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IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Key assurance and annuity contracts

A level-premium whole life policy is issued to a life aged 35. Compared with a 20-year term assurance with the same sum assured, which statement is correct about the contracts?

A whole life assurance pays the sum assured on death whenever it happens, so a claim is certain eventually. A term assurance pays only if death occurs within the term and has no maturity benefit on survival.

  1. AThe term assurance pays out if the life survives 20 years
  2. BThe whole life assurance pays the sum assured only if death occurs within a fixed term
  3. CThe whole life assurance pays the sum assured on death whenever it occurs, so a benefit is certain to be paid eventuallyCorrect
  4. DThe term assurance has a maturity value equal to the sum assured
  5. The whole life policy cannot have a premium payment term shorter than the benefit period

Explanation

Whole life assurance pays on death at any future time, so payment is certain to occur eventually. Term assurance pays only if death occurs within the term and has no maturity benefit. Premiums for whole life can be limited to a shorter period, so option E is false.

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