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Difficulty: MediumTypes of Insurance Policies (Life, Fire, Marine, Accident)

A retail businessman takes out a policy that guarantees payment of a fixed sum of money either when he reaches the age of sixty or upon his death if it occurs prior to that age. Which type of insurance policy has this businessman acquired?

  1. A
    Whole life policy
  2. Endowment policyAnswer
  3. C
    Fidelity guarantee policy
  4. D
    Reinsurance policy

Answer

An endowment policy provides payment of the sum assured either upon reaching a designated maturity age or upon the policyholder's earlier death.
An endowment policy combines financial protection for dependents with a savings element. The insurer agrees to pay the sum assured either when the policyholder survives to a specified maturity date/age (such as sixty years) or upon the policyholder's death if it occurs before maturity.

Step-by-Step Solution

1
Analyze the payout conditions described in the scenario.
The policy matures either at a specific age (sixty) or upon earlier death.
Identifying the dual nature of protection and investment in life assurance contracts.
2
Distinguish between life assurance policy types based on payout conditions.
A policy with a fixed maturity date or death clause is an endowment policy, whereas a whole life policy pays strictly upon death.
Categorizing the specific life assurance product that matches both living benefit and death benefit provisions.

Key Concept

Types of Life Assurance Policies
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Topics

Types of Insurance Policies (Life, Fire, Marine, Accident)

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