Core Reading states: "In its conventional with profits version, the product is usually a combination, in one contract, of a with profits endowment assurance and a decreasing or variable term assurance". How is the death benefit set for this kind of product? The Death Benefit under CWP Endowment would not decrease (set at a SA?) but under the variable term assurance would be variable or decreasing? And how would these two types of benefits be combined?
We want the death benefit to be at least as large as the capital outstanding on the loan. One problem with the endowment is that the sum assured plus declared bonuses is likely to be less than the loan in the early years. Policyholders often choose a premium that they think will give them enough to repay the loan at maturity, so they are relying on an element of RB and TB to repay the loan. Hence the endowment sum assured on its own isn't enough and a decreasing term assurance is required to cover the repayment of the loan on early death. Best wishes Mark
