Technicalities of insurance is one of the things that discourage people from making a purchase. Any insurance salesman can easily narrate rough experiences with clients; most especially when it comes to life insurance products.
The mantra should be, “keep it simple.” Insurance professionals find it easier to express themselves with the aid of technical jargons, but in most cases, they end up saying nothing – at least to the client! An assumption that everyone would know what is meant by “assured,” “life assured,” “sum assured,” “policy document,” “premium,” etc. would qualify for insurance curse of knowledge.
I was not too surprised when someone once asked me to differentiate between the words “assured” and “life assured”. It was a genuine request because the person didn’t know, and he later advised me to “write about it because many of us don’t know much about all these your insurance terms.”
The assured, in life insurance, is someone who has purchased a life insurance protection from an insurance company. He can also be called the “policyowner” or “policyholder” because he is the owner of the insurance contract with an insurance company.
An insurance policy can be on the life of the assured himself. For instance, Dickson could approach an insurance company to purchase a life insurance cover for the benefit of his wife and/or children. In that case, he becomes both the assured (policyowner/policyholder) and the life assured because the insurance protection is on his life.
That’s very simple, right?
To a non-insurance person, confusion may set in when the insurance cover is on the life of someone else. In that case, the buyer remains the “assured” (i.e. policyowner/policyholder) while the person on whose life the insurance protection depends now becomes the “life assured.”
If, for instance, the same Dickson in our example lends N10 million to Henry, he (Dickson) could buy a life insurance protection on the life of Henry (the debtor) to protect his financial interest (i.e. the N10 million loan). Should Henry drop dead while still owing Dickson, the insurance company will pay the outstanding loan to him (Dickson). In this example, Dickson is the “assured” while Henry is the “life assured.”
Dickson is able to enter into this type of insurance contract because he has an “insurable interest” in the life of Henry. The issue of insurable interest is another topic entirely but the most important thing to note is that one can buy life insurance cover on the life of another person if there is a financial interest on the continuous existence of that other person. That’s why it is possible for employers to do so in respect of their employees; and business partners on the life of each other.