Financial Planning | What Is Non-Indemnity Insurance?

In our last financial planning we discussed indemnity insurance. We never got around to discussing non-indemnity insurance so in this issue we discuss…

Indemnity Insurance

Let’s take an example:
John is married to Jacqueline. Jacqueline is a stay at home mom. John decides to insure Jacqueline’s life for an amount of R2 million. In the event of Jacqueline passing away, the life insurance company undertakes to pay R2 million to John.
How could we possibly place a R2 million value on Jacqueline’s life? The simple answer is “we can’t!”
For a non-indemnity insurance product to pay out there must be one thing in place:

  1. An insurable event must have taken place. In Jacqueline’s case it would be her death.

This type of loss is in essence non-patrimonial. A non-patrimonial loss is a loss which does not have a monetary value attached to it.
Any insurance product which covers death, disability, and severe illness is a non-indemnity insurance product…got it?

What is important with non-indemnity insurance products is…

There must be some sort of insurable interest between the person owning the insurance contract and the person whose life is insured.
If not…then you better watch your back…I’ve got a few Rands to spare and taking out some life insurance sounds like a great investment right now :wink: !

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