Chapter 4- Life Assurance

Question 1

Does WOL usually have a surrender value

Answer 1

No

Question 2

What is unit linked WOL

Answer 2

A mix of life assurance and investment

Question 3

How does unit linked WOL work

Answer 3

The level of cover determines the scope for value growth. Premiums are set on an assumed investment return, allocated as units and cancelled each month to cover the life over

Question 4

How often are unit linked WOL policies usually reviewed

Answer 4

Every 10 years

Question 5

What is the difference between a max cover unit linked WOL and a standard cover WOL

Answer 5

Max cover have set premiums for 5-10 years then increase with age, but standard cover set the premium so it needn’t increase if the investment performs as expected

Question 6

What is a bond

Answer 6

An insurance contract designed specifically for investment

Question 7

How are bonds usually written

Answer 7

Non-qualifying single premium WOL contracts

Question 8

What are the 3 different types of bond

Answer 8

Unit linked
Guaranteed income
Guaranteed growth

Question 9

What is a term 100 term assurance policy

Answer 9

Written to age 100

Question 10

How does a return of premium term insurance work

Answer 10

It is effectively an endowment equal to the premium value to return value of premiums on maturity if still alive

Question 11

What is family income benefit

Answer 11

Terms assurance where sum assured is expressed as £X payable yearly until Y

Question 12

What are the conditions that need to be met for a relevant life policy

Answer 12

Capital sum payable on death of a person below age 75
No surrender value
No sums or benefits paid except those prescribed
Trustee will pay to an individual or charity

Question 13

Hat are multi plans aka

Answer 13

Menu plans or universal plans

Question 14

What are multi plans

Answer 14

Usually combine different types of cover, offering lower charges, less overlap and more flexibility

Question 15

What are the main potential reasons for needing life cover

Answer 15

Mortgage/loans
Income for surviving spouse
Cost of children
Funeral costs
IHT 
Business liability

Question 16

What needs to be assessed to determinamount of cover needed

Answer 16

Capital vs income needs

Short and long term needs

Question 17

What are the 3 ways to increase insurance levels to keep up with inflation and earnings increases

Answer 17

Index linking
Guaranteed insurability option where sa can be increased at certain life events
Regularly review the clients need for cover

Question 18

What is the natural premium

Answer 18

Use mortality tables to determine mortality rate at any given age, multiply by SA to get premium.this increases each year as people age

Question 19

Why are natural premiums not very. Successful

Answer 19

Cost of cover. Increases later in life when needed most

Question 20

How do level premiums work

Answer 20

Higher premium at the start creates a deserve based on calculations on groups of policies of similar age, sum assured and divide by number in group for sing,e premium

Question 21

What is the pattern for the level of reserve created with alevel premium system

Answer 21

For the group it increases, peaks and then steadily falls to nil

Question 22

How do life offices gain interest on premiums

Answer 22

Invest them

Question 23

What are the major loadings on a life policy

Answer 23

Cover costs and expenses
Safety margin
Profit margin

Question 24

What is frequency loading

Answer 24

Added to premiums paid monthly as there is less to invest

Question 25

What are the advantages of putting life assurance in a trust

Answer 25

You do not need to wait for probate It may not be subject to IHT ensures benefits are distributed according to wishes Protection against creditors in the event of bankruptcy

Question 26

Which type of trust is most commonly used for life assurance

Answer 26

Discretion as you can decide who should benefit without restriction

Question 27

What evidence may be required for underwriting

Answer 27

``` GP report Paramedical Medical examination Additional health questionnaire Health screening ```

Question 28

Which act sets out the rules regarding non disclosure

Answer 28

Consumer insurance (disclosure and representations) act 2012

Question 29

Under what circumstances of non disclosure can an insurer void a contract for non disclosure.

Answer 29

Where there has been deliberate or reckless behaviour

Question 30

If an agent fails to disclose, and they're an agent of the insurer can the insurer void the contract

Answer 30

No

Question 31

What is terminal illness benefit

Answer 31

Often added to WOL and sa is paid upon diagnosis of advanced or rapidly progressing incurable and disabling terminal illness at which point the policy ceases

Question 32

What is an assignment

Answer 32

Transfer of ownership from one person to another

Question 33

Which act regulates assignment of life policies

Answer 33

Policies of assurance act 1876

Question 34

What is needed for an assignee to claim on the assigned policy in their own name

Answer 34

Production of policy document and deed of assignment

Question 35

What does section 3 of the policies of assurance act state in relation to notice

Answer 35

Priority of notice regulates priority of claim

Question 36

What is the effect of assignment

Answer 36

The assigned can surrender, alter or continue the policy and raise a loan on its security

Question 37

What are the usual conditions for a claim to be made

Answer 37

``` Payment of all premiums Production of the policy Proof of title Proof of death Proof of age on a death claim ```

Question 38

If a policy matures in trust what is needed to release the benefit

Answer 38

All trustee must sign the discharge

Question 39

Can a copy of a death certificate be used to prove death

Answer 39

No must be original

Question 40

How long must someone have disappeared for before presumption of death is made

Answer 40

7 years

Question 41

If both owners of a joint life policy die in the same incident if they can't tell who died first, how do they decide who died first for title purposes

Answer 41

The law of property act 1925 provides that they sill be presumed to have died in order of seniority

Question 42

What is needed if policies are lost

Answer 42

Execute a statutory declaration setting out the circumstances of loss and stating that the policy has not been assigned or changed