10 Personal protection Flashcards
When advising on protection, why should the adviser focus on if a will has been made where the client has children?
To assess whether a provision of guardianship has been set up as this isn’t provided under the intestacy rules
How should advisers calculate how much life cover is needed?
Add up capital needs, & long term + short term needs - then deduct existing cover to see shortfall
Name 2 ways the cost of proteciton be brought down
Combining policies
Reducing period of cover needed/ income needed
When arranging protection for clients, what is usually the highest priority item to insure against?
Mortgages
Name 2 ways IP & CIC can be complimentary to eachother in the way they provide cover
IP being able to pay out for conditions not covered by CIC, CIC can help to bridge the financial gap when someone is receiving reduced IP payments & CIC can be used to fund retirement income to take over at retirement age when IP ceases
Name 2 things advisers need to consider when insuyring against disability/ poor health
how long the family could cope with a lack of income, how long an employer could pay a reduced salary for & to identify the income available from the remaining partner to ascertain the cover level
Why should clients not just rely on state benefits / SMI for adequate protection if they become unemployed?
SMI is restricted and will only pay a certain amount of mortgage interest, claimant will have to pay it back
What are two disadvantages of arranging mortgage protection?
– policy may never pay out, redundancy policies can be expensive and only lasts for short time period
How did RDR affect the provision of regulated financial advice?
Under RDR anyone wishing to provide financial advice should have a level 4 qualification & a statement of professional standing
What type of products have an exception to the RDR qualified rule?
pure protection
For pure protection products what information should providers give to clients?
firms still do have to make charges and commission arrangements in relation to protection advice clear to clients
Why do IFAs have to understand the underwriting requirements of different insurers?
underwriting requirements of different insurers as can affect the price of the policy and amount of cover provided
When IFAs are looking at different insurers, what factors should be a priority when it comes to reccomending an insurer?
quality of service and financial strength of the provider should be considered & Free Asset Ratio
What is an insurer’s free asset ratio?
FAR is the surplus an insurer holds over the value of its liabilities as a % of its total assets
How is the FAR calculated?
Assets - liabilities = amount available, then express this as a % of the total assets
Why can FAR not always indicate a strong company?
- FAR depends on valuation of assets/ liabilities – these can be valued in different ways
- Life offices can easily reduce liabilities by re-insuring them
