Chapter 2 - Protection Planning Needs Flashcards
What is an Insurable Interest?
If the death or illness of Person A would cause Person B and/or their dependants to suffer a financial loss and/or other kinds of loss, Person B would have an insurable interest in Person A.
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What are the 6 scenarios that imply an automatic Insurable Interest?
- Own Life
- Spouse
- Employer and employee
- Partners in Partnership
- Creditor and Debtor
- Mortgagee and Mortgager
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How is IHT levied on PETs and CLTs?
PETs - If Donor dies within 7 years of gifting, and the value of all gifts exceeds NRB, IHT at 40% is charged.
CLTs - If the transfer (when added to other CLTs in the last 7 years) exceeds the NRB, IHT is levied at 20% on any excess over the NRB. If the Donor dies within 7 years, an additional 40% may then be due.
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What is Main Residence NRB?
An additional IHT-free allowance to help parents pass down their main home to their immediate relatives.
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What are the bands for Main Resident NRB?
17/18 - £100,000
18/19 - £125,000
19/20 - £150,000
20/21 - £175,000
Estates over £2,000,000 will lose £1 every £2 over.
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What kinds of companies is Business Protection more suited to?
- Younger businesses that do not yet have cash reserves.
- Businesses of any size where success relies on a key individual.
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What are the 3 categories of Business Protection?
- Key Person Insurance
- Shareholder Protection
- Partnership Protection
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What are the key features of a Life Assurance policy?
- Provides a tax-free lump sum on death either during a set term or for the whole of the individuals life.
- Used by the beneficiaries however they wish.
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What are the key features of an Income Protection (IPI) policy?
- Replaces lost income if policy holder is unable to work.
- Benefits paid monthly after deferred period and are paid until return to work, death, or expiry of the policy.
- Upper limit is typically 60% of gross earnings.
- Paid tax-free (except when paid through an employer).
- Cover is permanent (long-term).
- Premiums influenced by age, occupation and health.
- Considered Permanent Health Insurance (PHI) as the policy cannot be cancelled by the insurer as long as premiums are paid.
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What are the key features of Personal, Accident and Sickness cover (PAS)?
- Short term (cheaper than IPI).
- Regular, fixed amount for 24 month max.
- Pays out when losing a limb or sight.
- Can also pay out a lump sum.
- Annual contract (can be cancelled by insurer).
- Often a “rider” on other policies.
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What are the key features of Mortgage Payment Protection Insurance (MPPI)?
- Short term (cheaper than IPI).
- Benefits linked time mortgage payments and associated bills.
- Pays our regular benefit for 2 year max due to ASU.
- Maximum benefit is 125% of mortgage payments and associated bills.
- Can be cancelled by the insurer.
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What are the key features of Critical Illness Cover (CIC)?
- Pre-determined lump sum on the diagnosis of a specified serious/critical illness or permanent total disability.
- No investment content (usually).
- Must pass survival period before payout.
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What are the key features of Private Medical Insurance (PMI)?
- Private medical care (different levels available).
- Underwritten at inception and previous conditions excluded.
- Treatment for acute, short-term conditions.
- Can be issues subject to a Moratorium.
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What are the key features of Long Term Care (LTC)?
- Covers chronic conditions.
- Immediate needs - taken out at the time medical care is required.
- Pre-funded - bought ‘just in case’ like most other forms of insurance.
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What are the key features of Payment Protection Insurance (PPI)?
- Short-term (cheaper than IPI).
- Payments linked to loan and credit card repayments.
- Pays regular benefit for 2 years max due to ASU
- Can be cancelled by the insurer
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