BIA Diploma in Life Insurance cheat sheet

Insurable interest requires a pecuniary or legally recognised relationship at inception; for own life it is presumed, for others it must exist when the contract is formed.

Utmost good faith (uberrimae fidei) obliges the proposer to disclose material facts a prudent insurer would consider relevant; non-disclosure and misrepresentation are distinct breaches with different remedies.

Indemnity does not apply to life cover because the sum assured is agreed in advance; life policies are therefore valued, not indemnity, contracts.

Risk pooling converts individual uncertain losses into a predictable aggregate cost: expected claims equal the sum of individual loss probabilities multiplied by their amounts.

Moral hazard arises from the insured's behaviour after cover; adverse selection arises from information asymmetry before cover.

Reinsurance (yearly renewable term, coinsurance, or facultative) transfers part of the risk and affects retention limits and underwriting thresholds.

Principle of contribution and subrogation are generally inapplicable to life and personal accident benefits payable on death.

Premium components: risk premium (mortality cost) + expense loading + contingency/reserve margin; gross premium = net premium / (1 - expense ratio) as a simplified expression.

Contract of agency: the agent represents the insurer, not the applicant, and binds the insurer through acts within actual or apparent authority.

Term assurance pays the sum assured only on death within the term; no maturity value, hence lowest premium per unit of cover for a given age and term.

Whole life cover is permanent with a guaranteed death benefit; premiums may be level to age 100 or payable for life, and cash value accrues under participating or non-forfeiture provisions.

Endowment assurance combines death cover with a guaranteed maturity payout at a fixed date; premium exceeds term assurance for equal sum assured.

Unit-linked policies allocate premiums to units whose value fluctuates with the underlying fund; the insurer bears mortality risk but the policyholder bears investment risk.

With-profits policies distribute surplus via reversionary bonuses (vested, guaranteed once declared) and terminal bonuses (not guaranteed until claim).

Universal life separates the account value from the death benefit; cost of insurance is deducted monthly from the account value based on attained age and net amount at risk.

Annuities: immediate versus deferred, life versus fixed-term, and level versus escalating; a joint-life annuity continues on the survivor's life.

Standard policy provisions include grace period, reinstatement, incontestability, suicide exclusion, misstatement of age adjustment, policy loan, and surrender value.

Policy ownership rights (assignment, nomination, surrender, loan) sit with the owner, who may differ from the life assured and the beneficiary.

Financial underwriting assesses whether the sum assured is proportionate to income and needs; a common rule of thumb caps cover at a multiple of annual income plus liabilities.

Standard rating classes are preferred, standard, substandard (rated), and declined; substandard risks attract an extra mortality rating expressed as a percentage or years added to age.

Temporary flat extra is used for risks that diminish over time (for example, recovery from a specific condition), while permanent flat extra applies to non-improving impairments.

Numerical rating: debit points for adverse factors and credit points for favourable factors are summed and compared against a base of 100 to derive the mortality percentage.

Medical evidence escalates with sum assured and age: proposal form, attending physician's report, medical examination, and special investigations such as ECG or blood profile.

Non-medical factors include occupation class, hazardous pursuits, residence and travel, smoking status, family history, and driving record.

Moral and financial hazard indicators include over-insurance relative to income, recent large sum applications, adverse claims history, and policy replacement activity.

Aggregate retention and automatic binding limits determine when facultative referral to a reinsurer is required.

Mortality table columns: lx (survivors at age x), dx (deaths in year), qx = dx / lx (rate of mortality), px = 1 - qx.

Net single premium for whole life = sum over future years of discounted expected death benefit: A = Σ v^(t+1) · tpx · qx+t.

Net level annual premium = net single premium / annuity due factor (äx), where äx discounts expected payments while alive.

Reserves (policy liabilities) equal the present value of future benefits minus the present value of future net premiums; terminal reserves fund surrender values and non-forfeiture options.

Gross premium = net premium + expense loading, where loading covers acquisition, maintenance, and collection costs plus a profit margin.

Mortality improves over time and selection effects mean select mortality is lower than ultimate mortality in early policy years.

Claims process: notification, document verification (death certificate, claimant proof, policy status), assessment of exclusions and disclosure issues, then settlement within regulatory timelines.

Presumption of death and missing-person claims require a court declaration; accidental death benefits require proof of causation independent of disease.

Interest rate risk and longevity risk affect annuity pricing; lapse and mortality assumptions drive asset-liability matching.

A contract requires offer, acceptance, consideration, capacity, and lawful object; the proposal is the offer and the policy issuance or acceptance is the acceptance.

Utmost good faith duties are mutual: the insurer must disclose material terms and the proposer must disclose material facts; remedies range from avoidance to proportional reduction.

Incontestability clauses bar the insurer from contesting the policy after a stated period (commonly two years) for misrepresentation, except for fraud or non-payment.

Regulatory objectives typically include policyholder protection, solvency and capital adequacy, market conduct supervision, and insurer licensing.

Ethical duties of the intermediary include needs-based selling, disclosure of commissions and conflicts, suitability assessment, and avoiding churning or twisting.

Anti-money-laundering obligations require customer due diligence, source-of-funds verification, and suspicious transaction reporting.

Data protection principles: lawful and fair processing, purpose limitation, data minimisation, retention limits, and the insured's right of access to personal data.

Complaint and dispute resolution channels: internal complaints handling, an independent ombudsman or dispute resolution scheme, and then the courts.

Insurable interest, assignment, and nomination rules determine who may receive the benefit and how ownership can be transferred.

