Core reading (Ch3, pg 16), lists three ways to structure a death benefit - minimum pymt period, amortization of single premium, and capital protection. But there is no explanation for how each of these work. Can anyone explain? Thanks, Regards, Phani
Minimum payment period - the policy could guarantee to pay benefits for a minimum of 3 years. If death occurred before this time, the policy would still continue to pay out with the payments going to a nominated individual(s). Amortization - eg if there was a single premium of £100k, this could be spread over the first 2years of the term. So, if death occurred after 1 year, £50k would be returned to the estate. In reality, it is likely to be amortized over a much shorter period (eg 6 months, 50% returned if death within 1 month, 25% if death within 1-3 months, 10% if death within 4-6months and nothing after that). Capital protection - this would work for a unit-linked plan, the capital put in to the policy by the individual could be protected so it doesn't run off at all, but would be left as an inheritance on death. The interest on the capital and the insurer would meet the cost of any benefits. It may not be that all the capital is protected, it could just be part of it. There is more detail of unit-linked products and fund protection in Chapter 3 Section 5.1 p19. Hope this helps. Thanks Sarah
