Cash value element is made up of accumulated excess payments of the policyholder. It constitutes the savings component
Mutuality & Diversification - Mutuality is one of the important ways to reduce risk in financial markets, the other being diversification
Under diversification the funds are spread out among various assets (placing the eggs in different baskets). Under mutuality or pooling, the funds of various individuals are combined (placing all eggs in one basket).
Under diversification we have funds flowing from one source to many destinations. Under mutuality we have funds flow from many sources to one
Insurance involves a contractual agreement known as Insurance Policy in which the insurer agrees to provide financial protection against certain specified risks for a price or consideration known as the premium
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