Top 10 Lapse experience in Life insurance products in Canada

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• A unique first study in Canada As you may be aware, the Canadian Institute of Actuaries (CIA) has released in January the results of a 2-years study on lapse experience for 10-year term insurance. This study was made within the Individual Life Experience Subcommittee of the CIA. It has benefited from the important data contribution of many life insurance companies and RGA gladly took part in its 
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• Among the key elements to note, it must be pointed out that this study is a first by the CIA on T10 lapses. The project governance involved many volunteer actuaries and, through its course, 4 individuals from RGA contributed. The study manager came from the Fraser Group, an independent research organization. The data used by the study was provided by 10 out of the 12 largest writers of T10 life insurance. It represents over 6 million data records treated, or also 2.3 million unique policies.
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•  High renewal lapse rates Of the numerous valuable statistics derived in this study, I would like to highlight a couple. First, following are the results of the lapses observed at durations 10 and 11: Lapse Rates at Duration 10 & 11 (by Count) Duration Lapse Rate (Monthly Pay) 10 34.1% 11 32.9% My impression is that most of the industry stakeholders understand these results are quite high and few, to our knowledge, believe that they are lower than their own predictions. The lapse behavior in these 2 annual durations would certainly entice many of us to scrutinize them more in a future study.
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• Smokers have higher lapse rates than non-smokers Table 11 Variance in Lapse Rates by Smoking Status (by Count) Proportion of Exposure Actual Lapse Rate Variance Ratio Smoker 17% 10.3% 1.20 Non-smoker 81% 8.3% 0.96 Aggregate 2% 6.4% 0.98 Total 100% 8.6% 1.00 Among the various tables produced in the study, the results by smoking status (displayed below) indicate that smokers tend to lapse more than non-smokers by a rate of 20 to 25%. Could this be attributable to higher premium increases at renewal for smokers, compared to non-smokers? Table 12 Variance in Lapse Rates by Smoking Status (by Amount) Proportion of Exposure Actual Lapse Rate Variance Ratio Smoker 13% 9.8% 1.25 Non-smoker 85% 7.7% 0.96 Aggregate 3% 5.3% 0.98 Total 100% 7.9% 1.00
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• The next steps We should understand the reasons for these lapses, and the extent to which an insurer can control some of the factors influencing lapse behavior, for example the jump in renewal premium rates. At the upcoming CIA Annual Meeting in Vancouver, on June 18, there will be a session (no 6) about the impact this study will have on our industry. This is a very welcome opportunity to understand further this nice work - and see where future lapse studies may be headed.
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•  The next steps We should understand the reasons for these lapses, and the extent to which an insurer can control some of the factors influencing lapse behavior, for example the jump in renewal premium rates. At the upcoming CIA Annual Meeting in Vancouver, on June 18, there will be a session (no 6) about the impact this study will have on our industry. This is a very welcome opportunity to understand further this nice work - and see where future lapse studies may be headed.

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Top 10 Life Insurance Myths

Life insurance is not a simple product. Even term life policies have many elements that must be considered carefully in order to arrive at the proper type and amount of coverage. But the technical aspects of life insurance are far less difficult for most people to deal with than trying to get a handle on how much coverage they need and why. This article will briefly examine the top 10 misconceptions surrounding life insurance and the realities that they distort.

Myth #1: I'm Single and Don't Have Dependents, so I Don't Need Coverage
Even single persons need at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with. Plus, this can be a good way for low-income singles to leave a legacy to a favorite charity or other cause.

Myth #2: My Life Insurance Coverage Needs Only Be Twice My Annual Salary
The amount of life insurance each person needs depends on each person's specific situation. There are many factors to consider. In addition to medical and funeral bills, you may need to pay off debts such as your mortgage and provide for your family for several years. A cash flow analysis is usually necessary in order to determine the true amount of insurance that must be purchased - the days of computing life coverage based only on one's income-earning ability are long gone.

Myth #3: My Term Life Insurance Coverage at Work Is Sufficient 
Maybe, maybe not. For a single person of modest means, employer-paid or provided term coverage may actually be enough. But if you have a spouse or other dependents, or know that you will need coverage upon your death to pay estate taxes, then additional coverage may be necessary if the term policy does not meet the needs of the policyholder.

