Life insurance companies contribute to economic development by holding a part of their assets in?

A. long-term financial instruments
B. money market instruments
C. cash and near money
D. short-term financial instruments

Correct Answer:

Option C – cash and near money

Explanation

Life insurance is a contract in which an insurer (insurance company) in exchange for a premium, guarantees payment to an insured’s beneficiaries when the insured dies. This means that, the insurance company would compensate the beneficiary of a deceased person when they die. The premium paid by the insured are considered cash and near money assets.

Near money assets are highly liquid assets that can be easily converted to cash.