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R05 > Questions > Flashcards

Questions Flashcards

1
Q

The industry looks at PMI in terms of impact and frequency as?

A

Low frequency. High impact

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2
Q

Morality has increased over the last 50 years. What factors have least impacted the improvement?

A

A change in working habits

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3
Q

Why are policies being taken out for older lives?

A

People are working longer and therefore having mortgages longer

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4
Q

Mark died. In his will left 1million to his wife what IHT is payable?

A

Nil

2nd death will incur IHT

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5
Q

Statutory sick pay requirements

A 
Earns more than £112 a week
More than 4 days sick
Paid by employer
Pay class 1 NI
Taxable as wages & pay ni
28 weeks only > employment support
Not means tested
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6
Q

Self employed sick is most likely to claim?

A

Employment and support allowance

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7
Q

Redundancy benefit pays after?

A

39 weeks

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8
Q

Standard cover?
Guaranteed cover?
Maximum cover?

A

Standard - premium level as long as underlying investment preforms.
Guaranteed - set premiums will never change. No investment element
Maximum cover - premium set for period then reviews. Likely to increase premium or reduce benefit. small surrender value

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9
Q

Pure premium calculation is?

A

Sum assured x mortality rate

E.g.
£80,000 premium. Mortality rate of 0.0024

Pure premium is £192 (annual)

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10
Q

Health screenings usually include?

A

Non invasive tests. Saliva swabs. Hair samples. Urine tests

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11
Q

Terminal illness. Someone must have life expectancy of …. to pay out?

A

Less than 12 months

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12
Q

Val & Mark own a house together joint tenancy. Val dies what happens?

A

Mark would automatically own all of property

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13
Q

Tax treatment of life policies is?

  • qualifying?
  • non qualifying?
A

No tax on qualifying

Higher rate tax on non qualifying on gain

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14
Q

Endowment qualifying rules about premium& age and sum assured?

A

55 - to qualify must be min 75% premiums paid in

If policy taken out Over 55 reduces every year by 2%

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15
Q

How far can you backdate a policy and still be qualifying?

A

3 months

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16
Q

What’s IHT liability if Pete left Daniel his whole estate of £750,000

A

£170,000 (40% of taxable estate minus nil rate band)

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17
Q

Ref wishes to gift and endowment policy to his daughter. Using annual gift exemption in order to avoid IHT what’s the max premium he can pay per month?

A

£250 (£3000 per year)

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18
Q

What is a deferred period?

A

If a policy is taken out with a 3 month deferred period. This would mean if you couldn’t work from 1st Jan you don’t get paid on claim until 1st April. You would cover the first 3 months from savings etc

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19
Q

Strictest income protection category? Most likely to pay out in invent unable to work

A

Own occupation

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20
Q

If you have a deferred period when should you submit claim to provider?

A

Straight away to start deferred period

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21
Q

Group income protection has what features?

A 
Taken out by employer
Premiums paid by employer
Employee taxed as benefit in kind
Benefits paid to employer
Employee receives benefits as pay, subject to sax and NI to employer
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22
Q

Individual income protection is?

A

Monthly benefit

Tax free premium and benefit

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23
Q

Accelerated unit linked policy is?

A

Benefit added to life policy basically CIC

Alternative to death payment not additional. E.g. Life cover £150k. CIC pays out £150k nothing else is payable!

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24
Q

What is a split trust?

A

CIC to client

life cover to beneficiaries outside estate

25
Q

How is CIC lump sum taxed?

A

Nil tax

26
Q

Under local authority assessments how much is left as personal expenses?

A

£24.90

27
Q

What’s the advantage of an immediate care annuity?

A

Benefits paid tax free directly to care home

Pays for WOL

28
Q

Personal accident and sickness features?

A 
Benefits are not taxed
Premiums no tax relief
Covers loss of limbs. Death. Loss of eye. Other specific injuries
Set amounts 
Weekly benefit 
Medical expenses to a percentage
29
Q

Who is most likely to have a PAS policy?

