Chapter 4 Flashcards
What are the main policy types?
- whole life assurance
- endownments
- term assurance
What is increasing term assurance?
-the sum assured increases throughout the term
What is decreasing term assurance?
-the sum assured falls each year in a predetermined way, usually to 0 by the end of the term
Give 3 examples of decreasing term assurance
- mortgage protection insurance
- family income benefit (FIB)
- gift inter vivo term assurance
Why might a FIB policy be cheaper than a level term assurance for the same initial sum assured?
because the sum assured on the FIB policy will decrease over time
What is usually the best type of protection contract and basis of cover to protect a joint payment mortgage?
-decreasing term assurance, joint life, first death
What is a trust?
-a legal arrangement under which one party (policy owner) creates a legal framework (the trust) to hold assets (the trust property) for third parties (the beneficiary). The trust is run or managed by trustees.
Name some advantages of using a trust.
- beneficiaries can receive the policy without having to wait for probate
- the proceeds may not be subject to IHT
- the trust can ensure the benefits of the policy are distributed according to the settlors wishes
- may be better protection against creditors if the settlor goes bankrupt
What is the underwriting process?
-a series of questions linked to personal details /medical details
What are the 3 categories for non-disclosure to insurers?
- reasonable
- careless
- deliberate or reckless
What is the difference between a joint tenancy and a tenancy in common?
Joint tenancy - on death it’s passed to the other tenant. Tenancy in common, its passed to the estate.
Name the two types of claims
- maturity
- death
For what purpose are joint life, second death policies used?
IHT planning
What is a convertible term assurance?
- a term assurance with option to convert to an endowment or whole life policy with no further medical
