Life Insurance Products Flashcards
Whole of life
*Benefit on death of life insured
*whole of life, no term
*surrender
*paid up option
Uses
*funeral expenses
*dependants
*any outstanding liabilities/tax
**inheritance tax
**death duties
*transfer of wealth guaranteed
Types
With profit
Without profit
Unit linked
**max(Unit fund, guaranteed amt)
Group
No
term assurance
Defn
*benefit on death within a specified term
* benefit can be lump sum or income payable from death of the assured
No surrender value
Uses
*cheaper life cover
*dependants
*debt settlement
*credit card company to cover credit risk
Type
* decreasing
– benefit amount decreases as we near term expiry/later death occurs
*level
–default type
Group
Yes - death in service
Convertible term assurance
Defn
*benefit on death within a specified term
*option to convert to wol or endowment at the end of term (or other specified term)
*without additional underwriting
Uses
*convert to a linger term/higher benefit when
–need arises
–can afford it
Group
Conversion option
Critical illness
Defn
*LS benefit on diagnosis of critical illness
Long term care
Defn
*benefits - LS/annuity/some or all of the actual cost of care (indemnity)
*can be single or regular premiums
*all benefit structures are available
Group
Yes
Endowment assurance
*benefit
**LS benefit on survival to end of term
**LS on death within term
*savings vehicle
*may be allowed to surrender (guaranteed/non guaranteed)
Use
*savings vehicle
*transfer wealth to dependants (often guaranteed)
*repay loan
Savings for retirement
With profit
Without
Unit linked
Group
Employer provides for retirement/death in service
Pure endowment
Benefit
*benefit on survival to known date
*LS
*savings vehicle
*may be allowed to surrender (guaranteed/non guaranteed)
Use
*savings vehicle
*transfer wealth to dependants (often guaranteed)
*repay loan
Savings for retirement
With profit
Without
Unit linked
Group
Employer provides for retirement
Funeral
Life insurance - Renewable contract
*term assurance with option to renew at end of contract
*limited or no underwriting (esp if benefit does not change)
Life insurance - Immediate Annuity
Benefit
*purchased with a single premium
*
Uses
*retirement
*income stream
Types
*without profit
* linked
*with profit (bonus)
*unit linked (guaranteed units not money)
*impaired Annuity (higher annuities)
*temporary Annuity
–limited term
Group
Provide pension benefits
Life insurance - Deferred Annuity
Benefit
*immediate Annuity with a delay between purchased Annuity and income stream
*regular trajectory
–premium payments until vesting date
–at vesting date purchased of ab Annuity
Uses
*build a pension
*can access cash portion to settle debts/vacation
Group
Pension provision
Income drawdown
Benefit
*alternative to annuity
*instead of buying Annuity funds stay invested- member withdraws amount of fund each year (income/capital/both)
*significant charges - needs to be large fund
Legislative restrictions on
–amount of fund that can be withdrawn
–age at which drawdown must be converted to an Annuity
Advantages
*fl3xibility of amount drawn, subject to contains
*flexibility to buy an Annuity when rates are good
*may be able to earn better return on investment
Us3s
*transf3r of wealth if insured dies while account >0
Disadvantages
*if drawdown taken = income earned ->volatile
*fund can reduce to zero before member dies
*administration charges may be high
*remaining benefit in death may not be enough for dependants
*may be tax residual fund on members death
Investment bond
*single premium
*whole life
*medium to long term investment
*withdrawal from bond is allowed, may incur penalties in first years
*restriction on frequency of withdrawals in later years
*LS on death (might have guarantee =original single premium)
*dependants on investment return
Types
Unit linked
Investment linked
Uses
*Savings vehicle - with insurance component
*earn return
*benefit system death that could help with funeral/other liabilities/taxes
*option to make withdrawals when needs arise
Type
Medium/long term
Group
No
Income protection
Benefit
*provides income for insured and their dependants if risk event occurs
*Risk event
–sickness/incapacity (as defined in policy) own occ
*has a waiting/deferred period
*pays until nra
Group
Phi
Tip
Types
*tip
*ip
*sickness
Keyperson
Benefit
*Life/critical illness policy taken out to cover kept person within business
*LS paid to business if key person (without what business will struggle) is ill or dies
Use
*cover losses/profits
*buy out the individual
*meet costs to find a replacement
Group
No
