Part 2: Types of Life Insurance and Annuity
Paper III — Long Term Insurance · Part 2: Types of Life Insurance and Annuity
Further reading: Types of Life Insurance and Annuity study notes →
Which of the following statements about Term Insurance are correct? I. Death benefit is only paid if death occurs within the coverage period II. The sum assured is definitely paid upon policy maturity III. Premiums are generally higher than whole life insurance with the same sum assured
Why: Term insurance provides death protection only within the coverage period. If the insured survives to the end of the term, the policy expires with no payout and typically no cash value. As a result, term insurance premiums are generally lower than whole life insurance with the same sum assured, as there is no savings component. Term insurance is a pure protection product offering maximum death coverage at minimum premium.
The main difference between endowment insurance and term insurance is:
Why: Endowment insurance combines protection and savings: it pays a death benefit if the insured dies during the term, and pays a maturity benefit if the insured survives to the end of the term. Premiums for endowment insurance are therefore generally higher than term insurance with the same sum assured, as it includes a savings component. Endowment pays in both death and survival scenarios, while term insurance only pays upon death.
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