Classification of the life insurance market Flashcards
What are the 2 main reasons somebody gets life insurance?
They have dependents, Have a loan/mortgage that needs to be secured
Who doesn’t need life insurance?
Young people who don’t have dependents or those who have assets that can be used to support the family when that person is gone
Who gets a policy benefit if you arrange the policy your self, why is this a bad idea?
The policy is paid directly to your estate. This can be subject to tax so it is better to have a partner take the policy out on you.
Explain a joint life policy
When one of the 2 people named on the policy dies the benefit is paid to the surviving policyholder. It only covers one person and is over when it pays out.
Who would buy a joint life policy
Single income families
Explain dual life policy
A dual life policy covers 2 peoples lives. If one dies then the policy continues and would payout if the other person also dies in the term of the policy.
Who would buy a dual life policy?
Dual income families
What is the advantage of life insurance to the consumer?
Provides stability and security as somebody’s family won’t suffer financially if that person dies
What is a pure life policy?
A policy that has no investment element
Term life insurance
Provides protection for a specified time and pays the face value only if the person dies in that time.
Do term policy’s have a surrender value?
No
How does a term life policy end?
Death - pay out
Lapse (stop paying premiums)
Reach the end of the term - no pay out
What are the advantages of term life insurance (3)
Cheep
Large sum insured
Easy to compare when shopping
Limitation of term life policy’s (4)
Coverage terminates at the end of the term unless renewed
Gets expensive as you get older
No cash value
Might not be able to renew if you get older
Whole of life policy’s
Combination of savings and insurance
