" rims.
Accident Claims
A driving record that is clean and free of accidents will hold far better for you than lots of tickets and/or accidents.
Credit Rating
Many insurance companies view having a poor, or even no credit history as suggestive of higher risk and thus, charge you a higher premium. Monitor your to see if you can get a better score. A better credit score will save on insurance premiums.
Occupation
Insurers have statistically found a correlation between your occupation and risk. For instance, a newspaper delivery person is most likely a higher risk than the personal banker sitting at their desk all day.
Education
A higher education can save on your premiums.
Driving distance to work
Miles driven each year
Years of driving experience
Business use of the vehicle
Whether or not you currently have auto insurance and how high are your limits
Theft protection devices (often results in discounts)
Multiple cars and drivers (another opportunity for discounts)
What can I do right now to make sure I have the lowest premium?
Shop around and compare quotes from different insurers. CarInsurance.com puts many insurance companies on one site so you can compare them in one place. Carriers base their premiums on their claims experiences, which naturally differ. One company may see your area as a higher risk than others may. Another may charge more because of your occupation. Shopping at makes it easier because you can quickly see multiple companies and their rates for your particular situation. Where do I go for quotes?
One stop can take care of it all. Go to where you can receive multiple quotes, pick the best price, and then purchase. Get covered immediately on-line or over the phone. It REALLY is the easiest way to purchase car insurance. Enter your zip code above.
Customer Said:
Easier than going to an agency....faster too!
Shannon K.
Holiday, FL
Thank you for reading about factors that affect your car insurance premium... Please see if we can save you money with a car insurance quote!
Disclaimer: This article is for information purposes. It should not be interpreted as a recommendation to buy or sell any insurance product, or to provide financial or legal advice. This information is provided for information purposes only.
Articles written by CarInsurance.com have a copyright and cannot be reproduced or republished in any way or form without the written consent from CarInsurance.com. You may use our RSS feed with an active link to our site.
Thursday, August 23, 2007
How Banner Ads Work ?
Introduction
If you've spent any time surfing the Internet, you've seen more than your fair share of banner ads. These small rectangular advertisements appear on all sorts of Web pages and vary considerably in appearance and subject matter, but they all share a basic function: if you click on them, your Internet browser will take you to the advertiser's Web site. But how do they work and why are they there?
Banner ads are usually relatively simple pieces of HTML code, but their presence on the Web and their importance in Internet-based business is immense. In this edition , we'll examine banner ads and their place on the Internet. We'll see how they work, how advertisers rate their effectiveness, and how you can use them to advertise your site or bring in revenue. We'll also examine the technology behind them and look at some of the different forms they can take. By the end of this article, you will be a banner ad expert!
What is a Banner Ad?
Over the past few years, most of us have heard about all the money being made on the Internet. This new medium of education and entertainment has revolutionized the economy and brought many people and many companies a great deal of success. But where is all this money coming from? There are a lot of ways Web sites make money, but one of the main sources of revenue is advertising. And one of the most popular forms of Internet advertising is the banner ad.
A banner ad is simply a special sort of hypertext link. A bit of HTML code instructs a Web server to bring up a particular Web page when a user clicks on a certain piece of text. Banner ads are essentially the same thing, except that instead of text, the link is displayed as a box containing graphics (usually with textual elements) and sometimes animation.
Because of its graphic element, a banner ad is somewhat similar to a traditional ad you would see in a printed publication such as a newspaper or magazine, but it has the added ability to bring a potential customer directly to the advertiser's Web site. This is something like touching a printed ad and being immediately teleported to the advertiser's store! A banner ad also differs from a print ad in its dynamic capability. It stays in one place on a page, like a magazine ad, but it can present multiple images, include animation and change appearance in a number of other ways.
Types of Banner
AdsLike print ads, banner ads come in a variety of shapes and sizes. The Internet Advertising Bureau (IAB) specifies eight different banner sizes, according to pixel dimensions. A pixel is the smallest unit of color used to make up images on a computer or television screen. The IAB's standard banner sizes are:
The full banner (468 x 60) is by far the most popular, but you will see all these variations all over the Web. These are not the only banner ad shapes and sizes, either, but they are a good representation of the range of common banner ads. There is no universal file-size constraint for banner ads, but most Web sites impose their own limits on memory size, usually something like 12K to 16K. This is because banner ads add to the total file size of the page they appear on, therefore increasing the time it takes for a browser to load that page.