Myth #4: The Cost of My Premiums Will Be Deductible
Afraid not, at least in most cases. The cost of personal life insurance is never deductible unless the policyholder is self-employed and the coverage is used as asset protection for the business owner. Then the premiums are deductible on the Schedule C of the Form 1040.

Myth #5: I Absolutely MUST Have Life Insurance at Any Cost
In many cases, this is probably true. However, people with sizable assets and no debt or dependents may be better off self-insuring. If you have medical and funeral costs covered, then life insurance coverage may be optional.

Myth #6: I Should ALWAYS Buy Term and Invest the DifferenceNot necessarily. There are distinct differences between term and permanent life insurance, and the cost of term life coverage can become prohibitively high in later years. Therefore, those who know for certain that they must be covered at death should consider permanent coverage. The total premium outlay for a more expensive permanent policy may be less than the ongoing premiums that could last for years longer with a less expensive term policy.

There is also the risk of non-insurability to consider, which could be disastrous for those who may have estate tax issues and need life insurance to pay them. But this risk can be avoided with permanent coverage, which becomes paid up after a certain amount of premium has been paid and then remains in force until death.

Myth #7: Variable Universal Life Policies Are Always Superior to Straight Universal Life Policies Over the Long Run Many universal policies pay competitive interest rates, and variable universal life (VUL) policies contain several layers of fees relating to both the insurance and securities elements present in the policy. Therefore, if the variable subaccounts within the policy do not perform well, then the variable policyholder may well see a lower cash value than someone with a straight universal life policy.
Poor market performance can even generate substantial cash calls inside variable policies that require additional premiums to be paid in order to keep the policy in force.
Myth #8: Only Breadwinners Need Life Insurance CoverageNonsense. The cost of replacing the services formerly provided by a deceased homemaker can be higher than you think, and insuring against the loss of a homemaker may make more sense than one might think, especially when it comes to cleaning and daycare costs.

Myth #9: I Should Always Purchase the Return-of-Premium (ROP) Rider on Any Term PolicyThere are usually different levels of ROP riders available for policies that offer this feature. Many financial planners will tell you that this rider is not cost-effective and should be avoided. Whether you include this rider will depend on your risk tolerance and other possible investment objectives.
A cash flow analysis will reveal whether you could come out ahead by investing the additional amount of the rider elsewhere versus including it in the policy.
Myth #10: I'm Better off Investing My Money Than Buying Life Insurance of Any KindHogwash. Until you reach the breakeven point of asset accumulation, you need life coverage of some sort (barring the exception discussed in Myth No.5.) Once you amass $1 million of liquid assets, you can consider whether to discontinue (or at least reduce) your million-dollar policy. But you take a big chance when you depend solely on your investments in the early years of your life, especially if you have dependents. If you die without coverage for them, there may be no other means of provision after the depletion of your current assets.

The Bottom LineThese are just some of the more prevalent misunderstandings concerning life insurance that the public faces today. Therefore, there are many life insurance questions you should ask yourself. The key concept to understand is that you shouldn't leave life insurance out of your budget unless you have enough assets to cover expenses after you're gone. For more information, consult your life insurance agent or financial advisor.

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Common Life Insurance Myths Debunked

Like professionals in any line of work, those of us in the field of life insurance often hear from consumers who are misinformed about our industry. This is why we are devoting today’s post to the topic of common life insurance myths. Let’s take a closer look:

Life Insurance is Designed for Older People

Many young consumers believe that life insurance is intended to protect older generations. This however could not be further from the truth. Life insurance is intended to protect people of all ages and income levels. In fact, life insurance products are much cheaper when you buy them at a young age. So do yourself a favor, don’t wait until a later stage in life to compare life insurance premiums!

Life Insurance is Too Expensive

As we stated, life insurance premiums are lower when you’re young and healthy. Though they do rise as you age, life insurance premiums are typically much less expensive than you would expect. In fact, the 2014 Life Insurance Barometer revealed that the average consumer under the age of 25 overestimates the cost of a life insurance policy by nearly 10 times. If you are under the impression that you cannot afford life insurance, we urge you to investigate a bit further. You may very well find that you’re eligible for very affordable life insurance premiums!

Life Insurance Only Benefits My Family After My Death

Many permanent life insurance products offer investment opportunities far beyond simple death benefits. If you’re uneasy about purchasing a life insurance product because you feel it lacks investment opportunity, think again! Many permanent life insurance plans allow you to draw upon your policy’s cash value during your lifetime. All cash value that remains in your policy at the time of your death is then left to your beneficiaries, giving you the freedom to access cash when you need it and ultimately leave a legacy.

