CH6 - Life insurance products Flashcards
Pure endowment
A pure endowment assurance provides a benefit on survival to a known date and hence operates as a savings vehicle, for example to provide a lump sum on retirement, or a means of repaying a loan.
Endowment assurance
An endowment assurance also provides a significant benefit on the death of the life insured before that date and therefore operates also as a vehicle for providing protection for dependants.
Whole life assurance
A whole life assurance will provide a benefit on the death of the life insured whenever that might occur.
Term assurance
A term assurance provides a benefit on the death of the life assured provided it occurs within the term selected at outset. Term assurances do not normally have any benefit paid on withdrawal.
Convertible term assurance
Combines a term assurance with the certainty of being able to convert to a permanent form of contract (i.e an endowment or whole life assurance), without further evidence of health being provided (unless the benefit level is increased).
Renewable term assurance
Combines a term assurance with the certainty of being able to renew the original contract for a further period, without further evidence of health being provided (unless the benefit level is increased).
Immediate annuity
An immediate annuity involves a single premium purchasing an income stream, which commences immediately after purchase.
Deferred annuity
A deferred annuity can be used when there is time between the date of purchase and the date when the income is required to start (the vesting date). The contract can be paid for either by a single premium or by regular premiums during the deferred period.
Income drawdown
The contract allows an individual to leave their accumulated pension fund at retirement invested and draw an income from it each year. There may be limits on how much can be drawn each year and an age limit at which point an annuity must be purchased.
Investment bond
Single premium invested for the whole of life (or a fixed term). The benefit depends on investment returns during the period of investment. Funds can be withdrawn but this may incur surrender penalties, particularly at early durations. There may be a guaranteed offered on death.
Income protection insurance
The contract enables individuals to provide an income for themselves and their dependants during periods of long-term sickness or incapacity due to accident or illness. Such contracts typically terminate at retirement age.
Critical illness insurance
The contract provides a cash sum on the diagnosis of a ‘critical’ illness as defined by the policy documents.
Keyperson cover
Pays a lump sum on death or critical illness of a key individual within a business. The benefit may be linked to loss of profits or the salary of the individual and used to buy out the individual from the business or find a replacement.
Long-term care insurance
The contract can be used to help provide financial security against the risk of needing either home or nursing home care as an elderly person, i.e post retirement.
Without-profit life insurance
Where the benefit amount or method of calculation is specified.
