5 most important Sources of Funds that can be accumulated by the insurers

The funds with the insurers are accumulated from the various sources, some of which are given below:

(i) Premiums :

The main source of funds is the premiums collected by the insurer. The premiums may be single premium, level premiums or annuity considerations. The excess of these premiums over the needed premiums for meeting claims and expenses is the source of funds.

(ii) Interest :

The second source of funds is the excess interest earned over the assumed rate of interest. The assumed rates are lesser than the actual rate in most of the cases. In reverse, the funds will decline.

(iii) Capital Gain :

Funds obtained from the sale of share capital and debentures are included under capital gains,

(iv) Savings in Expenses:

Savings in expense loadings, bonus loadings or mortality savings are also contributing to the funds of the insurers.

(v) Non-Payment of Claims:

In pure endowment or term insurance, the claims may not arise, therefore, the premiums paid Tor such benefits are saved. Sometimes, in certain cases, the claimants do not come for payment at all. Thus, the saved money also forms a part of the funds of insurers.