There you have it; three of the most common life insurance myths debunked. Now are you ready to compare your life insurance options? Allow us to help you secure an affordable policy that will benefit you and your loved ones for years to come

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How Insurance Business Threatened By Technology

Insurance Business Threatened By Technology and You will find more web-connected devices than people on the globe. Smartphones, fitness armbands, cars, factories and in many cases domestic appliances churn out a constant stream of live data. Cheap sensors and also the tsunami of information they make can improve our lives; black boxes in cars can signify how to drive more meticulously and wearable devices (like this forthcoming Apple Watch) will nudge us all toward healthier lifestyles. Yet though consumers and surgeons general might welcome such developments, they pose an existential threat to many insurers. How might data-gathering devices spell doom for aspects of the insurance business?

Insurance uses dynamic of imperfect information. Individuals are at greater or lesser risk of all kinds of ills, from car accidents in order to cancer. But because those at most affordable personal risk of trouble will not be always aware of their luck, they seekinsurance against trouble alongside include those with greater propensities to fall significantly ill or face other problems. Unlucky and lucky alike pool premiums right collective fund, and the unused payments from the fortunate cover the costs from the unfortunate, leaving some money remaining as insurer profits.

How Insurance Business Threatened By Technology

But the uncertainty that underpins the importance for insurance is now shrinking on account of better insights into individual hazards. The growing mountain of personal data there for individuals and, crucially, to firms is giving include those with the necessary processing power the ability to distinguish between low-risk and high-risk folks (and those in between). Because of technological innovation, sensors that monitor our every move are getting to be cheaper, cleverer and more everywhere.

This could upend existing insurance coverage business models, in a few ways. The better behaviour resulting from smart devices is one hazard. Conventional risk pools (for home or car insurance, for example) are shrinking while preventable accidents decline, leaving the slow-footed giants from the industry at risk. Business can be instead moving to digital-native insurance companies, many of which are featuring low premiums to those prepared collect and share their data. Yet the biggest winners could be tech companies as opposed to the firms that now dominate.

Insurance Business Threatened By Technology

Insurance is increasingly reliant on the employment of technology to change behaviour; firms behave as helicopter parents to policyholders, forewarning of impending harm—slow down; decrease your sugar intake; call the plumber—the preferable to reduce unnecessary payouts. Yet this sort of “Big Mother” relationship relies upon trust, and the Googles and Apples from the world, on which consumers be dependent day-by-day and hour-by-hour, may be best placed to win marketing ebay. Most tech giants are now rushing to create health platforms. It doesn’t take a leap of imagination to envisage this process extending to monitoring of homes, automobiles, and much else apart from.

Whether technology companies are actually keen to get involved with the insurance business is not necessarily yet clear. The prize for the most successful firms is going to be huge; last year insurers collected around $338 billion in profits. Even so the industry will also face extreme regulatory scrutiny, as governments seek to ensure that the misfortunes of bad genes or misfortune do not leave some folks uninsurable and bankrupt. And since the financial crisis reminded us, good but limited data in addition to powerful algorithms still leave lots of room for the disastrous build up of risk. There are many dangers against which even this Apple Watch cannot protect us all.

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My Sadness...A Poem

             My Sadness

Clouds slowly roll in as the sky becomes gray. 
Thunder rumbles and lightning dances in the clouds. 
Droplets of rain begin to fall. 
The wind picks up and begins to moan. 
As trees creak and branch sway. 
Rivers rise and dirts blows to and fro. 
Birds huddle within their nests. 
People quicken their pace trying to beat the on coming storm. 
Umbrellas are released as they open protecting the person underneath. 
Puddles form as the rain falls harder and much faster then before. 
The wind now pushes people here and there.  

Umbrellas are pushes inside out some are even lost. 
People hurry now trying to get in from this aweful storm clothing soaked and hair stuck to their face as rain drips off.  
Why would anyone want to be in weather like this? 
But now its time to see for a different angle... 
Listen to the music nature offers 
The rain shhh's  as it falls and  pitter patters off the streets. 
Streams bubble and runs peacefully carressing the rocks in its way. 
Do you see the ducks bobbing along with the flow of the water quacking happily. 
Thunder softly rumbles showing its passing. 
Birds are now singing 
The rain slowing to a light drizzle now..the storm has finally passed. 