As you've probably noticed while surfing the Web, actual graphic content, or creative, varies considerably among banner ads. The simplest banner ads feature only one, static GIF or JPEG image, which is linked to the advertiser's home page. More common is the GIF-animated banner ad, which displays several different images in succession, sometimes to create the effect of animated motion. Then there are rich media banner ads -- ads that use audio, video, or Java and Shockwave programming. These banner ads, which usually have larger file sizes, are often interactive beyond their simple linking function.
Banner Ad Objectives
Advertisers generally hope a banner ad will do one of two things. Ideally, a visitor to the publisher site, the Web site that posts the banner ad, will click on the banner ad and go to the advertiser's Web site. In this case the banner ad has brought the advertiser a visitor they would not have had otherwise. The banner ad is a real success if the visitor not only comes to the site but also buys something. Failing a click-through, advertisers hope that a publisher site visitor will see the banner ad and will somehow register it in their heads. This could mean the visitor consciously notes the content of a banner ad and decides to visit the advertiser's site at some time in the future, or it might mean that the visitor only peripherally picks up on the ad but is made aware of the advertiser's product or service.
This second effect of advertising is known as branding. We've all experienced the effects of branding before. Say you see ads on television for Brand X glue all the time. The ads don't seem to particularly affect you -- you don't leap from your couch to go buy glue -- but down the road, when you're at the store shopping for glue, they may affect the decision you make. If you don't have any other reason to choose one type of glue over the others, you'll probably choose the one you're most familiar with, Brand X, even if you're only familiar with it because of advertising.
So there are several ways a banner ad can be successful. Consequently, there are several ways advertisers measure banner ad success. Advertisers look at:
Clicks/Click-throughs: The number of visitors who click on the banner ad linking to the advertiser's Web site. Publisher sites often sell banner ad space on a cost-per-click (CPC) basis.
Page views: Also called page impressions, this is the number of times a particular Web page has been requested from the server. Advertisers are interested in page views because they indicate the number of visitors who could have seen the banner ad. Although they don't measure the effectiveness of a branding campaign, they do measure how many visitors were exposed to it. The most common way to sell banner ad space is cost per thousand impressions, or CPM (In roman numerals, M equals a thousand).
Click-through rate (CTR): This describes the ratio of page views to clicks. It is expressed as the percentage of total visitors to a particular page who actually clicked on the banner ad. The typical click-through-rate is something under 1 percent, and click-through rates significantly higher than that are very rare.
Cost per sale: This is the measure of how much advertising money is spent on making one sale. Advertisers use different means to calculate this, depending on the ad and the product or service. Many advertisers keep track of visitor activity using Internet cookies. This technology allows the site to combine shopping history with information about how the visitor originally came to the site.
Different measures are more important to different advertisers, but most advertisers consider all of these elements when judging the effectiveness of a banner ad.
Advertising with Banners
An advertiser that is interested in posting banner ads on other sites has three basic options. The advertiser can:
Arrange to display other Web sites' banner ads in exchange for them displaying its ad.
Pay publisher sites to post its banner.
Pay an organization, usually a banner network like DoubleClick or Flycast, to post the banner on a number of publisher sites. These three arrangements take many forms and advertisers and publishers must choose the specific arrangement that best suits them. If you want to post banner ads on other sites but don't have the capital to mount a traditional advertising campaign, you may choose to exchange banner ads with other sites. There are two ways you can go about this. The first is to individually develop relationships with other Web sites and trade specific banners. This is a very natural process and allows you to place your banner ads conscientiously and post other Web site banner ads that fit your site well. Your banner ad doesn't end up on very many sites, however, unless you invest a whole lot of your time in seeking out interested webmasters.
If you want to get your banner ad on a lot of sites in a short amount of time (and don't want to pay for it) then your best bet is joining a banner exchange program.
