Explain the following terms used in insurance: (a) surrender value (b) cover note (c) policy (d) re-insurance (e) group insurance

Answer Details

Insurance terms explained

1. Surrender value: This is the amount of money an assured person receives when he decides to discontinue and cash in a life assurance policy before it matures. It is the sum the insurer pays back on the surrender of the policy.
2. Cover note: This is a temporary document issued by the insurer to the assured as evidence that a risk is covered while the full policy document is being prepared. It gives interim protection.
3. Policy: This is the written document that contains the full terms, conditions and details of the contract of insurance between the insurer and the assured. It is the evidence of the contract.
4. Re-insurance: This is the arrangement whereby an insurer, to reduce its own risk, insures part of a large risk it has accepted with another insurance company. It spreads a heavy risk among insurers.
5. Group insurance: This is a single insurance policy that covers a number of persons, usually employees of an organisation, under one master contract, often arranged by the employer.