Life Insurance Products and Coverages
Product families
Risk life (term) pays a sum assured only on death within the term - no savings element. Endowment/savings pays on survival or death, combining protection and savings. Whole life covers to death without a fixed term. Annuities convert capital into periodic income (immediate vs deferred; life vs fixed-term). Unit-linked (UL) policies invest premiums in funds; the policyholder bears investment risk, and the insurer must disclose charges and the risk profile.
Key concepts
- Sum assured is a fixed benefit; indemnity does not apply.
- Insurable interest and the insured’s consent are required; suicide clauses and contestability periods are standard.
- Cooling-off: 14-day withdrawal right for life policies.
- UL disclosure: the PRIIPs KID and the insurance product information document (IPID) must be provided; charges reduce returns.
- Tax treatment of premiums/benefits can differ; the exam tests the principle, not current rates.
Traps
- Treating term life as having a savings/cash value - it does not.
- Assuming the insurer bears investment risk in UL policies - the policyholder does.
- Confusing annuity accumulation with payout.
- Forgetting consent/insurable interest for third-party lives.
Worked example
A 30-year term policy with a 100,000 sum assured pays nothing if the insured survives; an endowment with the same sum assured pays 100,000 on survival or earlier death. Rule of thumb: term = pure protection; endowment = protection + savings; UL = protection + investment risk on the policyholder; annuity = income stream.