Tuesday 10 June 2014

A funny place to be asked a question about insurance.

Last week I was asked a question atop a 160ft gantry at Magna Science Adventure Centre seconds before doing a bungee jump.

Part of the Jumpmaster's job is to calm the jumpers' nerves as best he can, by keeping them thinking. Whilst my ankle straps were being attached to the bungee rope (no matter how expert they are, you can't help but think you need to double-check they are doing their job properly!), he asked, "So what do you do for a living?"
"I sell life insurance", I replied, peering over the gantry edge at drop beneath. The Jumpmaster and his crew member found this a lot funnier than I did, at the time.

He then asked a question I've been asked several times before, but usually in much less unusual situations than this, "What's the difference between insurance and assurance?"

I explained that the two terms refer to different things but are often used incorrectly. Insurance describes a policy which has a fixed term, and MIGHT pay out. Assurance usually has no fixed term and WILL pay out when a certain event happens.

Think about annual travel INSURANCE. You pay for a year's cover, but you hope you won't have to claim on it. In the same sense, a life INSURANCE policy to protect your home whilst you pay off a mortgage, for example, lasts until the mortgage is paid off. It is designed to pay out IF you die before the end of the policy. However, we all hope to outlive our mortgage!

A life ASSURANCE policy is designed to pay out WHEN you die, not IF. These are often called whole of life plans, as opposed to term insurance policies. They often have a cash value attached to them as well, which a term policy doesn't.

Anyway, the bungee rope was attached properly, and my life INSURANCE policy continues on towards the end of its term.

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