Random Questions

Question 1

If mortality is the biggest cost for a life insurance policy what is the second most expensive factor

Answer 1

Life office expenses

Question 2

The majority of questions that include the words what can be concluded from this what will be the typical answer

Answer 2

The one where nothing can be concluded

Question 3

When transferring money into a trust outside of the clients nil rate band, what % tax is payable

Answer 3

Basic rate of 20%

Question 4

What is a moratorium and what are the conditions of this

Answer 4

This is where a client forgoes underwriting so that any conditions that the client has had for the previous 5 years are then excluded for the next 2 of the policy. The underwriting is not technically forgone however as at the point of claim Is when the underwriting will happen causing them substantially less cover than they previously thought

Question 5

What is personal accident and sickness insurance

Answer 5

This insurance can pay out either lump sum or an ongoing depending on what issue was caused, so permanent things will have a lump sum where as temporary issues will get on going

Question 6

The taxation of PAS

Answer 6

PAS paid by an individual - No tax relief on premiums and no taxation on benefits

PAS paid by group employer schemes - if employer pays this as a benefit in kind this will be taxable under PAYE.

Question 7

What is PAYE

Answer 7

This is the pay as you earn system, which is what deducts tax from policies

Question 8

What occupation will most likely have a definition of disibility on an income protection policy linked to an inability to carry out a defined number of ADLs

Answer 8

Someone who hasn’t got a job because they will need an amount if not able to do a specific number of things unlike income protection for employed people who need it when unable to do work

Question 9

Why might an income policy have 2 different start dates

Answer 9

Statutory sick pay, initially low then rises after sick pay goes

Question 10

What types of trust will allow a beneficiary to access the money at age 18

Answer 10

Bare or absolute will always allow the beneficiary to access money at 18 as they have an ‘absolute right’ under this type of trust

Question 11

What is the rule for the minimum sum assured on an endowment policy.

Answer 11

For each year over age 55 the minimum sum assured as a percentage of premiums decreases by 2% starting at 75%

Question 12

After a claim on a cox policy following a diagnosis of bowel cancer, how long will it be before the claim is paid out

Answer 12

CIC policies have a survival period of 15-30 days

Question 13

What is the maximum number of years after death that. Deed of variation can be served

Answer 13

Must be done within 2 years

Question 14

What is a bolt on policy

Answer 14

This is where typically a cic policy is added to a WOL and when the CIC is claimed it will pay out the accelerated death claim. This is cheeper than having 2 separate running policies but will cease both when claimed

Question 15

What is the DWP

Answer 15

Department for work and pensions, they pay the state benefits typically

Question 16

What is support for mortgage interest

Answer 16

This is a state benefit which will pay the interest on up to £200,000 of a borrowed mortgage. A waiting period of 39 weeks is generally applied before anything is paid out only the first £100,000 of the value of the property is covered, this is up to a max claim of £200,000

Question 17

What are the tax liabilities for a group ASU where the premiums are paid by the company and the benefit goes to the employees

Answer 17

Premiums paid will be taxed on the employee as benefit in kind but benefits are tax free

Question 18

How will the payments from an impaired life annuity that are being paid directly into the clients bank account taxed

Answer 18

As a purchased life annuity, any capital portion (lump sums) will be tax free and the interest portion taxes as savings income (45% for additional rate tax payers)

Question 19

Describe a PET

Answer 19

Potentially exempt transfers; a lifetime gift from an individual to another or into either an absolute, bare or disabled persons trust. They have no IHT unless the donor does within 7 years then they have the tapered relief

Question 20

Describe CLTs

Answer 20

Chargable life time transfers; a transfer into trust other than absolute trust. No ITH sue provided that transfer plus the total of all other CLT made in previous 7 years falls within IHT nill rate. Once total exceeds nill rate then IHT immediately payable at lifetime rate on excess of 20% if trustees pay tax

If donor dies within 7 years tapered relief is used

Question 21

Describe a health cash plan

Answer 21

Policy which can pay up to 100% of the cost of treatment up to a present annual limit, could pay a fixed cash sum per day hospitalised.

