Financial Protection And Planning

Question 1

What type of life insurance is usually best to protect a mortgage?

Why would we not normally use the other type of life insurance to protect a mortgage?

Answer 1

Term insurance - the need is to provide cover for the term of the mortgage. There is no need to build a cash value within the plan. The exception is an endowment mortgage which pays off the mortgage in the event of death or at the end of the term.

There is no technical reason why whole of life assurance could not be used. The practical reasons why it is not used -

It provides whole of life cover so is effectively open ended. While a mortgage is fixed term. Due to being open ended it is far more expensive as the insurers risk is harder to define.

Whole of life plans build a cash value which can be surrendered early. It adds costs of the policy and not essential for mortgage cover.

Question 2

Protection for dependents in the event of death or illness is likely to be crucial at which life stage?

A) young, single person.

B) younger couple with children.

C) middle aged couple, children have left home.

Answer 2

B) younger couple with children.

Question 3

PMI may become a priority at which life stage?

A) young, single person

B) younger couple with children

C) middle aged couple, children have left home

Answer 3

C) middle aged couple, children have left home

Question 4

Financial protection through life assurance is unlikely to be a priority for which if the following?

A) young, single person

B) younger couple with children

C) middle aged couple, children have left home

Answer 4

A) young, single person

Question 5

“I find income protection policies hard to understand”

This customer is voicing which reason for under insurance

A) it won’t happen to me

B) product complexity

C) state provision

Answer 5

B) product complexity

Question 6

If a mortgaged property owner dies, the survivor might end up with the whole mortgage while owning only half the value of the property if it were registered:

A) as tenants in common

B) as a joint tenancy

C) in the deceaseds sole name

Answer 6

A) as tenants in common

Question 7

If a person has an amount of protection already in place, they are likely to have no shortfall. True or false?

Answer 7

False

A shortfall can still be calculated in the difference between the amount of protection needed if the event happened and the amount of protection they currently have.

Question 8

Protection funds may be used to meet what liabilities without selling the property.

Answer 8

IHT

Inheritance tax.

Question 9

The shortfall in protection cover can be expressed as the difference between the amount of protection needed if the risk occurred and:

A) amount of protection the client desires

B) the amount of protection the client currently has

C) amount of protection the client will have in 5 years

Answer 9

B) the amount of protection the client currently has

Question 10

The mortgage will recommend and arrange life cover. True of false?

Answer 10

False

Question 11

Which if the following protection needs is generally prioritised highest?

A) protection of dependents from the effects of loss of income in the event of premature death

B) protection of income for a time later in life when the client does not want to work

C) protecting self and dependents from the effects of losing the ability to earn an income in the long term

Answer 11

A) protection of dependents from the effects of loss of income in the event of premature deaths