Tontine Insurance (Noun)
Meaning
A form of life insurance whereby on the death or default of a participant his share is distributed to the remaining members.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The investment scheme was structured as tontine insurance to motivate individuals to maintain good health and prolong their lifespan in order to receive a larger share of the fund.
- The tontine insurance plan offered a unique alternative to traditional pension arrangements by pooling mortality risk among the participants.
- Historically, the tontine insurance model gained popularity as it provided low-cost life insurance and at the same time distributed wealth to the survivors of a group of individuals.
- Most states have banned tontine insurance arrangements due to moral hazard concerns and worries over insurers' inability to accurately calculate and set premiums.
- Despite criticisms, a modern variation of tontine insurance has resurfaced in the form of non-profit, shared-risk retirement arrangements.