Part 1: Introduction to Life Insurance
Paper III — Long Term Insurance · Part 1: Introduction to Life Insurance
Further reading: Introduction to Life Insurance study notes →
Which of the following statements about Need for Life Insurance are correct? I. To provide financial protection for dependants upon the insured's death II. To obtain investment returns for wealth accumulation III. To enjoy tax exemption benefits
Why: The purposes of life insurance include: (I) providing financial protection for dependants on the death of the insured, and (II) accumulating wealth through savings/investment components (Study Notes §1.1.1(c) explicitly lists Investment as a recognized purpose of life insurance). Tax exemption benefits (III) are not a core need for life insurance, and not all life insurance products in Hong Kong offer tax advantages. Therefore, both I and II are correct purposes of life insurance.
Which of the following statements about Insurable Interest are correct? I. The policyholder and their spouse II. A stranger and the insured III. Ordinary business partners (with no specific financial dependency)
Why: Insurable interest requires the policyholder to suffer a financial loss upon the insured's death. Spouses have a natural financial dependency, so insurable interest exists. A stranger generally has no financial dependency on the insured and lacks insurable interest. For life insurance, insurable interest only needs to exist at the time of application, not at the time of claim.
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