Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

R05 - 2023 > 4 - Life Assurance > Flashcards

4 - Life Assurance Flashcards

1
Q

Whole of Life policy

A

Long term insurance policy designed to pay out cash lump sum on death
New policies no surrender value (lower premiums)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Funeral Plans Life Assurance

Who uses it? What does it provide

A

Average age of buyers 65+
12-24 month period generally only payable on accidental death
After 12-24 months full sum payable, regardless of death

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Assurance Bonds

Types of bond - time limit of bonds, what does it cover?

A

Generally no specific maturity date
Only nominal life cover provided

Standard unit linked or with profit bonds
Guaranteed income bonds
Guaranteed growth bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Annual management charge of life assurance funds typically

A

1%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Term Assurance

Definition

A

Pays cash lump sum on death if occurs during term of policy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Types of Term assurance

A
  1. Level Term Assurance - Sum assured is fixed
  2. Increasing Term Assurance - Sum assured increases either on fixed bases or in line with index such as RPI
  3. Decreasing Term Assurance - sum assured falls each year usually to zero by end of term. Premiums will often be payable for a period slightly sohrter than duration of cover

Renewable term assurance - renewed at end of term but will be higher
Convertibile - converting to whole of life or endowment assurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Types of Decreasing Term Assurance

A
  • Mortgage Protection Assurance - sum assured that reduces each year in line with outstanding capital on a capital and interest repayment mortgage at specified interest rate. Decreases in line with linked interest rate assumed.
    Family Income Benefit - sum assured expressed as an amount payable each year from death until a fixed future point. Payment may be increasing (Escalating). A form of decreasing term assurance - total instalments paid out early is greater than if claim is made later. Rate of interest is ued to reduce amount that would have been paid over remainder of term due to early payment.
    Gift inter vivos term assurance - sum assured falls in line with any inheritance tax payable on potentially exempt transfers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Return of Premium term assurance

A

Pays out on death like other types of term assurance. With the addition of premiums paid if life assured survives until end of policy term.

Tends to be term assurance with endowment equal to premiums paid. (Genarlly higher premiums)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Pension term assurance

Date it was removed - what did it do

A

Before 2006 - tax relief on term assurance linked to pension plan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Relevant Life policies

Conditions- when is it paid, surrender value. How are the sums payable?

A

Normally written in trust for benefit for employee dependents
Payable on death of insured person under 75
Does not have surrender value

Sums payable or other benefits must be paid to
- Charity or individually beneficially entitled to individual
- Trustee or other person acting in fiduciariy capcaity who will secure sum.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Multiplans (Menu plans)

A

Single policies that incorporate different types of cover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Need for life cover

examples

A
  • Mortgage
  • Business liabilities
  • Funeral
  • IHT
  • Outstanding loans
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Determinants of type of life cover

A
  • Who needs to be insured (joint or single life basis)
  • How much life cover needed
  • Term over which cover will be required
  • Type of benefit needed - capital or income
  • Who will receive benefit
  • Should policy be written in trust?
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Life Assurance Policy set up

A

Own Life
- Benefits individual themselves (Endowment policy) or write policy in trust (benefit dependents)

Life of Another
- Life assured and insured (owner) are two different people and client has an insurable interest on life of second party
- Also used in business to purchase survinving business co-owners assets (business assurance)

Joint life First death
- Suitable if life cover is needed on lives of both partners. Pay out if one partner dies, policy pays other partner

Joint life second death/ joint life last survivor
- Suitable for IHT liability
- Should be effected under trust so sum assured is received free of IHT and Probate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Types of need

Capital and Income needs (Assurance Policy)

A

Capital needs - mortgage/loans payment, emergency funds, IHT
Income - Support family after death of breadwinner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Types of need

Short- long term needs (Assurance Policy)

A

Short term capital - repayment of five year loans
Short term income - support education of children (limited duration)
Long term need - income required to support dependent relative

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

EGL (Excepted Group Life policies)

A

To mitigate lifetime allowance limit.

