Chapter 6 - Life Insurance Products Flashcards

1
Q

Give examples of customer needs met by a group version of a term assurance product

A
  1. An employer could take out a group TA contract on its employees to provide a death in service benefit, which pays out if an employee dies.
  2. A credit card company can take out a group TA contract on its credit card holders to pay off any balance outstanding on the death of the cardholder
  3. A supplier of goods with payments in installments could take out a group TA on its payees to cover the difference between the amount owing and the value of the recovered goods upon the death of the payee
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2
Q

Under what circumstances are benefits paid under:

  1. A critical illness contract
  2. An income protection contract
  3. A long-term care contract
A
  1. Critical illness - On diagnosis of a critical illness as set out in the policy documentation
  2. Income protection - During periods of incapacity due to accident or illness
  3. Long term care - When the insured needs home or nursing home care
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3
Q

List 15 life insurance products

A
  1. Term assurance (level)
  2. Term assurance (decreasing)
  3. Term assurance (renewable)
  4. Term assurance (convertible)
  5. Endowment assurance
  6. Pure endowment
  7. Whole life assurance
  8. Critical illness
  9. Long-term care
  10. Income protection
  11. Immediate annuities
  12. Deferred annuities
  13. Income drawdown
  14. Investment bond
  15. Keyperson cover
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4
Q

List the 4 main investment types for life insurance contracts

A
  1. Without profit
  2. With-profit
  3. Unit linked
  4. Index-linked
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5
Q

Without profit

A

Benefits are fixed at outset.

The insurer bears the risk of experience not being as expected but also receives the profits.

Typically used for protection products but also for savings.

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6
Q

With profit

A

Profits and risks are shared between the policyholder and the insurer.

There are both guaranteed and discretionary benefits.

Typically used for savings products but also used for protection.

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7
Q

Unit linked

A

Benefits depend on the performance of the underlying assets.

Experience risks are generally borne by the policyholder, unless there is a minimum guaranteed benefit.

Used for both savings and protection products, but normally only where there is a significant investment element.

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8
Q

Index linked

A

Gives a benefit that is linked to the performance of an economic or investment index.

Premiums may move in line with the same index, or may be fixed in monetary terms.

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9
Q

Pure endowment/ Endowment assurance

A
  • Pure Endowment provides a benefit on survival to a known date and hence operates as a savings vehicle
  • Endowment assurance also provides significant benefit on the death of the life insured, operates as a vehicle of dependent protection.
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10
Q

Whole life assurance

A

Provides a benefit on the death of the life insured whenever that might occur.

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11
Q

Term assurance

A

Provides a benefit on the death of the life assured provided it occurs within the term selected at outset.
Normally don’t have any benefit paid on withdrawal.

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12
Q

Convertible/renewable term assurance

A

Combine a term assurance with the certainty of being able either to convert to a permanent form of contract (ie an endowment or whole life assurance) or to renew the original contract for a further period, all without further evidence of health being provided.

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13
Q

Immediate annuity

A

Involves a single premium purchasing an income stream, which commences immediately after purchase.

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14
Q

Deferred annuity

A

Can be used when there is the time between the date of purchase and the date when the income is required to start.
The contract can be paid for either by a single premium or by regular premiums during the deferred period.

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15
Q

Income drawdown

A

Allows an individual to leave their accumulated fund invested and draw an income from it annually.
May be limits on how much can be drawn each year and an age limit at which point an annuity must be purchased.

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16
Q

Income protection

A

Enables individuals to provide an income for themselves and their dependents during the period of long-term sickness or incapacity due to accident or illness.
Typically terminate at retirement age.

17
Q

Critical illness

A

Provides a cash sum on the diagnosis of a “critical” illness as defined by the policy documents.

18
Q

Long-term care

A

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, ie post-retirement

19
Q

For each of the products, 3 aspects need to be considered…

A
  1. Definitief of benefits.
  2. Use of the product to meet customer’s needs.
  3. Whether a group version exists.