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
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
3
Q
What is the main risk with annuities
A
- longevity risk
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
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