Definition
In life assurance (or life insurance) policies, the term “assured” refers to the person who is entitled to receive the benefits of the policy upon the death of the insured individual or upon the policy’s maturity. The assured is often also referred to as the beneficiary, and they are named in the policy documentation. The primary purpose of this arrangement is to provide financial security to the assured, ensuring that their future is protected in the event of the life assured’s passing.
Examples
- Scenario 1: John takes out a life assurance policy and names his wife, Jane, as the assured. In the event of John’s death, Jane will receive the policy’s death benefit, providing her with financial stability.
- Scenario 2: Sarah purchases a life assurance policy for a term of 20 years and names her son as the assured. If Sarah survives the term, her son will receive the policy’s maturity benefit, which can be used for his education or other needs.
- Scenario 3: A corporation takes out a key person life assurance on their CEO, with the company as the assured. If the CEO passes away, the company receives the benefits to help mitigate the financial impact of losing their top executive.
Frequently Asked Questions
1. How is the assured different from the policyholder?
The policyholder is the individual or entity that owns the insurance policy and is responsible for paying premiums. The assured, on the other hand, is the person named in the policy to receive the benefits upon the insured’s death or the policy’s maturity.
2. Can the assured and the policyholder be the same person?
Yes, the assured and the policyholder can be the same person. For instance, an individual may purchase a life assurance policy for their benefit, naming themselves as both the policyholder and the assured.
3. Can the assured be changed after the policy is in effect?
Changing the assured can depend on the policy’s terms and conditions. Many policies permit changes to the assured, but such changes may require the policyholder’s request and specific documentation to be filed with the insurance company.
4. What happens if the assured predeceases the insured?
If the assured predeceases the insured and no contingent assured is named, the policy typically allows the policyholder to update the policy to name a new assured. If not updated, the benefits may go to the insured’s estate.
Policyholder
The individual or entity that owns the insurance policy and pays the premiums.
Beneficiary
The person or entity entitled to receive the death benefit from a life insurance or assurance policy.
Life Assurance
A form of life insurance that guarantees a death benefit payout, regardless of when the insured person dies, provided the premiums are paid as required.
Online Resources for Further Reading
Suggested Books for Further Studies
- “Life Insurance, 15th Edition” by Kenneth Black, Jr. and Harold D. Skipper, Jr.
- “Fundamentals of Actuarial Mathematics” by S. David Promislow
- “Essentials of Life Insurance Products and Markets” by Robert Brown
Accounting Basics: “Assured” Fundamentals Quiz
### Who is the 'assured' in a life assurance policy?
- [ ] The person who purchases the policy.
- [ ] The insurance agent.
- [x] The person who will receive the benefits upon the insured's death.
- [ ] The underwriting company.
> **Explanation:** The assured is the individual named in the policy to receive the proceeds in the event of maturity or the death of the life assured.
### Can the assured and the policyholder be the same person?
- [x] Yes
- [ ] No
- [ ] Only for term insurance policies
- [ ] It depends on the insurer
> **Explanation:** The assured and the policyholder can be the same person if the individual purchases a policy and names themselves as the beneficiary.
### What is another term commonly used to refer to the 'assured'?
- [ ] Insurer
- [ ] Policyholder
- [x] Beneficiary
- [ ] Underwriter
> **Explanation:** The assured is also often referred to as the beneficiary, as they stand to benefit from the policy.
### What happens to the policy if the assured predeceases the insured?
- [ ] The policy becomes void.
- [ ] The policyholder must purchase a new policy.
- [x] The policyholder can usually change the assured.
- [ ] The premiums must be refunded.
> **Explanation:** Generally, most policies allow the policyholder to update the beneficiary designation in the event that the assured predeceases the insured.
### Who is responsible for paying the premiums in a life assurance policy?
- [ ] The insurer
- [ ] The assured
- [ ] The beneficiary
- [x] The policyholder
> **Explanation:** The policyholder (the person or entity that owns the policy) is responsible for paying the premiums.
### Why is the term 'assured' used in life assurance policies?
- [x] To highlight the security and assurance provided to the beneficiary.
- [ ] To obscure the actual function of the policy.
- [ ] To replace the term 'policyholder'.
- [ ] To avoid legal complications.
> **Explanation:** The term 'assured' emphasizes the financial security and assurance provided to the beneficiary in the event of the insured's death or policy maturity.
### What does it mean for a policy to mature?
- [ ] The death benefit is canceled.
- [ ] The policy is sold to another provider.
- [x] The time period for the policy has ended and benefits are payable.
- [ ] The policyholder stops paying premiums.
> **Explanation:** When a policy matures, it means that the term of the insurance policy has ended and the assured can receive the benefits if the insured is still alive.
### Who can claim the proceeds from the life assurance policy after the insured's death?
- [ ] The policyholder only
- [x] The assured/beneficiary
- [ ] The insurance agent
- [ ] Any family member
> **Explanation:** After the insured's death, the assured or named beneficiary is entitled to claim the proceeds from the life assurance policy.
### What type of policy ensures a death benefit payout regardless of when the insured dies?
- [ ] Term life insurance
- [x] Life assurance
- [ ] Property insurance
- [ ] Auto insurance
> **Explanation:** Life assurance guarantees a death benefit payout regardless of when the insured dies, as long as the necessary premiums have been paid.
### Can the assured be updated after the policy is in effect?
- [x] Yes, usually with the consent of the policyholder.
- [ ] No, once set, it cannot be changed.
- [ ] Only within the first 30 days.
- [ ] It requires legal intervention.
> **Explanation:** Many life assurance policies allow the policyholder to update the beneficiary or assured, usually with the required documentation and consent.
Thank you for exploring the concept of “Assured” in life assurance policies and testing your understanding with our quiz questions. Continue building your knowledge in financial and insurance fundamentals!
