Technical Life Insurance Information

Types of Life Insurance and Annuity
To the public and perhaps inexperienced insurance intermediaries, there must seem to be a bewildering variety of life insurance contracts.  Certainly, it is a sophisticated and well-developed market, but few basic guide rules should prove helpful;

1. Basic functions:  it is good to distinguish the various products offered by life insurers by what the products seek to do.  Another way of thinking about it is to ask the question: “Under what circumstances is/are the benefits payable?”  Some basic formats are:
   1. Payment on death only if it occurs during a specified period;
   2. Payment on death at any time;
   3. Payment on a specified date or an earlier death.
2. Basic variables: some additions/modification to the above are:
   1. The type of policy (called the plan) may be convertible, i.e. able to be changed into a different plan, at the policyholder’s option;
   2. Renewable, if originally for a limited time period;
   3. Par or non-par;
   4. Various Riders, i.e. endorsements, may be added to the policy, either to provide additional cover or to make certain provisos.
3. Basic questions: much heartache and misunderstanding in the whole business of life insurance selling would be avoided if insurers and insurance intermediaries clearly put the following two questions to potential policyholders:
   1. “What do you want the insurance to do for you?”, i.e. what is it for?
   2. “How much premium are you able or willing to pay?”, i.e. what can you afford?

Note: the other basic question “How much life insurance do you need?” is of course important, but this is usually answered by the insurance intermediary rather than the applicant.