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What are Principles of Insurance

                                           

(A) Insurable Interest

Insurable interest means that the person opting for insurance must have pecuniary interest in the property he is going to get insured and will suffer financial loss on the occurrence of the insured event.   This is one of the essential requirements of any insurance contract.   Therefore, a person can go for insurance of only those properties where he stands to benefit by the safety of the property, and will suffer loss, damage, injury if any harm takes place to such property.   Thus, if you want to insure Taj Mahal or Red Fort, you will not be allowed to do so as you do not have any pecuniary interest in these properties.

(B) Principle of utmost Good faith (Uberrima Fides)

  Like in other contracts, the insurance contract must be based on good faith.   If the insurance contract is obtained by way of fraud or misrepresentation it is void.

(C) Material Facts Disclosure

 In the Insurance contract, the proposer is required  to  disclose to the insurer all the material facts in respect of  the proposed insurance.   This duty of disclosing the material facts not only applies to the material facts which are known to him but also extends to material facts which he is supposed  to know. 

Thus, in case of Life Insurance the proposer must disclose the true age and details of the existing illnesses / diseases.  Similarly, in case of the insurance of a building against fire, the proposer must disclose the details of the goods stored if such goods are of hazardous nature.

(D) Principle of Indemnity

  The insurance contract should always be a contract of indemnity only  and nothing more.  According to this principle, the insurance contract should be such that in case of loss due to the eventialities mentioned in the contract, the insured should be  neither better off nor worse off  after receiving the insured amount.  The main object of this principle is to ensure that the insured is not able to use this contract for speculation or gambling.

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How Much Traffic Do You Need To Make $100,000 With Google AdSense

Is it really possible to make $100,000 a year from Google AdSense (or by selling ads on your website/blog)? If so, then the real question is how much traffic do you really need to make big bucks with Google AdSense? While it’s true that we can’t predict the Google AdSense income exactly, we can optimize the ads in different ways so as to make the most out of it.

Also, you must make sure that your website category is advertising friendly because your AdSense income depends a lot upon the category of your website. You can use Google AdWords Keyword Planner tool to find out the competition in your industry. If there is enough competition (i.e. if the suggested bid by AdWords for keywords in your niche is high) then we can assume that Google will fill your ad spaces with high paying ads (see how AdSense works).

For example, if you Google search “loans” then you’ll see a lot of ads so it means that if you have a blog related to personal finance then there will be enough competition for your ad space. Now I’ve randomly added few keywords to Keyword Planner to find out its suggested bid by AdWords. Here they are:

As you can see, the competition for keywords related to “finance” is very high compared to keywords related to “food”. Of course, the suggested bid is just an estimate and the real cost-per-click varies a lot. But still, even if it’s $5 then it means a lot. Why? It’s because the cost per click to advertise on Google is very high compared to cost per click on Google Display Network. So if an advertiser is paying $0.50/click on Google then he may be paying only $0.10/click on Google Display Network.

How Much Traffic Do You Need To Make Money With AdSense?

Let’s say you want to make $100,000 a year from Google AdSense and/or Google AdSense alternatives.

$100,000 divided by 365 = $274 a day.

So, you have to create either: 274 pages that earn $1 a day OR 548 pages that earn 50 cents a day OR 1,096 pages that earn 25 cents a day (which sounds reasonable, right?). Let’s say you have 1,096 high quality blog posts and you earn $0.25 per click from AdSense.

I have analyzed the traffic and AdSense stats (using Google Image Search) of several websites including my own blogs and websites.

Read: How To Find The Traffic Of (Almost) Any Website

From my analysis, I found that the average Page CTRis around 1% (or it’s something that we can achieve easily). But it really depends upon your niche, web site design and other factors.

In fact I have achieved a Page CTR of over 20% in 2007 for a niche website and was making $100+ a day from Google AdSense alone.

Let’s Do The Math To Make $100,000 A Year With Google AdSense

Let’s assume that you have a Page CTR of 1% and your average CPC is $0.25 (I believe it’s quite an achievable target unless your keywords have no advertiser competition – e.g. a recipe blog).

