Page 145 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes
The Bottom Line
These are just some of the more prevalent misunderstandings concerning life insurance
that the public faces today. Therefore, there are many life insurance questions you should
ask yourself. The key concept to understand is that you shouldn’t leave life insurance out
of your budget unless you have enough assets to cover expenses after you’re gone. For
more information, consult your life insurance agent or financial advisor.

Source: http://www.investopedia.com/articles/pf/08/life-insurance-myths.asp

Self Assessment

Fill in the blanks:
5. In term assurance the sum assured is paid only in case of ………………………. of the
assured within the term of the contract and nothing is paid in case of survival to end of the
term.

6. The ……………………… benefit is available only on certain conditions to be decided by
the insurer.

8.4 Annuity

In this section, we will discuss about Annuity. The following are some of the important definitions
and revelations in the context of Annuities/pension plans:

According to S. S. Heubner and Kenneth Black Jr., “Life Insurance pertains to the years of
ascendance and annuity to the years of decline. When coupled together, the two forms of
insurance complete the economic program from start to finish on a basis of financial
dependability.”

According to Bhir and Limaya, “Annuity is a contract where the annuitant agrees to pay to
insurer, a certain amount either in a lump sum or spread over a period of few years and the
insurer in return agrees to pay to the annuitant a certain sum every year, either so long as
the annuitant is alive or for such period as may be determined by the contract of annuity.”
According to W.A. Dinsdale, annuity may be defined as “The payment of amounts
periodically during the life time of the annuitant in consideration of the payment of an
agreed sum to insurance company.”

According to D.S. Hansen, “Annuity is a form of pension, whereby in return for a certain
sum of money, the assurer agrees to pay the annuitant, an annual amount for a specified
period.”
According to Mayerson, “The life annuity is a device that liquidates the annuitant’s capital
over the life time, paying him an income comparing both interest on his money and
portion of principal.’
Thus, annuity is a contract sold by a life insurance company that provides fixed or variable
payments to an annuitant, either immediately or at a future date. The recipient of annuity is
usually known as annuitant. Annuity literally means ‘an annual payment’, but can be described
as periodical payments depending on the status, time or life.

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