Banner Exchange Programs
Banner exchange programs offer a simple service. If you post a certain number of banner ads on your site, they will post your banner ad on another site. Usually, this isn't an even exchange; you have to post more than one banner ad for every one of your banner ads they post. This is how the exchange program makes a profit. Their arrangement yields them more banner ad spaces than actual banner ads they need to place for their members, so they can sell the extra banner ad spaces to paying advertisers. The exact ratio varies, but 2:1, posting two banner ads on your site for every one of yours posted on another site, is a typical arrangement.
Most banner exchange programs distribute banner ads in the same way. For every banner ad you've decided to display, the exchange provides you with a piece of HTML code. This code instructs a visitor's Web browser to bring up a banner ad from the exchange program's server. This enables the exchange program to easily change which banner ads are on which sites. They can also monitor the success of particular banner ads on particular member sites, which helps them to pair sites with suitable advertisers.
The advantage of joining a banner exchange program is it's a free way to get other sites to post your banner ads. The disadvantage is that you give up a lot of control over where your ads are posted and what ads are posted on your site. In most cases, the banner exchange program chooses where to put its members' banner ads, and you may not like what they decide to post on your site or where they end up posting your banner ad. Most banner exchange programs attempt to link banner ads and sites intelligently, and they often do a good job, but there is a possibility that at some point you will be dissatisfied with a banner ad that ends up on your site.
Some major banner exchange programs are:
LinkExchange
BannerSwap
SmartClicks
Free Banners
LinkBuddies
It's pretty easy to join a banner exchange program. Go to any of the above sites and they will walk you through their particular process. It's definitely a good idea to shop around, because different banner exchange programs have different strengths. Some programs concentrate on effective banner placement more than others, and some specialize in Web sites that feature a particular subject matter, such as religion or kid interests. Most banner exchange programs are free to join, but some also offer a better exchange ratio for a small fee.
What Makes a Banner Ad Effective?
There are no concrete rules about what makes a good banner ad. As in all advertising, an effective banner ad is the product of a number of different factors, and there is no sure way to predict how well any banner ad will do. A lot of successful banner ads are the result of extensive trial and error experimentation: A Web site puts a banner ad up and monitors the response it gets. If that doesn't work, the site tries something else. What makes a good advertisement is largely a mystery.
That said, there are a few qualities that generally make for more effective banner ads in many situations. If you are mounting a banner ad campaign you should keep these suggestions in mind:
Post banner ads on pages with related Web content -- the more related, the better.
Advertise a particular product or service in your banner, rather than your site generally.
If you do advertise a particular product or service, link the banner ad to that part of your Web site, rather than your home page.
Put banner ads at the top of the page, rather than farther down.
Use simple messages rather than complicated ones.
Use animated ads rather than static ones.
Your graphic content should pique visitor curiosity, without being too obscure.
Keep banner ad size small. If the page takes too long to load, a lot of visitors will go on to another page. The most important things are to make visually appealing ads with interesting content and to intelligently place the ads so they are exposed to audiences that would be interested in them. Combining these qualities is a simple notion, but effectively accomplishing this is a complicated art. And like any art, advertising is constantly evolving. New approaches to banner ads pop up all the time.
One interesting development that has been around for a while is targeting. Banner ads that are targeted appear based on the Internet user's activity. For example, advertisers can buy keyword advertising on a search engine, such as Alta Vista or Yahoo, so that their ads are displayed when someone performs a particular search. If an advertiser buys up keywords related to its product or service, it can probably increase click-through rates, because the visitor has already demonstrated an interest in finding sites on that particular subject.
The Internet is an attractive medium to advertisers, because cookies allow sites to gather information about each visitor. It's a good bet that the future of Internet advertising will involve extensive use of this technology to target individual Internet users. Many Web sites are already experimenting with presenting each visitor with specific banner ads that would be likely to interest them, based on information gathered from surveys and the visitor's Web-surfing activity.
The Future of Internet Advertising
Web experts have been predicting the end of traditional banner advertising for years, noting dwindling click-through rates. They have several different ideas of what will replace it as the dominant means of advertising. Pop-up ads, advertisements that appear in their own, small browser window, have been growing in popularity. Many Web users find them extremely annoying because you have to close each browser window, and if there are enough of them, they can overload some browsers' capacity. Some Internet research shows that text links are more effective than banner ads. This is probably because so many Web users are automatically aware of banner ads and so can easily ignore them while text links are less obvious -- they appear to be part of the site's content.