Some of the top paying AdSense niches are Finance, Internet Marketing, Technology, Web Hosting, Internet & Computers, Software, Health etc. and some of the lowest paying AdSense niches are Entertainment, Arts, Movies, Celebrity Gossips, News blog, Jokes, Wallpapers, Quotes, Recipes, Photo blogs etc.

As mentioned earlier $100,000 a year means you have to earn $274 a day. If your average CPC is $0.25 then you need 100,000/0.25 = 400,000 clicks a year (or approximately 1,000 clicks a day) to earn $100,000 a year from Google AdSense. Assuming that your Page CTR is 1% you need approximately 100,000 page views a day. Now, let’s say your “Bounce Rate” (it is the estimated percentage of visits to your website that consist of a single page view) is 100%. It means that you need 100,000 unique visitors a day itself to generate 100,000 page views a day.

In a nutshell, you need 100,000 visitors a day to make $100,000 a year from Google AdSense alone (with a CTR of 1% and CPC of $0.25).

Google AdSense Glossary

Page Views

A page view is what Google counts in your reports every time a user views a page displaying Google ads. We will count one page view regardless of the number of ads displayed on that page.

For example, if you have a page displaying three ad units and it is viewed twice, you will generate two page views.

Clicks

For standard content ads, Google counts a click when a user clicks on an ad.

For link units, Google counts a click when a user clicks on an ad on the page of ads, after selecting a link in the link unit.

Page Click Through Rate (Page CTR)

The Page Click Through Rate (CTR) is the number of ad clicks divided by the number of impressions or page views that you have received.

Page CTR = Clicks / Page Views

For example, if you received 5 Clicks from 100 Page Views, then your Page CTR would be 5%. (5/100*100=5%)

Cost Per Click (CPC)

The Cost Per Click (CPC) is the amount you earn each time a user clicks on your ad. The CPC for any ad is determined by the advertiser; some advertisers may be willing to pay more per click than others, depending on what they’re advertising.

Page Revenue Per Thousand Impressions (Page RPM)

Page Revenue Per Thousand Impressions (RPM) is calculated by dividing your estimated earnings by the number of page views you received, then multiplying by 1000.

Page RPM = (Estimated Earnings / Number of Page Views) * 1,000

For example, if you earned an estimated $0.15 from 25 page views, then your page RPM would equal ($0.15 / 25) * 1000, or $6.00.

Estimated Earnings

Your account balance (or earnings) for the time period selected.

Source: Google AdSense Glossary

But you are not using AdSense alone to monetize your website, right? You can make more money by selling direct banner ads, in-text ads, CPM ads, sponsored links, affiliate marketing, etc.

Read: 30+ Google AdSense Alternatives To Make Money Blogging

Cost Per Impression (CPM) Ads

So let’s say you’re selling direct banner ads and is also selling CPM advertising which is again an effective way to monetize your website.

What are CPM ads?

CPM (Cost Per Mille) stands for Cost Per 1,000 Impressions. CPM networks pays for every 1,000 impressions you generate. If a CPM ad network is paying you $1 CPM then it means that they’re paying you $1 for every 1,000 page views you generate.

CPM Network earnings totally depend upon your traffic quality but you can expect anywhere between $1 – $3 per 1,000 impressions. So, if you generate 100,000 page views a day then you can make $100 – $300 a day from CPM Networks. Again, you can earn $100 – $300 (or maybe even more) a day by selling banner ads directly to advertisers.

Now, you can split the traffic into three as you’re earning $300 each from 3 advertising networks. It means that you need 100,000/3=33,333 unique visitors a day (with a bounce rate of 100%) to make approximately $274/day.

Again, if you have an authority blog then your bounce rate will never be 100%. In that case you can expect an average page view of 1.5 per user. It means that 50% of your visitors exit from the landing page and others visit more than one page on your website.

All in all, you need approximately 20,000 visitors a day to generate 30,000+ page views and it can earn $274 a day which translates to $100,000 a year in advertising revenues. Need a little more help reaching that $100,000/year goal? Add commissions from Affiliate Programsas well into the equation and you can hit that $100,000 goal with much less traffic. In fact, in 2008 I was averaging $200+ a day from less than 200 daily unique visitors with affiliate marketing. It was possible because when it comes to affiliate marketing it’s all about traffic quality and not traffic quantity.

How To Optimize Google AdSense

You can optimize your AdSense ads in several ways. For example, you can try text ads only, image ads only, text & image ads to find out which ad format is performing better. Google recommends wide ad formats like 728 x 90, 336 x 280, 300 x 250, and 160 x 600 as they’re more advertiser friendly.

