2 - Financial Protection Needs Flashcards
What is Life Assurance
How is it paid? What conditions must individual satisfy
Provides a lump sum on death of life assured
What is Income Protection Insurance
How is it paid? What conditions must individual satisfy
Provide a regular income when insured is unable to work due to accident or illness
What is Critical Illness Cover (CIC)
How is it paid? What conditions must individual satisfy
Provide a lump sum if if insured is diagnosed as suffering from one of listed illnesses
What is Long term Care Insurance (LTCI)
How is it paid? What conditions must individual satisfy
Provide cover twoards the costs of long-term care due to old age or infirmity
What is Payment Protection Insurance (PPI)
How is it paid? What conditions must individual satisfy
Provide a regular income like MPPI, to cover loan or credit card repayments if insured is unable to work due to illness, accident, redudancy or unemployment
Personal accident and sickness insurance (PAS)
How is it paid? What conditions must individual satisfy
Providing a lump sum or income benefits if the insured suffers an accident or falls ill.
Accident, sickness and unemployment insurance (ASU)
How is it paid? What conditions must individual satisfy
Providing a lump sum or income benefits if the insured suffers an accident or is unable to work due to sickness, redundancy or unemployment.
Private medical insurance (PMI)
How is it paid? What conditions must individual satisfy
Providing cover towards the costs of private medical treatment.
Health cash plans
How is it paid? What conditions must individual satisfy
Providing small lump sum benefits for a number of medical treatments or on a per day basis for a hospital stay.
What is a menu plan?
Combination of different types of cover provided by one single contract
What are the main areas in need for protection
(5)
- Health, incapcaity or accident
- Income, mortgage or debt
- Death
- Asset protection
- Business protection
Why does an individual need cover for health?
What cover?
Income protection - Anyone who is financially dependent on earnings
Those who cannot return to work after critical illness - may require long term care -state benefits may not cover (PIP, Attendance Allowance).
What is a policy used to repay loan of mortgage
Life assurance policy
What type of protection would individuals take for death
Life Assurance
What is the rate of Nil Rate band
£325,000
What is a Chargeable Lifetime transfers (CLTs)
If individual makes lifetime gifts (other than absolute or disabled trust) and such transfers over a seven year period exceeds nil-rate band there is an immediate 20% tax of excess. If donor dies within seven or 14 years, further tax may be due.
What is Key person insurance
can take the form of life assurance, critical illness or income protection. The protection need will depend on the nature of the individual’s role within the business.
If a couple gets divorced is there any effect on cover?
- Policyholder
- Life assured
- Trustee
- Beneficiary
Will continue unless court orders otherwise
If a divorce occurs and one person has a critical illness since the assurance had been taken place what happens?
In this case, neither of the split policies would require any underwriting, as the life office will treat both policies as having been effected on the date the original policy commenced, but there might be a need for fresh cover. For example, the court may order one spouse to pay maintenance to the other, but this would cease if the former died, so the latter may wish to protect themselves by insuring their life for an appropriate sum.
What will be necessary to complete before insurance is required
Know your customer - Assets and liabilities of customer and financial dependents.
Employee benefits (protection cover)
- Sick pay/income replacement
- Life cover (death in service)
- Critical illness cover
- Pension arrangements
- Private medical insurance
What is advantage for employee for employer to provide protection
Employer bears cost. Underwriters provide “free cover” (amount of insured benefit allowed without medical underwriting)
Where is there a benefit in kind tax charge when employer pays employee?
Income replacement benefits, (income tax and National insurance)
Critical illness cover and private medical insurance - taxable as benefit in kind to employee and benefit is paid free of tax to individual
Where there is no benefit in kind tax charge for employee
Employer provides life assurance (death in service) or continue to pay a proportion of pre-disability income.
