Life Assurance
Core concepts
Life assurance questions test whether you can match a product to a need and read a policy correctly. Know the difference between term assurance (pure protection, no maturity value), whole-of-life (guaranteed payout, often reviewable premiums), endowment (protection plus savings), and unit-linked/investment bonds where the payout depends on fund performance. Understand sum assured, premium, policy term, surrender value, paid-up value, grace period, cooling-off period, and non-forfeiture.
Key structural ideas: insurable interest must exist at inception; utmost good faith and material disclosure govern underwriting; suicide clauses and pre-existing condition exclusions limit cover; assignments (absolute vs collateral) transfer rights; and nomination/beneficiary rules decide who receives proceeds.
Traps
- Confusing term (no cash value) with whole-of-life (cash value possible).
- Mixing up surrender value (early exit) with paid-up value (reduced cover, premiums stopped).
- Forgetting that the cooling-off period returns premiums but not the risk cover already provided.
- Assuming a nomination overrides a legal assignment - it does not.
Rule of thumb
A useful test: Does the client need protection only, or protection plus a savings pot? Protection-only points to term; long-term savings points to endowment or unit-linked.
Worked example
A 35-year-old with a 20-year mortgage and two children needs cover until the mortgage ends. Term assurance matching the 20-year term is the correct fit; whole-of-life would over-insure and cost more.