Term Assurance

Discussion in 'SP2' started by Krati Gupta, Jul 29, 2022.

  1. Krati Gupta

    Krati Gupta Made first post

    Why is there no surrender value on term assurance?
     
    Last edited by a moderator: Jul 29, 2022
    Krati Gupta, Jul 29, 2022
    #1
  2. Ethan

    Ethan Keen member

    Good SP2 exam question.

    I will make a start. Please correct and contribute as well

    Because:
    1. a small surrender value will make a bad reputation for the company. Like 50 pence
    2. surrender value will make the asset share volatile
    3. not much profit for a single policy
    4. surrender value will encourage anti selection. For term assurance, the biggest risk is to have healthy policyholders lapses, and the unhealthy ones stay. So the surrender value will worsen the problem
     
    Ethan, Jul 30, 2022
    #2
    Ppan13 and Lynn Birchall like this.
  3. Lynn Birchall

    Lynn Birchall ActEd Tutor Staff Member

    Thanks Ethan! For what it's worth, I'd particularly highlight number 4 on your list as being the major reason :)
     
    Lynn Birchall, Jul 31, 2022
    #3

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