(a) Differentiate between whole life and endowment assurance. (b) State five uses of life assurance. (c) List and explain two benefits covered under life as...

Answer Details

(a) Difference between whole life and endowment assurance

Under a whole life policy the insurer pays the sum assured only on the death of the life assured, whenever that occurs; premiums may be payable throughout life or up to a stated age, and the policyholder himself never collects the sum during his lifetime. Under an endowment policy the sum assured is paid either on the death of the life assured within the term or on his survival to the end of a fixed term, whichever happens first; it therefore matures and pays the policyholder if he lives, combining protection with saving. Whole life gives cheaper, pure protection, while endowment is dearer because of its savings element.

(b) Five uses of life assurance

1. It provides financial security for the dependants of the assured on his death.
2. It is a means of saving for the future and for retirement.
3. The policy can be used as collateral security to obtain a loan.
4. It helps in meeting future obligations such as children's education or estate duty.
5. It provides funds for business continuity, for example key-man cover or partnership protection.

(c) Two benefits covered under life assurance

1. Death benefit: The sum assured paid to the named beneficiaries when the life assured dies during the currency of the policy, giving financial support to the family.
2. Maturity (survival) benefit: The sum, sometimes with bonuses, paid to the policyholder himself on surviving to the end of the policy term, which he can use for retirement or other needs.