The correct answer is: A. Life insurance is a long term contract.
Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder). Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. The insurer invests the premiums and uses the proceeds to pay out benefits to beneficiaries.
Life insurance is a long-term contract because it is designed to provide financial protection for the insured person’s family or other beneficiaries in the event of their death. The length of the contract will vary depending on the type of life insurance policy, but it is typically for a period of 10, 20, or 30 years.
General insurance, on the other hand, is a type of insurance that covers a wide range of risks, such as property damage, theft, and liability. General insurance policies are typically shorter-term than life insurance policies, and they may be renewed annually.
Here is a brief explanation of each option:
- A. Life insurance is a long term contract. Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder). Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. The insurer invests the premiums and uses the proceeds to pay out benefits to beneficiaries. Life insurance is a long-term contract because it is designed to provide financial protection for the insured person’s family or other beneficiaries in the event of their death. The length of the contract will vary depending on the type of life insurance policy, but it is typically for a period of 10, 20, or 30 years.
- B. General insurance is a short term contract. General insurance, on the other hand, is a type of insurance that covers a wide range of risks, such as property damage, theft, and liability. General insurance policies are typically shorter-term than life insurance policies, and they may be renewed annually.
- C. Both A & B. This option is incorrect because life insurance is a long-term contract, while general insurance is a short-term contract.
- D. None of the above. This option is incorrect because both life insurance and general insurance are types of insurance.