When you use the recommended ad formats, your AdSense ads should perform well because of increased competition. How? The recommended ad formats by AdSense are the most popular ad formats and hence almost all advertisers must be targeting those ad formats. So it increases the competition naturally and Google will be showing the highest paying ads on your website.

But it’s also a good idea to try different ad formats as Google is now offering a variety of ad formats (including responsive ad units). I would recommend A/B testing on your website to find out the best performing ad formats. Like, you can do A/B testing by trying different ad types, ad formats, ad colors, and then by placing your ads at different sections on your website (above and below the fold) to find out which position is offering the best CTR).

But what if your AdSense earnings are low even though you have good a CTR? In that case, I would recommend ad controls though Google mentioned that blocking any ad will reduce our potential earnings.

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Auto Insurance Buying Guide

Auto Insurance Buying Guide

Auto insurance tip #1

Understand why you need auto insurance

In short, you need car insurance to protect your car, yourself and your passengers. You also protect any assets, like your home and savings, as well as comply with state law.

Auto insurance tip #2

Know your current coverages-but be willing to adjust

Use your current coverages and limits as a starting point; you can refer to your declarations page for this information. Then, adjust your coverages as necessary to match your lifestyle-which might be different than it was when you first bought the policy.

For example, if your teenager starts driving next month, you might consider adding him or her to your policy now. Or, if you just bought a new car, you might choose loan/lease payoff coverage, so that if your car is stolen or declared a total loss, you'll have help paying off your loan or lease.

Auto insurance tip #3

Decide what you want to protect, then choose your coverages

Here are some of the auto insurance coverages that might be available in your state:

Your goal	Coverage to buy
Protect your car against damage caused by a collision with another car	Collision
Protect your car against damage caused by hitting an animal or other events, like theft or a fire	Comprehensive
Cover repair/medical bills for an accident that's caused by a driver who has no insurance or doesn't have enough	Uninsured/underinsured property and bodily injury
Cover medical bills if you or your passengers are seriously hurt in an accident	Medical payment/personal injury protection
Protect your assets in case of a lawsuit	Bodily injury and property damage liability
Cover the cost of a rental car if you have a claim	Rental reimbursement
Pay off your loan/lease if your vehicle is declared a total loss or is stolen and not recovered	Loan/lease payoff

Auto insurance tip #4

Use deductibles to your advantage

Your deductible is what you agree to pay out of pocket when you use your car insurance. In general, the higher you set your deductible, the less you'll pay for your policy. And conversely, if you set your deductible low, you'll pay more for your policy, but less when you have a claim.

Auto insurance tip #5

Know that certain things affect your rate

Insurance companies evaluate a variety of things when they calculate your rate, from your driving record to where you live and how many miles you drive on average. Keep this in mind when you see your rate.

                   

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What exactly is a diamond?

As vintage vixen Marilyn Monroe sang, diamonds are a girl's best friend. They've come to symbolize the height of affluence and affection. Though the baubles have been in vogue only since the 1950s, these minerals have existed deep inside the Earth for billions of years.

And while they aren't any rarer than rubies, emeralds or sapphires, diamonds' unique properties put them a cut above the rest.

The Chemistry of Diamonds

Diamond is the most concentrated form of pure carbon in the natural world and the strongest mineral on Earth, far exceeding other carbon allotropes such as graphite and fullerite. The secret to diamond's superior strength is found on the molecular level. Carbon atoms possess four valence electrons available for bonding. In diamond crystals, each of those four free electrons forms a covalent bond with a valence electron of a neighboring carbon atom. Since all of the free electrons are bonded uniformly, it creates a rigid tetrahedral lattice that gives the coveted mineral its prized properties.

The Real McCoy: Natural Diamonds

The organic process of diamond formation requires four key ingredients: carbon, pressure, heat and time. When it comes to heat and pressure, the specific conditions are at least 752 degrees Fahrenheit (400 degrees Celsius) and 434,113 pounds per square inch (30 kilobars). Prime diamond real estate is located about 100 miles (160 kilometers) underground in the Earth's mantle. There, diamonds have formed over billions of years from heated and pressurized carbon.

