Types of policys Flashcards
What happens if you stop paying a term policy
Cover ends
Do term life policies have a surrender value?
No
When does a level term policy payout?
The company pays out a fixed amount if the person dies before the expiry date
Do premiums change in level term?
no
What is the cheapest type of policy?
Level term policy
What is unique about a renewable term policy
It can be renewed without proof of health.
Do premiums change in a renewable term?
Yes as risk profile changes to prevent adverse selection
Convertible term
Can be converted into whole of life or endowment
Decreasing term cover
Covers an amount that decreases over time so eventually, the sum insured is zero
Do decreasing term policy’s premiums change?
no
Index-linked term insurance
The amount insured increases every year and is link to an index (usually inflation)
Do premiums increase in an index-linked policy?
Yes usually more than inflation/index
What situation is an index-linked policy useful?
Short term
Family income benefits
It covers the income of a family member, if they die it pays out that weekly allowance until the policy expires
Why does the sum insured decrease in a family income benefit policy?
Because every week the number of allowances that the insurance company has to pay out reduces.
Credit term
Pays off the remainder of a debt if the person dies, sum insured decreases over time
Non-profit whole of life
Level term that can be cashed out
Whole of life policies
A form of savings
With profit whole of life policy
A sum insured + profits that have been allocated by the company
Can whole of life policy’s be cashed in?
Yes
When is it best to get a with profit whole of life policy?
When you are younger as you will have more when you retire.
Low-cost whole of life policy?
Only pays out on death but has a sum insured + interest
What is a unit-linked whole life policy?
You decide how much you want to invest and you can pick what fun to invest in. Value is linked to units in an insurers fund.
Single premium unit lined policy
A policy that lets you top up your investment
Regular premium unit-linked whole of life policy
Invests at regular intervals in a fund that is reviewed after 10 years.
Unit linked term assurance
Only payable on death if death occurs in the term
Normal bonus
Declared annually as a % of the sum insured
Can a normal bonus be taken away?
No
When is a terminal bonus paid
Only when the policy becomes a claim
Is a terminal bonus paid on surrender
No
