Life Insurance Products Flashcards
Pure endowment and endowment assurance
Pure endowment
Operates as a savings vehicle, e.g. a lump sum at retirement, or a means of repaying a loan
Endowment assurance
Also operates as a vehicle of providing protection to dependants on top of a savings vehicle
Term assurance
Typically do not offer benefits on withdrawal
Convertible or renewable term assurance
Gives term assurances the option to convert it to a permanent form of contract (e.g. endowment or whole life assurance) or to renew the original contract to a further period without further evidence of health being provided (unless benefit levels increased)
Deferred annuity
Premiums can be paid as a lump sum or at regular intervals during the deferred period
Income drawdown
Individuals draw an income from their accumulated pension fund at retirement each year
There may be a limit to the amount that could be drawn each year and an age limit to which point an annuity needs to be purchased
Investment bond
Single premium invested for the whole life (or fixed term)
The benefits depend on the investment return during the period of investment. Funds can be withdrawn but this may have surrender penalties, particularly at early durations.
There may be a guarantee offered on death
Income protection insurance
Typically terminates at retirement age
Provide income for individuals and their dependants during periods of long-term sickness or incapacity due to accident or illness
Critical illness insurance
Provides a cash sum on diagnosis of critical illness defined in the policy documents
Key person cover
Pays lump sum on death or critical illness of key person in a business
The benefits may be linked to loss of profits or salary of the individual and used to buy out the individual from the business or find a replacement
Long term care insurance
Provide financial security against the risk of needing home or nursing home care as an elderly person
Investment types of life insurance
Without profit
With profit
Unit linked
Index linked