Hundreds of millions of years ago, eruptions of magma from the mantle propelled natural diamonds closer to the Earth's surface. The funnel-shaped areas carved out by the magma eruptions are called kimberlite pipes, named for the first formation discovered in Kimberley, South Africa. Gradually, the tops of the pipes eroded, exposing the diamonds below. Erosion can also carry diamonds from their original location into riverbeds and coastal lands. In its roughest form, diamond ore doesn't look like the shiny nuggets atop engagement rings. Diamonds must be sorted, cut and polished to bring out their luster.

Fake, But Flawless: Synthetic Diamonds

Like 18th-century alchemists striving to turn common elements into gold, geologists long sought out methods for creating synthetic diamonds. According to the American Museum of Natural History, Swedish and American researchers cracked the carbon code in the 1950s to convert graphite and molten iron into diamond.

The most authentic man-made diamonds today are manufactured by subjecting pure carbon to intense heat and pressure in a simulation of the organic process. To the naked eye, these synthetic diamonds are indistinguishable from natural ones -- and fetch a lower price to boot.

Bling Bling: The Value of Diamonds

Since the cartel De Beers controls a majority of the world's diamonds, the price tag seldom drops. However, as the world's most durable mineral, diamonds are in high demand even outside of the fashion accessory market. According to the Natural Museum of History, diamonds conduct heat five times faster than copper, can pass or block electrical currents and endure extreme temperatures and chemical exposure. The sharpened gems are employed as specialized drill bits, for instance, and synthetic diamonds have opened the possibility of applying them to microchips and semiconductors.

Whether produced in the Earth's mantle or a high-powered pressure cooker, diamonds are valued equally for their beauty and their practicality. Given the gems' potential applications, tomorrow's diamond spokesperson may be more along the lines of Bill Gates than Marilyn Monroe.

Beyond exquisite jewelry, diamonds have many industrial uses. Diamonds are the hardest natural substance known that resists scratching. They are used for their durability to cut through many solid materials, including other diamonds. The beauty of how light passes through and shines upon a diamond has made it the favorite choice for jewelry and most popular gem around the world.

Identification

Diamonds gemstones are very rare. They are composed of carbon atoms that form tight bonds with each other to make the extremely durable diamond. Diamonds naturally exist 100 miles into the Earth's mantle. Volcano eruptions would surface large chunks o f the xenoliths, or mantle rocks. Diamonds are mined from these rocks and their sediments.

Diamonds as Gems

Diamonds with superior clarity are chosen specifically for jewelry. The value of diamonds is based on their quality, beauty, color, cut and carats. Diamonds are highly sort after for their high sparkle against gold, platinum, silver and other precious metals. Diamonds move light like a prism. The high refractive index and the high dispersion of diamonds causes light to bend and spread, showing all the colors of the rainbow. Most of the diamonds mined are not used for jewelry. In fact, four of five diamonds are used for industrial operations. These diamonds are called bort diamonds.

Diamonds Used as Abrasives

Diamonds are used as slurries and as cutting tools. Diamond slurries are a paste made of water and a mixture containing small diamond pieces. These slurries are used to grind down the surface of solid rock and other materials and for polishing their surfaces. Diamond slurries are also used in lapping, where the slurry is sandwiched between two surfaces. These surfaces are then rubbed together, so that the slurry grinds down the surfaces.

Engraving

Diamonds are used to engrave stones of granite, quartz and other hard materials. These diamonds will not scratch or break against the other stones, so the work can be completed without worrying about replacing the engraving bit.

Other Uses

Diamonds are also used in x-ray machines and lasers, as windows over enclosed parts. Diamonds enhance sound when made into a very durable speaker dome. In addition to the high refractive index and high dispersion, diamonds also have the highest level of thermal conductivity. Because of this quality, diamonds are used as heat sinks, to prevent heat damage to delicate parts, as in electronic applications. Diamonds are also used to prevent friction between microbearings, and to provide more durability to its mechanism parts.

Diamonds and International Trade

Diamonds are traded all around the world. Many people rely on the diamond industry for their earnings, where jewelers, diamond buyers and diamond miners exchange diamonds for profit. Diamonds are also most notably associated with criminal activity. Many people go to great lengths to possess diamonds, even resorting through theft and other illegal activities.

Future Uses

Future uses for diamonds may extend into medicine for surgical tools, medical devices and for the replacement of joints. Diamonds may also be used in computer parts, communication equipment and for sound materials and devices.

                                    

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