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Ro5 Finanacial Protection > Life Assurance And Its Many Forms > Flashcards

Life Assurance And Its Many Forms Flashcards

1
Q

Why do people buy life insurance? 3

A

Sold it and don’t know why.
For peace of mind.
Told they had to have it. (Loan etc.)

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2
Q

What is the simplest and cheapest form of life insurance?

A

Term insurance.

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3
Q

Why is decreasing term not good for mortgages?

A

Because mortgage capital falls slowly in the early years and faster later on.

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4
Q

Describe mortgage term insurance

A

Set term and premium.
Decreasing sum shaped to match the repayment of a mortgage.
Slow to begin and fast in the end.

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5
Q

Describe return of primium insurance

A

Sum assured if life assured dies but pays back premium if not.
Term assurance policy and pure-endowment running together.
Very expensive

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6
Q

Describe pension term insurance

A

Offered prior to April 2006
Tax-relief on primiums bellow 5% of insureds income.

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7
Q

What makes a relevant life policy?

A

By employer for employee
Payout capital on death under 75
No surrender value
Paid to life assured, someone nominated by life assured or trustee with discretionary choice of beneficiary.

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8
Q

What are relevant life policies usually offered with?

A

Employer pension schemes, but they’re not linked.

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9
Q

Describe how unit-linked whole of life products work

A

Higher premium than necessary to cover cost early on.
Part of premiums invested into unit funds.
Units canelled or sold to pay for cost of cover.
Excess units in fund form surender value. (Higher of which is paid out.)

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10
Q

What is the difference between the offer and bid price called? How much is it usually? And what is it for?

A

The bid/offer spread
5%
To pay the administration of the fund

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11
Q

Describe maximum cover unit linked

A

Premium set to provide maximum cover for given level of premium.
Usually reviewed after 10 years or yearly after the age of 70.
Less in investment, premium will need to be increased or cover reduced.

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12
Q

What is the usual cover level for life assurance bonds and why?

A

101%
Minimum cover to be tax efficient investment.

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13
Q

What variations of life assurance bonds are there?

A

Unit-linked
Company profit bonuses
Guaranteed income
Guaranteed growth

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14
Q

How is tax handled on an endowment?

A

Corporation tax only.
Paid at the basic rate.
No other tax liability provided conditions are met.

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15
Q

What is the premium limit on endowments?

A

£3600 per annum

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16
Q

What is the name of a 10-year endowment policy?

A

Maximum investment plan.

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17
Q

What are the 4 principles of insurable interest? (Who can be insured by another)

A

A person always has an interest in theirs or their spouses life.

A parent generally never has an interest in their child to prevent harm.

Other cases assessed by virtue of the facts

Insurable interest is required at the outset and may not remain

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18
Q

Which policy is cheaper out of joint life first or second death?

A

Joint life second death

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19
Q

What do some employers use to avoid the tax free allowance?

A

Expected group life schemes (ELG)

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20
Q

What extra forms of information may an insurer use in their underwriting process?

A

Request GP report
Subject access report
Medical examination
Paramedical/nurse undewriting
Additional questionnaires
Additional testing
Tele-underwriting

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21
Q

What is a PMAR covered by?

A

The access to medical reports act

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22
Q

Under the access to medical reports act, what is the life insured’s rights?

A

Right to see a copy of the report before it is sent or at any point in 6 months after.
Right to have any errors corrected and may have notes add notes if they disagree with something.

23
Q

Why is subject access request a preferred method of gaining life insureds medical info?

A

Cheaper because client to accesses notes themselves. Doctor cannot charge for this.

24
Q

Why is the subject access request currently not being used?

A

The Information Commissioner’s office (ICO) had concerns about it.

25
Q

Who pays for a medical examiners report (MER)

A

The insurer.

26
Q

What are the outcomes of underwriting? 4

A

Accept on normal terms- standard premium as life is normal.

Accept but exclude- certain conditions excluded

Accept but rate- charge additional premium (premium loading) because life is abnormal.

Decline

27
Q

What are the ways rating can be done?

A

Ageing up - raising the age rating
Rating up - raising the mortality Rating. (Extra cost of £x£1000 of benefit(per mile))
Liens- reduced sum assured

28
Q

What policy lays out the disclosure rules for underwriting?

A

Consumer insurance (Disclosure and Representations) Act 2012

29
Q

What piece of legislation determines the way data is collected?

A

Data Protection Act 2018: developed previous legislation by giving shape to laws on data processing and enforcement.

The general data protection regulation: asks firms to show how they comply with data processing requirements.

30
Q

What are the 6 rules of GDPR?

A

Processed in a lawful, fair, and transparent way.
Be only collected for a specified purpose.
Be limited to that that is necessary.
Be accurate.
Be stored for no longer than is necessary.
Be processed confidentially and in a way that maintains its integrity.

31
Q

What would happen with natural premium policies?

A

Looked at risk on a year by year basis
Started cheap and ended up prohibitively expensive.

32
Q

Describe level premium

A

Starts off high, but part of the premium can be invested to pay for risk towards end of life.

33
Q

What is an actuaries?

A

A specialist mathematician who determines the correct level of premiums.

34
Q

What is pure premium?

A

The premium needed to cover a claim if no investment was made.

35
Q

What extra costs are built into the premium

A

Costs of running a life office
Profit
Frequency loading

36
Q

What are the benefits for putting something into trust?

A

Avoid probate
IHT

37
Q

What can not be put into trust?

A

ISAs

38
Q

What are the types of trust?

A

Bare/absolute - preset shares (absolutely) and beneficiaries. Cannot be changed.

Flexible/discretionary - choose from set classes and decide benefit.

39
Q

What is the advantage of an MWPA

A

Provides the greatest possible protection from creditors in bankruptcy.

40
Q

What is the disadvantage of an MWPA?

A

Only for spouse or immediate children.

Must be placed into trust on outset.

41
Q

How can a trust avoid being registered with the HMRC?

A

Only Payout benefits on death, crit illness or provide healthcare

42
Q

What is sue?

A

Claim

43
Q

What is assignment by way of mortgage?

A

Transferring collateral for a loan on a temporary basis.

Pays proceeds to the mortgagee (lender) who pay excess to the mortgager (borrower).

When the loan is repaid, policy can be assigned back by equity of redemption.

44
Q

What is absolute assignment?

A

Outright and permanent transfer of policy along with policy documents.

Either sale or gift.

45
Q

What is the assignment to trust?

A

Moves ownership from original person to trustees.

Once something is assigned, it can not be put into trust as ownership has already changed.

46
Q

Where are the rules around assignment found?

A

Policies of Assurance Act 1867

47
Q

What is the principle of notice?

A

The first notified assignment is the one that will be entitled to claim.

Ie not necessarily the first assigned.

48
Q

What are the ways assignments can happen?

A

By deed or Implied (constructive notice)

Life policies must have written assignment.

49
Q

How does a company check to see of death ocured?

A

Death cert (not copy)
Overseas cert
Under presumption of death act 2013 (7 years or less with evidence)

50
Q

How is Proof of age checked?

A

Marriage cert or birth cert

51
Q

What is proof of title?

A

Handing over policy documents and endorsements or a lost policy declaration.

52
Q

How can right to claim be demonstrated?

A

Demonstrating assignment
Grant of probate for wills
Letter of administration for no will

53
Q

When do most policies accept suicide?

A

6 - 12 months after start of policy.

Ro5 Finanacial Protection (11 decks)

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