A

Members of clubs
Sports clubs
Travelling and participating in a specific holiday
Engaging in firms business

30
Q

Basic PMI would usually not cover what?

A

Out patient
Physicatric care
Cancer treatment

31
Q

Why is mortgage protection cheaper than income protection?

A

Is fully underwritten

Linked to mortgage benefits

32
Q

What’s a capital need of a typical client seeking life insurance?

A

Funeral costs

33
Q

Key person cover what evidence should be provided?

A

Business plan & company accounts

34
Q

Key person cover (multiple of salary) what rate is normal and how is it calculated?

A

Salary 5-10x

35
Q

Key person cover proportion of profits formula

A

Key persons salary x profit last year x no of years to replace key person

Divided by

Total salary bill

36
Q

Why is a partnership agreement needed if one of the partners were to die?

A

The partnership would end is either was to die

37
Q

What happens to live cover in event of divorce?

A

The court can make any arrangements it sees fit in relation to existing policies

38
Q

What is bereavement benefit?

A

£2000 lump sum to spouse or CP
Died before Retirment
Or allowance payable for 52 weeks at £112.55 full rate

Widows £122.55 for if child. Finishes if spouse remarries or lives with another partner

39
Q

Income support?

A

Not studying full time
Work less than 16 hours
Low income
Not receiving job seekers or employement & support allowance

40
Q

Job seekers is?

A

£57.90 pw if 16-24
£73.10 over 25

6 months max as contribution based

then goes to income based which is means tested

41
Q

Stator sick pay is?

A

£112 per week for 28 weeks

42
Q

Employment and support allowance is?

A

After 28 weeks of stat sick pay for employed people

Or available after 3 weeks for self employed

Same rate as statutory

13 week assessment period then-passed to:
Support group - terminal
Work activity- week 14 £102.15 pw help to re-enter job market for a year. After year means tested £16,000

43
Q

What is needed for proof of title for an individual?

A

Policy

44
Q

Reinstatement rules for qualifying policies?

A

13 months to reinstate

45
Q

Non qualifying policy what events are taxable?

A

Assignment
Maturity
Death

46
Q

What does charity donations in a will do to IHT calcs?

A

Under 10% or taxable estate - take off charity donation and 40% tax

Over 10% of taxable estate- take off charity donation and then 36% tax

47
Q

What’s the cost of wop?

A

2-5%

48
Q

How much is child benefit per week?

A

£20.70 first child

£13.70 extra child

49
Q

How is child benefit reduced for higher rate tax payers?

A

50,000 higher limit
Every £100 over reduces amount by 1%

E.g. £53000
Is 100 x 30 over 50000
30% of child benefit is 20.70 x52 / 100 x 30 - 1076.40

Is £753.48 per year child benefit

50
Q

Endowment qualifying rules?

A

At least 10 years
Sum assured on death at least 75% premiums
Must be paid annual or shorter intervals for 10 years

51
Q

WOL qualifying rules?

A

10 years plus
Total premiums 1 year must not be double the premiums payable in any other year or 1/8 of total premiums over the whole term
75% of premiums at age 75

52
Q

Temp insurance more than 10 years qualifying rules?

A

10 years plus
Total premiums 1 year must not be double the premiums payable in any other year or 1/8 of total premiums over the whole term
75% of premiums at age 75

53
Q

Temp insurance under 10 years qualifying rule?

A

Premiums must not exceed what’s been paid in
More than a year less than ten years
No min payable

54
Q

Qualifying rules annual premium limit?

A

£3600

55
Q

Gain on £5,600 on a surrender of a higher rate tax payer on a qualifying policy. Over premiums paid in. What tax is due on the gain?

A

£1,220 (20%)

56
Q

What is annual gifting exemptions?

A

£3,000 pa

57
Q

Advantages of a drawdown mortgage?

A

Funds would be withdrawn when needed. Resulting in less interest building up. Against whole value being taken at inception

58
Q

Budget PMI what will reduce premiums?

A

Excess being higher

59
Q

CGT taxation?

A

10% as income
20% additional rate tax payers
£1100 allowance
Trusts is 1/2

R05 (1 decks)

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