Lifetime allowance limit is unlimited from 2023/2024
Was 1,073,100 in 2022/2023

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Flexible Life Assurance Policy

A

Whole of Life plan
Add convertibility feature to term assurance (can change to WOL without underwriting of persons state of health)
Add renweable policy - so cover can be guaranteed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How can insurers predict claims for life assurance

A

Mortality tables

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Natural Premium

Definition

A

Each year will cost a little bit more than the next - more premium to pay
Was not as effective - as premiums charged were too high - unfit people did not take, and mortality rates increased

Replaced by Level premium system

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Level Premium System

Definition and insurance principle

A

Level premium charged through duration of policy
**Premium higher in early years **form reserve to pay heavier claims in later years (When premium is lower than risk associated)

Insurance Principle - claims at early date subsidised by policy where claims occur at later date
1st year - Few deaths, not much total premium paid out in claims - balance goes in reserve for future claims
2nd Year - more deaths than first - slightly lower proportion goes in reserve
3rd year - Each successive year - claims csot will be higher and amount going intoreserve will be slightly lower. Reserve grows until cost of one year claimants match premiums. Reserve eventually used up.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Pure Premium

Definition

A

Premium required to pay claims for that year or for each year under level premium system.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Interest on Premiums

A

Pure premiums - money invested as soon as its paid
Natural Premium - invested for part of year until claims made (small interest)
Level Premium - Reserve is invested, can have substantial interest if life assurance is long policy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Premium loading fees

examples

A

Salaries
Comission paid
Cost of office building
Regulatory cost
Underwriting cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Frequency Loading

A

If paid more frequently, higher charges. Discount for paying annually for example.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Trust

Three parties

A

Settlor
Trustee
Beneficiaries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Trust for gifts (Exemptions)

A

Gifts totalling up to £3,000 a year
Regular gifts from income that do not affect the donor’s standard of living

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Married Women Property Act (1882)

Pros and cons (3)

A
  1. Relative simple
  2. Greatest protection against creditors
  3. Lack of flexibility about beneficiaires - limited to children and spouse
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Discretionary Trusts

A

Changed flexible interest in possession trusts
Assets could be regarded as creating chargeable lifetime transfers
Could be subject to periodic change every 10 years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What are the differences in tax with discretionary trusts and flexible interest in possession trusts

A

None since Finance Act 2006

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Discretionary trust what does it allow for trustees to do?

A

Allows trustees to decide who should benefit from trust proceeds without restriction. No potential beneficiary has an interest in trust capital or income until trustee says so

32
Q

Can financial advisors be trustees?

A

NBot usually due to potential personal liability for decisions and conflicts of interests

33
Q

What policies can be written in trusts?

A

Existing life assurance not already in trust or assigned to third party
New policy unless assigned to third party
Any life assurance written part of pension scheme usually under master discretionary trust

34
Q

Who do individuals have to register with when creating trust

A

HMRC

35
Q

What is the time frame trustee have to distribute funds before registration becomes required to HMRC

A

2 years

36
Q

What is a typical underwriting application consist of

A

Details including age
Current stae of health
Medical history
Occupation and any hazardous pursuits
Lifestyle

37
Q

What is a moratorium?

A

Usually for short-term policies.** It excludes any condition** for treatment for applicant in **last 5 years. **Conditions will remain excluded for two years if no further treatment is required. Any further tretment exclusion will run for another two years after subsequent treatment.

38
Q

What is continuing personal medical exclusions?

A

Underwriter adopts underwriting decisions by previous insurer and accepts risk. Typically to gain more applicants without need of full underwriting application.

39
Q

Tele-underwriting benefits

A

Shorter Application form
Faster underwriting (less evidence from doctors)
Less non-disclosure

40
Q

Two types of Tele-underwriting

A

Big T tele-underiting: few questions on form instead asked over phone
Little t underwriting only supplemntary questions asked, most question asked on application form

41
Q

Who pays for additional medical charges with tele-underwriting

A

The Insurer

42
Q

Who should GDPR report to in data breach

A

Information Commision officer

42
Q

What were insurance generally provided on the principle of

A

utmost good faith

43
Q

Nature of non-disclosure

A

Reasonable - normally claim will be in full despite not all material being disclosed if customer was honest
Careless - Proportionate remedy will apply
Deliberate or reckless - insurance will be void

