Distinguish between the following pairs of terms used in insurance:
(a) Third-party and comprehensive policy
(b) Whole life and endowment policy
(c) Insurance and assurance
(d) Premium and compensation
Explanation
(a)(i) Third-party insurance covers damages caused to others while comprehensive insurance covers damages to others and the insured.
(ii) In third party insurance range of risks is limited while comprehensive insurance covers a wide range of risks.
(iii) Third-party insurance is very cheap while comprehensive insurance is perhaps the most expensive.
(i) In the whole life policy, the premium is paid until death while the premium is paid for a specific period in the Endowment policy.
(ii) The insured cannot benefit in the whole life policy while the insured can benefit in his lifetime in the case of Endowment policy.
(c)(i) Insurance is taken to cover risks that may or may not occur e.g. car insurance. Assurance is taken to cover risks that are certain to occur e.g. Death.
(d)(i) Premium is paid before the occurrence of the event while compensation is paid after the occurrence of an event.
(ii) Premium is the periodic payment made by an insured to the insurer while compensation refers to the amount of money that the insurance pays to the insured.