Advertisers have also found some success with interstitial ads. Like Pop-up ads, these ads appear in their own browser window. When a visitor clicks on a link, the interstitial ad appears before the browser brings up the linking page. Most interstitial ads close automatically, so they are less annoying than pop-up ads, but they briefly fill the user's screen, so they definitely make an impression.
If you keep an eye on Internet news, you will continually see stories on the death of the banner ad, as well as stories about upturns in banner ad success. Banner ads will most likely be around for some time, but it's a good bet they will take new, interesting forms. As we've all read in recent years, the Internet is in its infancy, and webmasters have only begun to tap its potential. The same can certainly be said for Internet advertisers, and since advertising is the main source of revenue the keeps Web sites going, you can be sure it will continue to evolve at an accelerated rate.
If you've spent any time surfing the Internet, you've seen more than your fair share of banner ads. These small rectangular advertisements appear on all sorts of Web pages and vary considerably in appearance and subject matter, but they all share a basic function: if you click on them, your Internet browser will take you to the advertiser's Web site. But how do they work and why are they there?
Banner ads are usually relatively simple pieces of HTML code, but their presence on the Web and their importance in Internet-based business is immense. In this edition , we'll examine banner ads and their place on the Internet. We'll see how they work, how advertisers rate their effectiveness, and how you can use them to advertise your site or bring in revenue. We'll also examine the technology behind them and look at some of the different forms they can take. By the end of this article, you will be a banner ad expert!
What is a Banner Ad?
Over the past few years, most of us have heard about all the money being made on the Internet. This new medium of education and entertainment has revolutionized the economy and brought many people and many companies a great deal of success. But where is all this money coming from? There are a lot of ways Web sites make money, but one of the main sources of revenue is advertising. And one of the most popular forms of Internet advertising is the banner ad.
A banner ad is simply a special sort of hypertext link. A bit of HTML code instructs a Web server to bring up a particular Web page when a user clicks on a certain piece of text. Banner ads are essentially the same thing, except that instead of text, the link is displayed as a box containing graphics (usually with textual elements) and sometimes animation.
Because of its graphic element, a banner ad is somewhat similar to a traditional ad you would see in a printed publication such as a newspaper or magazine, but it has the added ability to bring a potential customer directly to the advertiser's Web site. This is something like touching a printed ad and being immediately teleported to the advertiser's store! A banner ad also differs from a print ad in its dynamic capability. It stays in one place on a page, like a magazine ad, but it can present multiple images, include animation and change appearance in a number of other ways.
Types of Banner
AdsLike print ads, banner ads come in a variety of shapes and sizes. The Internet Advertising Bureau (IAB) specifies eight different banner sizes, according to pixel dimensions. A pixel is the smallest unit of color used to make up images on a computer or television screen. The IAB's standard banner sizes are:
The full banner (468 x 60) is by far the most popular, but you will see all these variations all over the Web. These are not the only banner ad shapes and sizes, either, but they are a good representation of the range of common banner ads. There is no universal file-size constraint for banner ads, but most Web sites impose their own limits on memory size, usually something like 12K to 16K. This is because banner ads add to the total file size of the page they appear on, therefore increasing the time it takes for a browser to load that page.
As you've probably noticed while surfing the Web, actual graphic content, or creative, varies considerably among banner ads. The simplest banner ads feature only one, static GIF or JPEG image, which is linked to the advertiser's home page. More common is the GIF-animated banner ad, which displays several different images in succession, sometimes to create the effect of animated motion. Then there are rich media banner ads -- ads that use audio, video, or Java and Shockwave programming. These banner ads, which usually have larger file sizes, are often interactive beyond their simple linking function.
