Chapter 3 - Life insurance products (3) Flashcards

1
Q

Immediate annuity contracts

A

Pays out regular amounts of benefits provided the life insured is alive at the time of payment

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2
Q

Why are surrenders not normally available on annuity products

A
  • Because of anti-selection risk, only those in ill health who stand to gain the most from surrendering will surrender.
  • i.e they do not expect to receive many more premiums
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3
Q

What is the main risk with annuities

A
  • longevity risk
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4
Q

What is a deferred annuity contract

A
  • It is a contract that pay out regular amounts of benefit provided the life insured is alive at the end of the deferred period when payment commence
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5
Q

What are the risks associated with Endowment insurance

A
  • Investment returns, because the contract has a large savings element
  • Mortality. If a significant benefit is payable on death then the risk is of higher death rates than expected
  • Withdrawals. Especially when asset share is negative, or where guaranteed surrender terms have been given
  • Expenses
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