Questions and Answers
What is a primary benefit of term insurance for individuals with limited financial resources?
Which situation effectively illustrates the use of term insurance?
What happens if the insured survives the term of a term insurance policy?
What feature of term insurance allows adjustments depending on financial circumstances?
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Which rider can be included in a term insurance policy to enhance its benefits?
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What is one of the main features of a rider in term insurance?
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What is a key characteristic of the premium paid for term insurance upon renewal?
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Which statement best describes the premium payment structure for term insurance?
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What is a key characteristic of basic term insurance?
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What does the term 'term to age 70' indicate regarding a term insurance policy?
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Study Notes
Overview of Term Insurance
- Provides temporary life insurance protection for a specified period known as the policy term.
- Two classes exist: coverage against death only, and coverage against disability and death.
Policy Terms and Conditions
- Benefits are payable only upon death or total permanent disability during the policy term.
- Policy term can vary, typically ranging from 1 to 20 years, or expiring at a specific age (e.g., term to age 70).
- Coverage expires on the anniversary closest to the insured's 70th birthday or upon reaching age 70.
Structure of Term Insurance
- Can be issued as a basic cover or as a rider on an existing life insurance policy.
- Sum assured usually remains level throughout the policy period.
- Riders provide additional benefits beyond the basic policy.
Premiums
- Premiums are level during the term but may increase upon renewal due to the insured's age.
- Single premium payment options are available, where the entire premium is paid upfront.
- No benefits are payable if the insured survives the policy period.
Key Advantages
- Simplest form of life insurance, offering high cover at low initial premiums compared to other life insurance types.
- Younger insured individuals usually benefit from lower premiums.
- Non-participatory, meaning it does not share in the insurance company's profits and has little or no cash value.
Utilization of Term Insurance
- Ideal for individuals seeking high insurance coverage at affordable premiums.
- Suitable for protecting financial loans or mortgages.
- Provides insurance for business investments during growth phases.
- Safeguards against the loss of a key employee in a business due to untimely death or disability.
- Used to ensure continuity of children's education during critical financial times.
- Can supplement existing policies to enhance coverage.
Additional Features and Riders
- Options to include riders that offer diverse benefits such as:
- Participation in the insurance company’s divisible surplus.
- Disability benefits.
- Medical and critical illness coverage.
- Features include options for sum assured adjustments, renewal, and conversion of terms.
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Description
This quiz covers the fundamentals of term insurance, including its purpose, types, and policy terms. Understand the differences between death-only coverage and disability and death coverage. Test your knowledge on how term insurance works and its benefits.
