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FRM Part I · FRM Exam Part I · Insurance Companies and Pension Plans

An insurer writes only policies that pay a benefit if the policyholder dies during a fixed 20-year term, with no payout if the policyholder survives the term and no savings element. Which type of insurance is this?

This is term life insurance. It pays a death benefit only if the insured dies within the stated period, here 20 years, and pays nothing on survival. Whole life and endowment policies include savings or lifetime cover, and annuities pay income rather than a death benefit.

  1. AWhole life insurance
  2. BTerm life insuranceCorrect
  3. CEndowment life insurance
  4. DAnnuity contract

Explanation

Term life insurance pays only if death occurs within a specified period and has no cash value or maturity benefit. Whole life covers the insured for life and builds cash value. Endowment pays on death or at maturity. An annuity pays income while the annuitant lives.

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