This insurance policy is equivalent to an option contract, Financial Management

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This insurance policy is equivalent to an option contract

Mr. Klaus Miller starts working for a Mauritius subsidiary of a German insurance company, and purchases a house in Mauritius for 600,000 rupees. He also purchases an insurance policy, which will pay him 500,000 − Xt rupees, where Xt is the value of the house at time t, in years, with 0 ≤ t ≤10, if the value of the house drops below 500,000, to be used only once. This insurance policy is equivalent to an option contract. What option contract is it exactly?

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Financial Management: This insurance policy is equivalent to an option contract

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