Life assurance Flashcards
What is life assurance?
A form of insurance taken out on a person’s life
When is compensation paid out for life assurance?
When the policyholder dies
What is the main benefit of life assurance?
It can be used to provide financial security for dependents as family members can use the lump sum to pay off bills, make mortgage repayments and supplement existing income
List the three different types of life assurance
Term life assurance
Whole of life assurance
Endowment life assurance
What is term life assurance?
An insurance policy that covers individuals for a specified and agreed length of time
In relation to term life assurance, what happens in the event of death of the policyholder?
A lump sum of compensation will be paid out to dependents
In relation to term life assurance, what happens if a person survives the term of cover?
No payment is made and the policy must be reviewed to ensure cover is continued
What are the benefits of term life assurance?
3
It is the cheapest and simplest form of life assurance as there is no guarantee the person will die
Provides peace of mind that young dependents will be looked after
Suitable for a young family on a low income
What are the disadvantages of term life assurance?
2
There is no savings element
The older the person gets the more expensive the premium will be as the person has a higher chance of dying within the term
What is whole of life assurance?
2
An insurance policy that lasts for a whole lifetime, and is not limited to a specific time frame
The person’s life is covered indefinitely as long as premium payments are made
What is the advantages of whole of life assurance?
Savings are made for dependents and paid out upon death of the policyholder
What is the disadvantage of whole of life assurance?
It is more expensive than term life assurance because a claim is inevitable
What is endowment life assurance?
An insurance policy that combines life assurance and a savings element
How long does endowment life assurance last
The policy exists for an agreed term or up to an agreed age
In relation to endowment life assurance what happens when the term is up?
A lump sum is paid out
