BCP Life Insurance Products 2 — Questions and Answers
Question 1: What is an Investment-Linked Policy (ILP) in Singapore?
- A fixed-deposit insurance plan
- A life insurance policy where premiums are invested in sub-funds chosen by the policyholder (Correct answer)
- A policy that guarantees fixed returns
- A government savings bond with insurance coverage
Correct answer: A life insurance policy where premiums are invested in sub-funds chosen by the policyholder
An ILP combines life insurance with investment. Premiums are used to buy units in sub-funds selected by the policyholder, meaning returns depend on fund performance and are not guaranteed.
Question 2: What does the 'cash value' or 'surrender value' of a life insurance policy represent?
- The total premiums paid to date
- The amount the policyholder receives if they cancel the policy before maturity (Correct answer)
- The death benefit amount
- The commission earned by the agent
Correct answer: The amount the policyholder receives if they cancel the policy before maturity
The cash or surrender value is the amount payable to the policyholder upon voluntary termination of the policy. It is typically lower than total premiums paid, especially in early years.
Question 3: In Singapore, what is the purpose of the Policy Owners' Protection (PPF) Scheme?
- To guarantee investment returns on ILPs
- To protect policy owners if their insurer fails, covering guaranteed benefits up to specified limits (Correct answer)
- To reimburse premiums for cancelled policies
- To provide free insurance to low-income families
Correct answer: To protect policy owners if their insurer fails, covering guaranteed benefits up to specified limits
The PPF Scheme, administered by the Singapore Deposit Insurance Corporation (SDIC), protects policy owners by covering guaranteed benefits of life and general insurance policies if an insurer becomes insolvent.
Question 4: What is a 'rider' in the context of a Singapore life insurance policy?
- The person who delivers the policy document
- An additional benefit attached to a base policy for extra premium (Correct answer)
- The insurance agent's title
- A type of investment fund
Correct answer: An additional benefit attached to a base policy for extra premium
A rider is supplementary coverage added to a base life insurance policy. Common riders in Singapore include critical illness, total and permanent disability (TPD), and hospital income riders.
Question 5: What is the ElderShield/CareShield Life scheme in Singapore?
- A travel insurance scheme for elderly Singaporeans
- A long-term care insurance scheme providing monthly payouts for severe disability (Correct answer)
- A dental insurance plan for retirees
- A home renovation insurance scheme
Correct answer: A long-term care insurance scheme providing monthly payouts for severe disability
CareShield Life (which replaced ElderShield) is a compulsory long-term care insurance scheme providing monthly cash payouts to Singaporeans who become severely disabled and need long-term care.
Question 6: What is the 'assignment' of a life insurance policy in Singapore?
- Changing the beneficiary designation
- Transferring the ownership rights of a policy to another party (Correct answer)
- Adding a rider to the policy
- Increasing the sum assured
Correct answer: Transferring the ownership rights of a policy to another party
Assignment involves transferring the policyholder's rights and interests to another party (the assignee), commonly done for collateral when taking a bank loan in Singapore.
BCP Life Insurance Products 2
What is an Investment-Linked Policy (ILP) in Singapore?