Life Insurance Products and Features
Life Insurance Products and Features tests product mechanics: term, whole life, endowment, ULIP, annuity and riders, plus premium, cash value, surrender, loans and non-forfeiture. You must match a client need to a contract and explain what is guaranteed and what is not.
Core rules
- Term provides death cover for a fixed period with no maturity value; pure protection, lowest premium for a given sum assured.
- Whole life covers death whenever it occurs; endowment pays on death or maturity, so it blends protection and savings.
- ULIP separates protection from investment; fund value fluctuates with market returns and charges, and the investment risk sits with the policyholder.
- Annuity converts capital into income; immediate vs deferred, life vs joint-life, with or without return of purchase price.
- Riders add benefits such as critical illness, waiver of premium or accidental death; they cannot exceed the base cover rules.
- Non-forfeiture protects paid-up value or surrender value after premiums cease; policy loan borrows against cash value.
Worked example
A 35-year-old non-smoker needs 5,000,000 of cover for 25 years and has limited surplus. A term plan costs 12,000 a year; an endowment for the same sum assured costs 250,000 a year. The term plan meets the protection need at 5% of the endowment outlay; the endowment's savings element is not a reason to underinsure. Recommendation: term cover plus a separate disciplined investment, unless the client explicitly wants forced savings. Reasoning: match the product to the need, not to the premium or commission.
Traps
- Calling ULIP returns guaranteed.
- Treating surrender value as a refund of all premiums paid.
- Confusing annuity (income) with life cover.
- Assuming riders are free or automatically included.
- Ignoring the effect of lapse on paid-up value.