Basic Product Types Flashcards
What would a joint life first death policy be used for and when would a joint life second death policy be suitable?
1st death - To pay off mortgage
2nd death - IHT Planning
Which term insurance product would best suit a client that wants to ensure that their life cover maintains its value in real terms against inflation?
Increasing Term Insurance
What is the typical benefit limit on IP?
50% - 60% of the insureds average earnings in the months in the year prior to the incapacity.
When does a whole of life pay out?
When the insured dies
When does an endowment policy pay out?
On maturity or upon death of the insured
What sort of trust is used for a key person policy?
A trust is not used. It is a life of another contract with the company as the owner and the key person as the life insured.
What is required by law for a life of another policy?
To have insurable interest.
What is a convertible term insurance?
A Term Insurance with the option to convert to a WOL or Endowment without evidence of health.
What is a family income benefit?
Pays out upon death of the life insured, a regular monthly or yearly sum for the balance of the term of the policy.
What is a low-start endowment?
A type of low cost endowment where the premiums start at a low level and rise gradually to the full premium (over a number of years)
What is a single premium unit linked whole of life policy often called?
An investment bond
What is critical illness cover?
Pays out upon one of the critical illnesses specified in the policy.
What advantage does a cross option agreement have over a buy and sell agreement in partnership protection?
It preserves IHT benefit relief.
What is income protection?
Pays out a regular income where the policy holder is unable to work due to sickness or accident.
What type of insurance is personal accident and sickness (PAS) under the regulatory rules?
General or short term insurance
Give an example of a key person
An employee who is vital to the profitability of the business. Eg: Marketing executive with valuable contacts or an inventor of products.
What is a level term insurance?
It has a sum insured which is fixed throughout the term.
What is a renewable term insurance?
It has the option at the end of the term to take out a new policy without further evidence of health.
What is convertible term insurance? (CTA)
It has an option to convert at any point from a term insurance to a whole of life or endowment policy. Without further evidence of health.
What is a decreasing term insurance?(DTA)
It has a sum insured which decreasing each year by a stated amount, decreasing to nil at the end of the term. Normally used to cover a reducing debt ( repayment mortgage)
What is an increasing term insurance?
It has a sum insured that increases over the term of the policy without any further evidence of health - either on a fixed basis (for Eg - 5% compound each year) or linked to inflation. Whichever method is used the premium will be increased to cover the cost of the increased risk the life office is accepting.
If a life office allows policy loans, on what value would the loan be based?
Current sum assured
Why might a property fund include a condition that can delay surrenders or switches?
Property is an illiquid asset
Terminal illness benefit does not apply for some policies in the last
18 months of the contract
