Multidimensional Classification of Life Insurance and Practices in Term Life Insurance: From the Definition of Insured Events to Adverse Selection Risk Prevention Strategies

II. Types of Life Insurance The variety of life insurance products is constantly increasing. In various countries, the development speed of life insurance has far exceeded that of property insurance, with a thriving business and a large scale. (I) Classification by Insurance Nature In life insurance practice, people customarily classify traditional life insurance into ordinary life insurance and special life insurance according to the nature of the insurance. Ordinary life insurance is insurance for individuals or families, protecting against basic risks such as birth and death. The main types of ordinary life insurance are term life insurance, whole life insurance, and endowment insurance. Special life insurance refers to new types of insurance that have evolved from ordinary life insurance, with special provisions in one or more aspects of the life insurance policy terms. These mainly include annuity insurance, simplified life insurance, group life insurance, and substandard life insurance. Overall, ordinary life insurance has always been at the core of the life insurance business. (II) Classification by Different Insured Events According to the different insured events, life insurance can be divided into three types: death insurance, survival insurance, and endowment insurance. (1) Death insurance refers to life insurance that pays out insurance benefits upon the death of the insured. Depending on the insurance period, death insurance is divided into two basic types: term death insurance and whole life death insurance. (2) Survival insurance is life insurance that pays out insurance benefits upon the insured's survival at the end of the insurance period or upon reaching a certain age. Survival insurance is a type of life insurance with the purpose of savings. (3) Endowment insurance refers to insurance that pays out insurance benefits to the insurer regardless of whether the insured dies during the insurance period or survives at the end of the insurance period. (III) Classification by whether insurance benefits are distributed (1) Participating life insurance, also known as benefit-distributing life insurance, refers to a type of life insurance in which the insurance company distributes a certain proportion of the distributable surplus of the previous year to the policy beneficiaries after the end of each accounting year. (2) Non-participating life insurance, also known as non-profit-distributing life insurance, refers to a type of life insurance in which no operating surplus is distributed after the policyholder pays the premium. (IV) Classification by the risk level of the insured According to the different risk levels of the insured, life insurance can be divided into standard risk insurance and substandard risk insurance. (1) Standard life insurance refers to life insurance where the risk level is acceptable according to the insurance company's standard or normal premium rate. (2) Substandard life insurance, also known as weak life insurance, refers to a form of insurance where the risk level is too high to be covered by the normal premium rate. With the development of life insurance, some innovative products have also emerged, the main types of which are variable life insurance, universal life insurance, and variable universal life insurance.

Section 2 Ordinary Life Insurance I. Death Insurance and its Characteristics (I) Term Death Insurance Term death insurance is a type of life insurance in which the insurer pays a lump sum of insurance money if the insured dies within the period stipulated in the contract. It is also called term life insurance. The characteristics of term life insurance are as follows: (1) The insurance period is fixed. The insurance period can be 5 years, 10 years, 15 years, 20 years or 25 years. Some have a specific age (such as 65 years old or 70 years old) as the insurance period expires. (2) The premium is not refundable. If the insured is still alive when the insurance period expires, the insurer will not assume the liability for payment and will not refund the premiums paid by the policyholder. (3) The nominal premium of term life insurance is generally relatively low. Under the same insured amount and the same insurance conditions, its premium is lower than any other type of life insurance. (4) The low price and high protection of term insurance increase the adverse selection of the insured and are also prone to moral hazard. (5) The adverse selection tendency of the policyholder and the risk selection of the insurer coexist. When people feel or already have physical discomfort, or perceive a certain extreme risk, they often purchase term insurance policies with large sums of money. To ensure that the insured risk is under the insurer's control, insurance companies conduct rigorous selection of policyholders. Common measures include: ① conducting comprehensive and detailed medical examinations for policyholders exceeding a certain sum insured; ② increasing premiums for policyholders with slightly poorer health or those engaged in high-risk work; and ③ refusing to insure those who are older or in poorer health.