Risk pooling: expected aggregate claims = number of policies × probability of claim × average claim amount.

Insurable interest must exist at inception for life cover; it is presumed for one's own life.

Utmost good faith requires disclosure of material facts a prudent insurer would consider relevant.

Life policies are valued contracts, not contracts of indemnity; the sum assured is agreed in advance.

Moral hazard is post-contract behaviour; adverse selection is pre-contract information asymmetry.

Gross premium = risk premium + expense loading + contingency margin.

Reinsurance transfers part of the risk and sets retention limits that affect underwriting thresholds.

Term assurance pays only on death within the term and has no maturity value.

Whole life cover is permanent with a guaranteed death benefit and accruing cash value.

Endowment assurance pays on death or at maturity; premium exceeds term assurance for equal sum assured.

Unit-linked policies place investment risk on the policyholder; the insurer bears mortality risk.

Reversionary bonuses vest once declared; terminal bonuses are not guaranteed until claim.

Universal life deducts cost of insurance monthly from the account value based on attained age.

Standard provisions include grace period, reinstatement, incontestability, and suicide exclusion.

Policy ownership rights (assignment, nomination, surrender) sit with the owner, who may differ from the life assured.

Financial underwriting caps cover at a multiple of annual income plus liabilities.

Rating classes: preferred, standard, substandard (rated), and declined.

Temporary flat extra applies to diminishing risks; permanent flat extra applies to non-improving impairments.

Numerical rating sums debit and credit points against a base of 100.

Medical evidence escalates with sum assured and age: proposal, physician's report, examination, investigations.

Non-medical factors: occupation, hazardous pursuits, residence, smoking, family history.

Moral hazard indicators include over-insurance relative to income and policy replacement activity.

Automatic binding limits determine when facultative referral to a reinsurer is required.

qx = dx / lx and px = 1 - qx, where lx is survivors at age x and dx is deaths in the year.

Net single premium for whole life = Σ v^(t+1) · tpx · qx+t over future years.

Net level annual premium = net single premium / annuity due factor (äx).

Reserves = present value of future benefits minus present value of future net premiums.

Gross premium = net premium + expense loading (acquisition, maintenance, collection, profit).

Select mortality is lower than ultimate mortality in early policy years.

Claims process: notification, document verification, exclusion and disclosure assessment, settlement.

Accidental death benefits require proof of causation independent of disease.

A contract requires offer, acceptance, consideration, capacity, and lawful object.

Utmost good faith duties are mutual; remedies range from avoidance to proportional reduction.

Incontestability clauses bar contest after a stated period (commonly two years), except for fraud or non-payment.

Regulatory objectives: policyholder protection, solvency, market conduct, and licensing.

Intermediary ethics: needs-based selling, commission disclosure, suitability, and avoiding churning.

AML obligations require customer due diligence, source-of-funds checks, and suspicious transaction reporting.

Data protection: lawful processing, purpose limitation, data minimisation, retention limits, and access rights.

Complaint channels: internal handling, independent ombudsman or dispute scheme, then the courts.

Mortality table: lx survivors, dx deaths, qx = dx/lx, px = 1 - qx.

Net single premium A = Σ v^(t+1) · tpx · qx+t.

Net level premium = A / äx, where äx discounts expected payments while alive.

Reserve = PV future benefits − PV future net premiums.

Gross premium = net premium + expense loading + profit margin.

Select mortality is below ultimate mortality in early policy years.

Claims: notification, verification, exclusion assessment, settlement within regulatory timelines.

Presumption of death requires a court declaration; accidental benefits need independent proof of causation.

Insurable interest must exist at inception; presumed for own life.

Utmost good faith requires disclosure of material facts.

Life policies are valued contracts; indemnity does not apply.

Expected aggregate claims = policies × claim probability × average claim.

Moral hazard follows cover; adverse selection precedes it.

Gross premium = risk premium + expense loading + contingency margin.

Reinsurance sets retention limits and underwriting thresholds.

Financial underwriting caps cover at a multiple of income plus liabilities.

Rating: preferred, standard, substandard, declined.

Temporary flat extra for diminishing risk; permanent for non-improving impairment.

Numerical rating compares summed points against a base of 100.

Medical evidence escalates with sum assured and age.

Non-medical factors: occupation, pursuits, residence, smoking, family history.

Over-insurance and replacement activity signal moral hazard.

Automatic binding limits trigger facultative referral.

Term assurance: death only, no maturity value, lowest premium per unit of cover.

Whole life: permanent cover with guaranteed death benefit and cash value.

Endowment: death or maturity payout; premium exceeds term assurance.

Unit-linked: policyholder bears investment risk; insurer bears mortality risk.

Reversionary bonuses vest once declared; terminal bonuses are not guaranteed.

Universal life deducts cost of insurance monthly from account value.

Standard provisions: grace, reinstatement, incontestability, suicide exclusion.

Ownership rights sit with the owner, who may differ from the life assured.

Contract elements: offer, acceptance, consideration, capacity, lawful object.

Mutual utmost good faith; remedies include avoidance or proportional reduction.

Incontestability bars contest after a stated period, except fraud or non-payment.

Regulatory objectives: policyholder protection, solvency, market conduct, licensing.

Ethics: needs-based selling, commission disclosure, suitability, no churning.

AML: customer due diligence, source-of-funds checks, suspicious transaction reporting.

Data protection: lawful processing, purpose limitation, minimisation, retention, access.

Dispute channels: internal complaints, ombudsman, then courts.