(a) What is endowment policy?
(b) Differentiate between the following terms:
(i) Third party and comprehensive motor insurance; (ii) • Death benefit and maturity benefit; (iii) Contracts of life and non-life insurance.
Explanation
(a) Endowment Policy: This is a-life assurance policy that ensures the payment of benefits either on the death of life assured or on the survival of life assured with iti,the period of insurance whichever comes first.
(b) Differentiating between the Following Terms:
(i) Third party and Comprehensive motor insurance; Third pally motor insurance provides only for damages to someone else'S vehicle or property or injury or death of someone else in an accident involving the insured's vehicle, while; Comprehensive motor insurance on the other hand provides cover for both the insured's car and that of someone else's car, property or life arising from the usage of the insured's. car on the road.
(ii) Death Benefit and Maturity Benefit: Death Benefit is payable under a life policy if life assured passes on within the period of insurance, while; Maturity benefit is payable if a life assured survives the period of insurance.
(iii) Contracts of Life and Non-life Insurance:
- In-Contract of Life,The policy are long-term insurance contracts
- The subject matter of insurance is a human being.
- The benefits payable are pre-determined at the inception of the contract .
- The lump sum is paid to the assured on the survival of the life assured or the beneficiary if the life assured dies before the maturity of the policy.
- The policies are contracts of benefit. It offers protection to policy holders.
- The occurrence of the insured event is certain.
- It serves as a source of income to surviving spouse.
While in Contracts of Non-life Insurance:
- The policies are contracts of indemnity
- The subject matter of insurance are properties
- The subject matter of insurance is a non-living thing.
- The policies are personal contracts.
- The policies are annual insurance contract.
- The policies are assignable to third parties except in marine cargo
- The amount payable is determined after the occurrence of loss.