4 Life assurance Flashcards by Peter Ffoulkes

What is the purpose of holding life assurance in a bond?

For investment purposes

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What is a standard unit linked or with profit bond?

Offers a return based on underying performance of funds

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What is a Guaranteed income bond?

Guarantees level of income to the investor

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What is a guaranteed growth bond?

Guarantees level of growth for the policyholder

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what is family income benefit and why would someone use a decreasing term assurance policy to cover this?

Cover used to protect a family with young children, usually a set amount paid out until death each year.

As kids get older, less cover is required over time

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What is Return of premium term assurance?

Pays out on death, but also pays back premiums if the assured survives until the end of the period

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What tax relief could indivuduals benefit from pre 2006 linked to a pension plan?

Pension Term assurance

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When is the tax relief on Pension term assurance lost?

If the policy benefits are increased or the term extended

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What is a Relevant Life Policy?

A standalone policy designed to meet Income tax regulation

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List 2 criteria for a policy to be a Relevant Life Policy

The amount is payable for the insured person when they’re under 75
No surrender value
No benefits paid except those prescribed

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Who usuaully arranges a relevant life policy?

The employer and written in to trust for employee’s dependants

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What is a multiplan/ menu plan?

Plans which incorporate different types of cover in to 1 plan

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What are some benefits of multiplans?

lower charges, less overlap of cover & more flexibility

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under a multiplan can general & life insurance policies be combined?

Yes if the insurer can write general & life business, if not needs to be seperate

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Name 3 reasons for needing life insurance

To provide cover if have dependants on death of a parents
To cover a mortgage
To provide an income for surviving spouse

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when should a life assurance policy be arranged on a life of another basis?

Where the insured has an insurable interest in the life of another party

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When an adviser is reccomending the amount of term & cover needed for a life assurance policy, what needs have to be taken in to account?

Capital & income needs – need capital for repayment of mortgage etc, income to support family
Short & long term needs - short term – repaying short term loan, long term income to support dependants

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if a client is part of an expected group life policy (EGLP), what is the max level of cover available?

There is no max

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How can clients add flexibility to their life assurance policies?

add a convertability feature to term assurance to change it to WOL
Make the policy renewable so cover can be guaranteed/ extended

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How can clients increase their amount assured under their life assurance policies?

index linking the policy to RPI or earnings, or selecting a policy which guarantees to increase if certain events happen (guaranteed insurability option)

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What do life assurance companies use to calculte the amount of deaths and consequenetly the amount of claims in a given year?

Mortality tables

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How does an actuary work out the pure premium to charge a policyholder for the year?

Mortality rate for age x sum assured in policy

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What are natural premiums?

Premiums which rise naturally as the sum assured gets older

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What is a level premium?

Where the premium is the same throughout the length of the policy

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What are some common loadings life offices have to take in to account to arrive at the premium chargeable?

staff salaries, commission to 3rd parties, costs of office buildings

What is frequency loading?

some life offices impose frequency loading on to the cost of the premiums if they are not paid all at once and instead in instalments

What are 2 advantages of writing a life policy in to trusts?

- Proceeds can be distributed quicker - Policies not subject to IHT

What type of trust is a Married Women’s Property Act (MWPA) trust?

A simple, absolute trust

What are some of the benefits of using MWPA trusts?

Simple to set up & use Most protection against creditors

Why were most trusts written in to flexible interest in possession trusts until 2006?

Introduction of finance act 2006, used to have better IHt treatment pre this act

Why are discretionary trusts now used more than flexible interest in possession trusts nowadays?

Interest in possession trusts now no longer have advantageous tax treatment

Name 2 policies which can be written in to trust

- Any existing life assurance policy not already written in to trust - A new policy, unless it is going to be assigned to a 3rd party - Life assurance written as part of a pension scheme

What is an example of an exmption where a life policy would not have to be registered with the Trust Registration service?

- They pay out on death or critical illness of person, or to meet healthcare costs of person assured

What does it mean when a policy is written on moratorium basis and to which types of policy would this usually apply?

