Topic 11 - Life Assurance Flashcards
Assurance
Protection against an event that will definitely happen (death)
What is term assurance
Cheapest and basic form of life assurance. Protection for a limited period with no investment
Sum assured
The amount that will be paid out under the terms policy
Surrender value
The sum payable by insurance company if policyholder decides to terminate before end of term
Level term assurance
Sum assured remains constant throughout term and premiums paid monthly/annually.
Used when a fixed debt has to be paid off (bank loan)
Decreasing term assurance
Sum assured reduced to 0 over the term. Premiums may be payable but limited.
Used to cover decreasing debt (repayment mortgage)
What is gift inter vivos cover
Type of term assurance designed to cover IHT liabilities.
Gifts made during someone’s lifetime instead of death
What is convertible term assurance
Gives an option to convert policy into a whole of life/endowment assurance at normal rates without providing evidence
Increasing term assurance
Sum assured increases each year. Used where cover is effected by inflation/purchase power
Renewable term assurance
Includes an option to renew policy at the end of term for the same sum assured without evidence
What is family benefit income
An option to pay lump sum as an income
What is a whole of life insurance
Covers the life assured for the length of their lifetime.
Features of a whole of life assurance policy
Non profit
With profits
Low cost
Unit linked
Unitised with profits
What is flexible whole of life
When a whole of life policy is issued Ona unit linked basis. The flexibility is that they can offer mix between life cover and investment content
Universal whole of life assurance
When you add a range of benefits to a flexibility whole of life assurance. Most come with additional costs
Waiver of premium
Allows policy holder to stop paying premium if unable to work due to sickness/disability
What are Endowment policies
Life assurance products that combine life assurance with savings.
Non profit endowment
A fix sum assured which is payable at the end of term. Premiums are fixed and so is returns.
protected if stock markets fails and can’t have share in any profits.
Full with profits endowment
Same principle as non profit however charges a higher premium which allows policy holder to have share in profits via bonuses.
Reversionary bonus - declared each year and are added to policy
Terminal bonus - added when policy holder dies. Company can change rate.
What is a Principles and practices of financial management
FCA required companies to publish document (PPFM) to show how they manage with profits business
Low cost with profits endowment
The same principle as with profits but at a lower cost as it’s made up of decreasing term assurance Aswell
Unit linked endowment
The premium you pay minus expenses are used to purchase units of chosen fund.
Unitised with profits
The same principle as unit linked however has security element of with profits. Which means bonuses are added and can’t be taken away.
If cashed in early, deductions apply to units
