Questions Flashcards
The industry looks at PMI in terms of impact and frequency as?
Low frequency. High impact
Morality has increased over the last 50 years. What factors have least impacted the improvement?
A change in working habits
Why are policies being taken out for older lives?
People are working longer and therefore having mortgages longer
Mark died. In his will left 1million to his wife what IHT is payable?
Nil
2nd death will incur IHT
Statutory sick pay requirements
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
Self employed sick is most likely to claim?
Employment and support allowance
Redundancy benefit pays after?
39 weeks
Standard cover?
Guaranteed cover?
Maximum cover?
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
Pure premium calculation is?
Sum assured x mortality rate
E.g.
£80,000 premium. Mortality rate of 0.0024
Pure premium is £192 (annual)
Health screenings usually include?
Non invasive tests. Saliva swabs. Hair samples. Urine tests
Terminal illness. Someone must have life expectancy of …. to pay out?
Less than 12 months
Val & Mark own a house together joint tenancy. Val dies what happens?
Mark would automatically own all of property
Tax treatment of life policies is?
- qualifying?
- non qualifying?
No tax on qualifying
Higher rate tax on non qualifying on gain
Endowment qualifying rules about premium& age and sum assured?
55 - to qualify must be min 75% premiums paid in
If policy taken out Over 55 reduces every year by 2%
How far can you backdate a policy and still be qualifying?
3 months
What’s IHT liability if Pete left Daniel his whole estate of £750,000
£170,000 (40% of taxable estate minus nil rate band)
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?
£250 (£3000 per year)
What is a deferred period?
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
Strictest income protection category? Most likely to pay out in invent unable to work
Own occupation
If you have a deferred period when should you submit claim to provider?
Straight away to start deferred period
Group income protection has what features?
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
Individual income protection is?
Monthly benefit
Tax free premium and benefit
Accelerated unit linked policy is?
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!
What is a split trust?
CIC to client
life cover to beneficiaries outside estate
How is CIC lump sum taxed?
Nil tax
Under local authority assessments how much is left as personal expenses?
£24.90
What’s the advantage of an immediate care annuity?
Benefits paid tax free directly to care home
Pays for WOL
Personal accident and sickness features?
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
Who is most likely to have a PAS policy?
Members of clubs
Sports clubs
Travelling and participating in a specific holiday
Engaging in firms business
Basic PMI would usually not cover what?
Out patient
Physicatric care
Cancer treatment
Why is mortgage protection cheaper than income protection?
Is fully underwritten
Linked to mortgage benefits
What’s a capital need of a typical client seeking life insurance?
Funeral costs
Key person cover what evidence should be provided?
Business plan & company accounts
Key person cover (multiple of salary) what rate is normal and how is it calculated?
Salary 5-10x
Key person cover proportion of profits formula
Key persons salary x profit last year x no of years to replace key person
Divided by
Total salary bill
Why is a partnership agreement needed if one of the partners were to die?
The partnership would end is either was to die
What happens to live cover in event of divorce?
The court can make any arrangements it sees fit in relation to existing policies
What is bereavement benefit?
£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
Income support?
Not studying full time
Work less than 16 hours
Low income
Not receiving job seekers or employement & support allowance
Job seekers is?
£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
Stator sick pay is?
£112 per week for 28 weeks
Employment and support allowance is?
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
What is needed for proof of title for an individual?
Policy
Reinstatement rules for qualifying policies?
13 months to reinstate
Non qualifying policy what events are taxable?
Assignment
Maturity
Death
What does charity donations in a will do to IHT calcs?
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
What’s the cost of wop?
2-5%
How much is child benefit per week?
£20.70 first child
£13.70 extra child
How is child benefit reduced for higher rate tax payers?
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
Endowment qualifying rules?
At least 10 years
Sum assured on death at least 75% premiums
Must be paid annual or shorter intervals for 10 years
WOL qualifying rules?
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
Temp insurance more than 10 years qualifying rules?
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
Temp insurance under 10 years qualifying rule?
Premiums must not exceed what’s been paid in
More than a year less than ten years
No min payable
Qualifying rules annual premium limit?
£3600
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?
£1,220 (20%)
What is annual gifting exemptions?
£3,000 pa
Advantages of a drawdown mortgage?
Funds would be withdrawn when needed. Resulting in less interest building up. Against whole value being taken at inception
Budget PMI what will reduce premiums?
Excess being higher
CGT taxation?
10% as income
20% additional rate tax payers
£1100 allowance
Trusts is 1/2
