Chapter 4 - Life insurance products (4) Flashcards
1
Q
What is without-profits
A
- Fully guaranteed benefits with usually level regular premiums
2
Q
What is with-profits
A
- The Policyholder is entitled to part or all of any future surplus which arises under the contract
3
Q
What is unit-linked
A
- A policy where the benefits are linked directly to the investment performance of a specified fund
4
Q
What is index-linked
A
- A policy where the benefits are linked directly to a specified investment index or economic index, and are guaranteed to move in line with that index
5
Q
What is the bid value of the unit fund
A
It is the amount of money that the company would pay to the policyholder on a claim under the policy
6
Q
What is the non-unit fund
A
- It is the company’s ‘other’ money.
- It is the accumulated value of all the charges the company has taken out of its unit-linked policies,
– less the actual costs it has incurred on behalf of those contracts
– less any distributions of profit it has made to its providers of capital
– plus any capital injections paid in (eg to pay to set up reserves)
7
Q
What is the difference between unit fund and asset share
A
- The unit fund is a definition of the policy benefits at a point in time
- The asset share is the accumulated value of the total premiums less actual costs to the same point in time
8
Q
What is the main risk to the policyholder in the case of conventional without-profits contracts
A
- The amount of benefit provided, which is fixed and guaranteed, eventually turns out to be insufficient
- Given the long-term nature of the contracts, this risk is exacerbated by the effects of inflation over time
9
Q
A