K
Krati Gupta
Member
Why is there no surrender value on term assurance?
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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
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
Thanks Ethan! For what it's worth, I'd particularly highlight number 4 on your list as being the major reason 