Distinguish between the following pairs of terms used in insurance:
(a) Third party and comprehensive policy
(b) Whole life and endowment policy
(c) Insurance and assurance
(d) Premium and compensation.
Explanation
(a)(i) Third party insurance covers damages caused to other while comprehensive insurance covers damages to others and the insured.
(ii) In third party insurance range of risks is limited while comprehensive insurance covers a wide range of risks.
(iii) Third party insurance is very cheap while comprehensive insurance is perhaps the most expensive.
(i) In whole life policy, premium is paid until death while premium is paid for a specific period in Endowment policy
(ii) The insured cannot benefit in whole life policy while the insured can benefit in his life time in the case of Endowment policy.
(c)(i) Insurance is taken to cover risks that may or may not occur e.g. car insurance. Assurance is taken to cover risks that is certain to occur e.g. Death.
(d)(i) Premium is paid before the occurrence of the event while compensation is paid after the occurrence of event.
(ii) Premium is the periodic payment made by an insured to the insurer while compensation refers to the amount of money which the insurance pays to the insured.