Life Insurance Products and Features
What this domain tests
Life Insurance Products and Features tests whether you can match a client's need and time horizon to the right policy structure and explain the moving parts: premium, face amount, cash value, beneficiaries, riders, and the provisions that keep a contract alive.
Core rules
- Term life pays only on death within the term; it has no cash value and gives the lowest premium for a given face amount.
- Whole life is permanent, level premium, builds guaranteed cash value, and may be participating (dividends) or non-participating.
- Endowment pays at death or at maturity, whichever comes first.
- Universal life separates protection from savings; cost of insurance is deducted from the account value, so flexible premiums carry lapse risk.
- Variable/unit-linked life invests in separate-account funds; the policyholder bears the investment risk.
- Nonforfeiture options on lapse: cash surrender, reduced paid-up, extended term.
- Common riders: waiver of premium, accidental death, disability, critical illness, payor benefit.
Worked example
A 32-year-old public school teacher needs PHP 2 million of cover until her youngest child finishes college in 18 years, and also wants funeral cash whenever she dies. Reasoning: the 18-year need is temporary, so a 20-year term policy delivers the largest death benefit per peso. The permanent funeral need is small, so a modest whole life policy covers it without over-insuring. Buying PHP 2 million of whole life would protect both needs but at a premium she cannot sustain, and a lapsed policy protects no one.
Traps that cost marks
- Saying term life builds cash value.
- Ignoring that universal life can lapse if deductions exceed premium.
- Treating dividends as guaranteed.
- Forgetting that an irrevocable beneficiary's consent is needed to change designation or take a policy loan.