Paper 3, Long Term Insurance, has 50 questions in 75 minutes and a 70% pass mark. The efficient approach is to start with the client's need, then trace how protection, savings, premium, policy value, risk allocation and servicing interact.
Start with the need, not the product
Income protection, debt, education, retirement, medical and estate needs differ in term and amount. “Higher return” does not complete a suitability assessment if it ignores the protection gap, affordability, term and risk tolerance.
Compare long-term products on three axes
| Axis | One end | Other end | Why it matters |
|---|---|---|---|
| Coverage term | Specified period | Whole of life | Premium, need and sustainability |
| Source of value | Protection-focused | Savings or cash value | Surrender, loans and non-forfeiture |
| Degree of guarantee | More guaranteed elements | More non-guaranteed or market-linked elements | Disclosure and customer risk |
The policyholder is not always the life insured
The policyholder generally owns contractual rights and pays premiums; the life insured is the person whose life or health is covered; a beneficiary receives benefits under the arrangement. For assignments, beneficiary nominations, policy loans or surrender, identify who owns the relevant right first.
Underwriting is more than accept or decline
Underwriting considers health, occupation, lifestyle, financial need and other relevant risk information. Outcomes may include standard acceptance, an extra premium, special terms, postponement or decline. Do not confuse underwriting before the risk is accepted with claim investigation after a loss.
Treat the policy as a lifecycle
- Needs and recommendation: establish objectives, protection gap and affordability.
- Application and underwriting: disclose material information and allow the insurer to set terms.
- In-force servicing: premiums, grace period, reinstatement, changes, loans and assignments.
- Maturity, surrender or claim: each ending affects benefits, values and cover differently.
Paper 3 and Paper 5 are not alternatives
The common route for linked long-term business is Papers 1 + 3 + 5. Paper 5 adds funds, investment risk, charges and suitability to the Paper 3 foundation. Continue with the Paper 5 guide.
Official sources used
Use these primary sources to confirm any change after the article date.
