(a) What is non-indemnity insurance?
(b) List and explain three types of life assurance policies.
(c) Explain the term surrender value.
Explanation
(a) Non-indemnity insurance: Refers to those associated risks for which no amount of compensation could equate to the loss suffered by the insured however only a consolation payment is made to the insured.
(b)(i) Whole life assurance
- Endowment policy
- Term assurance
(i) Whole life assurance: In this case, the insurance company pays a definite sum of money on the death of the policyholder.
(ii) Endowment Assurance: Here, the insurance company pays the policyholder the amount assured when the person who is insured attains a certain age or when such a person dies, whichever comes first.
(iii) Term assurance: In this case, the life of the policyholder is insured for a particular period but he gets paid by the insurance company if death occurs within this period.
(c) Surrender value: This is the amount paid to an insured when he opts to discontinue the payment of a life policy.