MOD 4 - R05 Flashcards
What is the main purpose of life assurance?
To provide benefit if the insured person dies during the term of the policy.
What is WOL assurance?
Long-term insurance policy designed to payout a cash lump-sum on death, whenever that occurs.
A common type of WOL policy is unit-linked, what does this mean?
It means your premiums are invested into investment funds. A portion of the money built up in these funds is used each month to pay for the life cover.
Funeral plans are popular with older people. These are often marketed as over 50s plans. What is the average age of buyers?
65
Funeral plans often offer low SA and premiums together with simplified underwriting. True and False?
True.
For funeral plans, during the first ______ or sometimes ______ months, the full SA is often only payable on accidental death. Premiums are usually returned.
12 or 24 months
For funeral plans, after 12 or 24 months, the full SA is payable regardless of the reason of death. Many have premiums limited to a ____________________,
Particular age (e.g. age 90).
When does Term Assurance (TA) pay out?
When death occurs during the term of the policy.
What are the 4 different types of Term Assurance (TA)?
-Level TA
-Increasing TA
-Term 100
-Decreasing TA
What is Level TA?
The SA is fixed throughout the term.
What is Increasing TA?
The SA increases throughout the term either on a fixed basis (i.e. 5% compound each year) or inline with an index (RPI/AWE).
What is Term 100?
TA policy written to age 100. (Alternative to WOL policy).
What is Decreasing TA?
The SA falls each year in a predetermined way, usually to 0 by the end of the term.
Premiums for Decreasing TA will often be payable for a period slightly __________ than the duration the cover.
Shorter.
What is mortgage protection assurance?
Insured for a SA that reduces each year in line the outstanding repayment mortgage at a specified interest rate (DTA).
What is return of premium TA?
Pays out on the death within term but also returns premiums paid if the life assured survives until the end of the policy term. Premiums are likely to be higher. (DTA)
What is gift intervivos TA?
Where the SA falls inline with IHT payable PETs (DTA).
What is Family Income Benefit (FIB)?
Used to protect a family or young children, The SA is expressed as an amount payable each year (£x) from death until a fixed future point. Payments may be level or increasing. (DTA)
TA may have other features such as:
-increasing or increasable
-renewable
-convertible (i.e. to WOL or endowment or combination or both).
Pension TA - prior to April 2006, it was possible for an individual to benefit from tax relief on TA linked to a pension plan (PTA). The amount of cover was restricted by HMRC’s premium limit of ____% of the personal pension contribution applied to buy retirement benefits.
10%
Providers now offer stand-alone relevant life policies (RPL’s). Who are these good for?
Employers.
For relevant life policies, a capital sum is payable and arises on the death in any circumstance of the insured person. What age does the insured person have to be under?
Under the age of 75.
Do relevant life policies have or be able to acquire a surrender value?
No.
Under relevant life policies, no sums or other benefits may be paid under the policy except those prescribed; and any sums payable or other benefits arising under the policy must be paid to or for, or conferred on, or applied at the the direction of:
1) An individual charity beneficially entitled to them; or
2) A trustee or other person acting in a capacity who will secure that the sums or other benefits are paid to/for in favour of an individual or charity beneficially.