Life Assurance Grade 12 Commerce by Mr. G. Mumba Munali Boys High School, August 2008 Life Assurance This provides cover against death, which will certainly occur. The principle of indemnity does not apply to life assurance, as it is not possible for the Insurance company to bring back the dead to life when the risk of death strikes. Life Assurance therefore deals with certainties as opposed to Insurance which deals with probabilities. Life Assurance Types The main policies under Life Assurance are: Whole Life Policy Terms Policy Life Endowment Policy Annuity Policy Funeral Policy (Group Life Policy) etc. Life Assurance Premiums The amount of premium to be paid for Life Assurance is determined by the following factors: The age of the proposer The current and historical health status The occupation of the proposer The gender The lifestyle of the proposer Whole Life Policy Under this policy, the person assures his/her life for a certain sum which is paid to his/her dependants only when death occurs. The assured continues to pay the premium for the rest his/her life time, that is, until he or she dies or retires No compensation until when one dies And when death occurs, the sum assured is paid to the dependants or official beneficiaries. Terms Policy This policy covers a person for a specific period of time and specified sum, e.g. 10 years. If the assured does not die within the covered period, no compensation is granted But if the assured dies within the specified period, the compensation goes to the dependants. It therefore means that Terms Policy has no value at the end of its full period as the assured gets nothing if he/she lives up to the end of the policy. Life Endowment Policy Just like in Terms Policy, the assured is also covered for specific period of time under endowment policy, e.g. 10 years. If the assured dies before the maturity of the policy, the compensation goes to the dependants Life Endowment Policy Cont. But if he/she lives up to the end of the policy, the sum assured is personally paid to him/her. It is therefore means that compensation is guaranteed with or without death. Life Endowment Policy enables the assured to save as well as have life cover. An Endowment Policy can be with profit or without profit. Annuity Policy This policy provides regular payments to the assured from a fixed future date until the person dies, arranging such payments to begin from the time one retires. It is suitable for self- employment people who have no pension plan or scheme.
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