Banner Ad Objectives
Advertisers generally hope a banner ad will do one of two things. Ideally, a visitor to the publisher site, the Web site that posts the banner ad, will click on the banner ad and go to the advertiser's Web site. In this case the banner ad has brought the advertiser a visitor they would not have had otherwise. The banner ad is a real success if the visitor not only comes to the site but also buys something. Failing a click-through, advertisers hope that a publisher site visitor will see the banner ad and will somehow register it in their heads. This could mean the visitor consciously notes the content of a banner ad and decides to visit the advertiser's site at some time in the future, or it might mean that the visitor only peripherally picks up on the ad but is made aware of the advertiser's product or service.
This second effect of advertising is known as branding. We've all experienced the effects of branding before. Say you see ads on television for Brand X glue all the time. The ads don't seem to particularly affect you -- you don't leap from your couch to go buy glue -- but down the road, when you're at the store shopping for glue, they may affect the decision you make. If you don't have any other reason to choose one type of glue over the others, you'll probably choose the one you're most familiar with, Brand X, even if you're only familiar with it because of advertising.
So there are several ways a banner ad can be successful. Consequently, there are several ways advertisers measure banner ad success. Advertisers look at:
Clicks/Click-throughs: The number of visitors who click on the banner ad linking to the advertiser's Web site. Publisher sites often sell banner ad space on a cost-per-click (CPC) basis.
Page views: Also called page impressions, this is the number of times a particular Web page has been requested from the server. Advertisers are interested in page views because they indicate the number of visitors who could have seen the banner ad. Although they don't measure the effectiveness of a branding campaign, they do measure how many visitors were exposed to it. The most common way to sell banner ad space is cost per thousand impressions, or CPM (In roman numerals, M equals a thousand).
Click-through rate (CTR): This describes the ratio of page views to clicks. It is expressed as the percentage of total visitors to a particular page who actually clicked on the banner ad. The typical click-through-rate is something under 1 percent, and click-through rates significantly higher than that are very rare.
Cost per sale: This is the measure of how much advertising money is spent on making one sale. Advertisers use different means to calculate this, depending on the ad and the product or service. Many advertisers keep track of visitor activity using Internet cookies. This technology allows the site to combine shopping history with information about how the visitor originally came to the site.
Different measures are more important to different advertisers, but most advertisers consider all of these elements when judging the effectiveness of a banner ad.
Advertising with Banners
An advertiser that is interested in posting banner ads on other sites has three basic options. The advertiser can:
Arrange to display other Web sites' banner ads in exchange for them displaying its ad.
Pay publisher sites to post its banner.
Pay an organization, usually a banner network like DoubleClick or Flycast, to post the banner on a number of publisher sites. These three arrangements take many forms and advertisers and publishers must choose the specific arrangement that best suits them. If you want to post banner ads on other sites but don't have the capital to mount a traditional advertising campaign, you may choose to exchange banner ads with other sites. There are two ways you can go about this. The first is to individually develop relationships with other Web sites and trade specific banners. This is a very natural process and allows you to place your banner ads conscientiously and post other Web site banner ads that fit your site well. Your banner ad doesn't end up on very many sites, however, unless you invest a whole lot of your time in seeking out interested webmasters.
If you want to get your banner ad on a lot of sites in a short amount of time (and don't want to pay for it) then your best bet is joining a banner exchange program.
Banner Exchange Programs
Banner exchange programs offer a simple service. If you post a certain number of banner ads on your site, they will post your banner ad on another site. Usually, this isn't an even exchange; you have to post more than one banner ad for every one of your banner ads they post. This is how the exchange program makes a profit. Their arrangement yields them more banner ad spaces than actual banner ads they need to place for their members, so they can sell the extra banner ad spaces to paying advertisers. The exact ratio varies, but 2:1, posting two banner ads on your site for every one of yours posted on another site, is a typical arrangement.
Most banner exchange programs distribute banner ads in the same way. For every banner ad you've decided to display, the exchange provides you with a piece of HTML code. This code instructs a visitor's Web browser to bring up a banner ad from the exchange program's server. This enables the exchange program to easily change which banner ads are on which sites. They can also monitor the success of particular banner ads on particular member sites, which helps them to pair sites with suitable advertisers.