44
Q

Agent of consumer vs Agent of insurer with consumer disclosure

A

If agent of consumer makes reckless decision without customer knowledge , insurer can avoid policy
If agent of insurer makes reckless decision, insurer is bound by action and cannot avoid policy

45
Q

Terminal illness benefit

A

Additional benefit added to term or whole of life policy

Sum assured is normally payable if life expectancy is less than 12 months

46
Q

Various types of assignments

A

Absolute Assignment
Assignments by way of mortgage
Assignments by operation of law on bankruptcy
Assignments to trustees

47
Q

Joint ownership

A

Tenancy in common
Joint tenancy

48
Q

Policies of Assurance Act 1867

A

Allows any person entitled to life policy has legal power to sue in own name to recover monies payable

49
Q

What kind of assignment is notice giving in Policies of Assurance Act

A

Assignment -> an assignee who gives notice to assurers can claim precedence over all othe interests where notice have not been given, even if date of assignment is later than other interests

Priority of notice regulates priority of claim

50
Q

Priority rule [what can be done] e.g. charges, how long notice

A

Assignee must give notice of assignment asap
Assurance company must state what notice of assignment can be given
Assurance company must on request acknowledge receipt in writing of notice of assignment
Assurer can charge a fee not exceed £0.25 for acknowledging receipt of notice (such acknowledgement is conclusive evidence of receipt of notice)

51
Q

Definition of Assignment

A

Transfer of ownership from one person to another.

52
Q

Constructive notice

A

**Usually Express although can be implied. **Can also be implied from correspondance on office files, even if no formal notice has been served.

53
Q

Newman vs Newman (1885)

A

Notice does not need to be given in any form

54
Q

Effect of giving notice

(4)

A

Give assignee right to sue in own name
Bind insurers so if they pay other claimant, will be held responsible
Gain priority of claim over early assignees who failed to give notice
Preserve priority of claim ovser subsequent assignees

55
Q

Absolute Assignments

A

Complete transfer of policy - by sale or gift

56
Q

What are the conditions for assignment of life policy

A

**Must be in writing **not mere delivery
**Deed of assignment **(can be done by interchange of letters offering and accepting sale with proof of payment
Must be dated during currency of policy and during lifetime of life assured

57
Q

Deed of Assignment

A

Assignor should be person legally entitled to policy prior to agreement
Asignee should be person claiming
Signature of assignor must match previous signatures
Dates should be checked to see if its in currency of policy

58
Q

What is Equity of redemption

A

Distinguishes a mortgage from absolute assignment

Once loan is paid off, asset used as mortgage is returned to borrower

59
Q

What is it called when an office gives a loan on security of one of its own policies?

A

Mortgage deed

60
Q

Who are life policies often mortgaged to?

A

Banks, building socieities and life office themeselves

61
Q

Claims under mortgage policy

A

If more than one, priority of claim under doctrine of notice

62
Q

If there was a claim on a mortgaged policy, who would the life office pay – the mortgagee or the mortgagor?

A

Mortgagee

63
Q

What are the two types of claims

A

Maturity and Death

64
Q

What is the period that life office will tell policyholder before maturity claim of endowment policy

A

1-2 months before maturity date

65
Q

Who can sign the discharge of maturity claim

A

Only person with legal title to the policy

66
Q

What is required when death claims occur

A

Proof of death
Proof of title
Proof of age
Signature of legal claimant

67
Q

What is needed for proof of death

A

Only Original death certificates not photocopied

68
Q

Presumption of death

A

Seven years absent

Or swear to death if court allows (missing person)

69
Q

Can life office see cause of death

A

Yes as long as office has written authority of deceased personal representatives - usually to see if life assured died from something outside cover

70
Q

How much would life office pay claims without grants

A

£5,000 where value of estate is less than £10,000 -> generally small claims
Often only if provided payment goes to surviving spouse

71
Q

What happens if two lives died under joint life policy?

A

Senior dies first.
Payment made to younger person estate

72
Q

In suicide, who burdens the responsibility to find if death is suicide

A

Life office

73
Q

What happens if a policy is lost

A

Claimant executes statutory declaration before a magistrate or solicitor

74
Q

What do FCA require life office to make sure endowment policies who seek surrender values

A

Made aware of other options available - they may be able to sell policyon traded market

75
Q
A

R05 - 2023 (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions