The treatment of insurance, social insurance and pensions

1. There are two types of insurance; life and non-life insurance (see figure A.IV.1). Life insurance is an activity whereby a policyholder makes regular payments to an insurer in return for which the insurer guarantees to provide the policyholder with an agreed sum, or an annuity, at a given date or earlier if the policyholder dies beforehand. The sum may be fixed or may vary to reflect the income earned from the investment of premiums during the period for which the policy operates. In such cases, the terms “with-profits” life insurance or endowment policy are generally used. Although the date and sum may be variable, a claim is always paid in respect of a life policy. Non-life insurance covers all other risks; accidents, sickness, fire, etc. A policy that provides a benefit in the case of death within a given period but in no other circumstances, usually called term insurance, is regarded as non-life insurance because as with other non-life insurance, a claim is payable only if a specified contingency occurs and not otherwise. In practice, because of the way in which insurance corporations keep their accounts, it may not always be possible to separate term insurance from other life insurance. In these circumstances, term insurance may have to be treated in the same way as life insurance for purely practical reasons.