The advantage of joining a banner exchange program is it's a free way to get other sites to post your banner ads. The disadvantage is that you give up a lot of control over where your ads are posted and what ads are posted on your site. In most cases, the banner exchange program chooses where to put its members' banner ads, and you may not like what they decide to post on your site or where they end up posting your banner ad. Most banner exchange programs attempt to link banner ads and sites intelligently, and they often do a good job, but there is a possibility that at some point you will be dissatisfied with a banner ad that ends up on your site.
Some major banner exchange programs are:
LinkExchange
BannerSwap
SmartClicks
Free Banners
LinkBuddies
It's pretty easy to join a banner exchange program. Go to any of the above sites and they will walk you through their particular process. It's definitely a good idea to shop around, because different banner exchange programs have different strengths. Some programs concentrate on effective banner placement more than others, and some specialize in Web sites that feature a particular subject matter, such as religion or kid interests. Most banner exchange programs are free to join, but some also offer a better exchange ratio for a small fee.
What Makes a Banner Ad Effective?
There are no concrete rules about what makes a good banner ad. As in all advertising, an effective banner ad is the product of a number of different factors, and there is no sure way to predict how well any banner ad will do. A lot of successful banner ads are the result of extensive trial and error experimentation: A Web site puts a banner ad up and monitors the response it gets. If that doesn't work, the site tries something else. What makes a good advertisement is largely a mystery.
That said, there are a few qualities that generally make for more effective banner ads in many situations. If you are mounting a banner ad campaign you should keep these suggestions in mind:
Post banner ads on pages with related Web content -- the more related, the better.
Advertise a particular product or service in your banner, rather than your site generally.
If you do advertise a particular product or service, link the banner ad to that part of your Web site, rather than your home page.
Put banner ads at the top of the page, rather than farther down.
Use simple messages rather than complicated ones.
Use animated ads rather than static ones.
Your graphic content should pique visitor curiosity, without being too obscure.
Keep banner ad size small. If the page takes too long to load, a lot of visitors will go on to another page. The most important things are to make visually appealing ads with interesting content and to intelligently place the ads so they are exposed to audiences that would be interested in them. Combining these qualities is a simple notion, but effectively accomplishing this is a complicated art. And like any art, advertising is constantly evolving. New approaches to banner ads pop up all the time.
One interesting development that has been around for a while is targeting. Banner ads that are targeted appear based on the Internet user's activity. For example, advertisers can buy keyword advertising on a search engine, such as Alta Vista or Yahoo, so that their ads are displayed when someone performs a particular search. If an advertiser buys up keywords related to its product or service, it can probably increase click-through rates, because the visitor has already demonstrated an interest in finding sites on that particular subject.
The Internet is an attractive medium to advertisers, because cookies allow sites to gather information about each visitor. It's a good bet that the future of Internet advertising will involve extensive use of this technology to target individual Internet users. Many Web sites are already experimenting with presenting each visitor with specific banner ads that would be likely to interest them, based on information gathered from surveys and the visitor's Web-surfing activity.
The Future of Internet Advertising
Web experts have been predicting the end of traditional banner advertising for years, noting dwindling click-through rates. They have several different ideas of what will replace it as the dominant means of advertising. Pop-up ads, advertisements that appear in their own, small browser window, have been growing in popularity. Many Web users find them extremely annoying because you have to close each browser window, and if there are enough of them, they can overload some browsers' capacity. Some Internet research shows that text links are more effective than banner ads. This is probably because so many Web users are automatically aware of banner ads and so can easily ignore them while text links are less obvious -- they appear to be part of the site's content.
Advertisers have also found some success with interstitial ads. Like Pop-up ads, these ads appear in their own browser window. When a visitor clicks on a link, the interstitial ad appears before the browser brings up the linking page. Most interstitial ads close automatically, so they are less annoying than pop-up ads, but they briefly fill the user's screen, so they definitely make an impression.
If you keep an eye on Internet news, you will continually see stories on the death of the banner ad, as well as stories about upturns in banner ad success. Banner ads will most likely be around for some time, but it's a good bet they will take new, interesting forms. As we've all read in recent years, the Internet is in its infancy, and webmasters have only begun to tap its potential. The same can certainly be said for Internet advertisers, and since advertising is the main source of revenue the keeps Web sites going, you can be sure it will continue to evolve at an accelerated rate.
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