To short term cover policies, means exculiding certain conditions applicant has had in last couple of years

Name 2 pieces of evidence underwriters can request to assess a policy

- GP report - Health questionnaires - Health screenings

Can tele underwriting result in more or less non disclosure?

Less

What are the 2 types of tele underwriting and what is the difference between the 2?

a) big ‘T; - fewer questions on form and more on phone, b) little ‘T’ – most on form and only supplementary questions in call –

Where additional medical information is required by underwriters, who would pay for this?

The insurance co

Which two pieces of legislation govern data protection laws in the UK?

GDPR & DPA 2018

What is personal data?

Any info a living individual can be identified by

What are some examples of sensitive data?

race, gender, genetic data

Who is the onus on to ask the right questions when a customer is making an insurance application?

The insurer

When would an insurance be voided on the basis of non-disclosure?

If the customer was deliberately misleading or reckless

What is a terminal illness benefit?

A benefit where the sum assured is suffering from a terminal condition with less than 12 months to live

If the assured lives beyond the expiry date and has been given a terminal illness benefit, is it refundable?

What is an advantage and disadvantage of the terminal illness benefit/

Advantage is it gives terminal assured money to live out rest of their days in full, but disadvantage is that assured may be too unwell to take advantage of payment and then they would have no cover left for dependants

What is the tax treatment of the terminal illness benefit?

Not subject to income tax but balance left over would form part of the estate which could be subject to IHT

What is an assignment?

A transfer of ownership from one person to another

What are two differen types of assignments?

- Assignments by way of mortgage - Assignment to trustees - Absolute assignments (gifts/ sales)

What is the difference between a joint tenancy and a tenancy in common?

Joint tenancy - if joint tenant dies then it passes automatically to survivor Tenancy in common - if dies then passes to estate

What is an assignment?

Transfer of ownership from one person to another

Which act regulates the assignment of life policies?

Policies of Assurance Act 1867

In general, what are the two types of claims life offices receive?

Death & Maturity

For maturity claims who does the life office have to deal with?

The person with legal power to sue

For a death claim, what does a life office need to receive in order to pay out the policy?

proof of death & age, date of death

Why do life offices need an original copy of the death certificate in order to pay out?

To protect against fraudulent claims

What measures mght a life office go to to confirm death if a death has happened abroad?

need a death certificate from that country and may have to issue a death abroad questionnaire or hire an investigator to confirm the findings

When can death be proven for presumption of death claims e.g when couldnt recover the body?

Can be proved by circumstancial evidence, then can get a death certificate

If the life assured has dissapeared and been absent, how long must a claimant wait to make a claim?

7 years

Why might the cause of death be relevant in a death claim?

if it’s not listed in the policy or a condition wasn’t disclosed then the office may not have to pay out

What does The Access to Health Records Act 1990 allow life offices to do with regards to death claims?

allows life offices to look at medical records if the office has the authority of the deceased’s representatives to do this

When proving proof of title, what grants could the executors obtain to prove this?

Grant of probate Grant of letters of administration

What is the difference between Grant of probate Grant of letters of administration?

grant of probate (where a will naming executors was left) a grant of letters of administration (where there was no valid will left)

If two lives assured died at the same time and there was no evidence to show who died first, which estate would the payment be made to?

The estate of the youngest assured

How would life offices obtain proof of age in a death claim ?

With a birth dertificate

On death if the life assured turned out to be older than stated in the policy, how would this affect the payout?

If the life assured was older then would retrospectively reduce the sum assured

On death if the life assured turned out to be younger than stated in the policy, how would this affect the payout?

if younger then would calculate the premiums and refund the excess of the premiums paid

When would a life office pay out for a suicide claim?

may payout the assured lacked mental capacity or depending on the wording of a suicide clause

When might a life office pay out for a claim arising from claim from a policyholder's own unlawful act ?

If they lacked mental capacity or for unintentional manslaughter