Chapter 3 - Life insurance products (3)

Question 1

Immediate annuity contracts

Answer 1

Pays out regular amounts of benefits provided the life insured is alive at the time of payment

Question 2

Why are surrenders not normally available on annuity products

Answer 2

• Because of anti-selection risk, only those in ill health who stand to gain the most from surrendering will surrender.
• i.e they do not expect to receive many more premiums

Question 3

What is the main risk with annuities

Answer 3

• longevity risk

Question 4

What is a deferred annuity contract

Answer 4

• It is a contract that pay out regular amounts of benefit provided the life insured is alive at the end of the deferred period when payment commence