In the UK, the status of cash value policies, particularly in relation to indemnity insurance, can be understood through the definitions and distinctions between these types of insurance products.
These are insurance contracts where the policyholder is entitled to receive a payment upon surrender or termination of the contract. Common types of UK insurance products that are most likely to be classified as cash value insurance products include:
These are life insurance policies where the policyholder invests a lump sum or makes regular payments into a variety of investment funds aiming for an investment return.
Policies under which fixed sums are paid to an insurer, and specified amounts are paid out later based on actuarial computation.
These delay distribution of payments until a future point after the accumulation phase has passed.
Regular premium life assurance policies generally with a small amount of life cover, where premiums are pooled for investment.
nsurance contracts, like private placement life insurance, where assets are managed in accordance with a personalized investment strategy or under the policyholder's control or influence.
Notably, cash value insurance contracts do not include general insurance policies or term life insurance contracts. This specifically includes indemnity insurance contracts between insurance companies, as well as policies indemnifying against economic loss from specified circumstances, like personal injury or theft.
Central to insurance is the principle of indemnity, which implies that a policyholder should be restored to their original position after a loss. The principle stems from the Latin word “Indemnus,” meaning “security against hurt, loss, or damage”.
This type of policy covers a legal defect with the property that either cannot be resolved or would be very costly or time-consuming to address. Instead of rectifying the problem, the insurance is taken out to protect against future expensive bills.
Purchasing an indemnity policy involves a one-time payment providing coverage for a specific issue, such as adverse possession indemnity insurance related to property ownership claims without land register evidence.
In summary, cash value policies in the UK are distinct from indemnity insurance, with the former including various investment-focused insurance products and the latter aimed at providing security against specific legal or financial risks. Indemnity insurance, by its nature, doesn't fall under the cash value policy category and serves a different purpose in the insurance landscape.
