Explain the following terms used in insurance:
(a) surrender value
(b) cover note
(c) policy
(d) re-insurance
(e) group insurance
Explanation
(i) Surrender value: This is the value an insurer will pay to the insured if he discontinues the contract at any moment before the maturity of life policy after the assured must have paid premium for some time.
(ii) Cover Note: This is a temporary document issued by the insurer to the proposed insured for the period before the policy itself will be ready.
(iii) Policy: This is the document that is issued by the insurer detailing the terms under which a cover is provided. The contract takes effect the moment a cover note is issued.
(iv) Reinsurance: This is the process of sharing a risk already taken by an insurer with other insurers by sharing the premium. The law also demands that a level of the contract be reinsured. The purpose is to prevent a heavy burden on one insurer if there is a big claim.
(v) Group Insurance: This is an insurance cover for a set of employees of a common employer. Under the contract between the insurer and the employer, premium payment maybe by the company or partly contributed by the employee. Any employee who suffered a loss will be compensated by the insurer.