Have to wait a period of 6 months before any claims can be made after policy activation

Very low cost, alternative to PMI

Question 22

What are ratings and loadings

Answer 22

A rating is the reason for a premium to be increased, for example an age rating or mortality rating

A loading is the amount which the premium has been increased by in effect of the rating

Question 23

When dying intestate without a spouse or children, who is first to access the remaining money

Answer 23

Parents

Question 24

What is the general function of the court of protection

Answer 24

To protect individuals of unsound mind under the mental health act of 1983

Question 25

Who puts in the claims for the beneficiary of a protection policy in trust

Answer 25

The trustees as it’s their legal property but they won’t always be the beneficiary

Question 26

What is a single option agreement in relation to a ci partnership protection policy

Answer 26

Where only the ill parter has power to make other parters of company buy the person out

Question 27

What are the two components which make personal independence payments

Answer 27

Daily living and mobility

Question 28

Describe the term paid up

Answer 28

Premiums stop and any life cover amount will be reduced however the policy does remain live

Question 29

What is the cost of assignment for a life assurance policy to a mortgage lender

Answer 29

There is usually no charge for the assignment of a life policy between any two parties

Question 30

When is the PAYE system used

Answer 30

When a policy is paying out that was tan by the employee of the client, I.E when a member of an employer group income protection policy claims successfully

Question 31

What is the most important factor determining a life offices financial strenbfth

Answer 31

Free asset ratio

Question 32

Briefly summarise the advantages and disadvantages of employer sourced protection

Answer 32

Adavtange
- they take some or all of cost
- the can negotiate better deals

Disadvantage
- benefit will cease if employee leaves
- employer may withdraw or reduce benefit

Question 33

What benefit is awarded to those with a spouse who has passed away and what is the name of the benefit

Answer 33

This is called bereavement support payments

If no children £2500 plus £100 pm for 18 months

If children £3500 plus £350 pm for 18 months

Question 34

Describe contribution based benefits

Answer 34

A contribution based benefit goes off the amount of NICs which the client has contributed

Entitlement is built up through class 2 NICs but class 4 contribute to the common fund

Question 35

Describe means based testing of benefits

Answer 35

This is when it’s based off the circumstances of the individual

Question 36

Why might a Family income benefit policy be cheeper than a level term assurance policy

Answer 36

Because FIB is a form of Decreasing term assurance and so premiums should generally be lowering

Question 37

Describe natural and level premiums

Answer 37

Natural premiums were the initial method of charging premiums to clients where they would go up each year due to age and so toward the end of the protection clients couldn’t afford it when it was most needed as it became too expensive

This was replaced by level premiums where the premiums are level through out the life of the policy

Question 38

What is the criteria for a qualifying policy, how can they be broken and what are the effects of this

Answer 38

Rules: last over 10 years premiums

75 rules applies to capital sum upon receiving as need to be at least 75% value of premiums, age of policy should be 10 years or 75% of age if over 10,

If broken the policy becomes a restricted relief qualifying policy, this means it is treated at qualifying policy up in till the rule break anything after is taxed

Gain x total allowable premiums/total premiums payable under the policy

Example
Gain of £10,000 total premiums £70,000 and allowable premiums of £55,000

7k x 55k/70k

Question 39

What is a relevant capital payment on a chargeable gain calculation?

Answer 39

On death - if the surrender value immediately before death plus any relevant capital payments, exceeds the premiums paid plus the total gains on previous chargeable events

On maturity/ surrender - if the amount paid plus any relevant capital payments exceeds premiums paid plus total gains on any previous chargeable events. Where sun assures it payable by instalments, amount taken for calculation is the capital value of the instalments

On assignment - if the consideration, plus any relevant capital payments exceeds the premiums paid plus the total gains on previous chargeable events

Question 40

Definitions of incapacity used for income protection

Answer 40

Own occupation - unable to perform one’s own occupation and not following any other employment, this is the widest definition and provides the highest level of cover

Suited occupation - totally unable to follow any occupation to which one is suited by reason of education, training or experience

Any occupation - totally unable to follow any occupa to on whatsoever, this is known as the tightest definition for some reason

Question 41

What are the rates based on occupation class for Income protection

Answer 41

Class 1 - professional worker
Class 2 - shop workers/light skill manual in non-hazardous jobs
Class 3 - skilled workers in non-hazardous jobs
Class 4 - skilled workers in hazardous jobs

Question 42

Taxation of IP policies

Answer 42

• individual IP generally paid gross and not subject to income tax
• when policy premiums qualify for tax relief as deductible part of a business expense, benefits will be taxable but still paid gross l
• under most group IP policies, claims are paid to employer without deduction of tax. HOWEVER. When payment is passed on to employee it is taxable under PAYE (Pay As You Earn). This makes it allowable to expense as the employer and they effectively don’t pay tax on this either, employee does receive this net of tax + NICs

Question 43

When is IP paid free of tax

Answer 43

When paid directly to the claimant under an individual policy

Question 44

What is the most important factor in IP underwriting and premium rating

Answer 44

Occupation

Question 45

What are the normal IP cover limits

Answer 45

50 - 60% (I think go back to check this card when know)

Question 46

Name 5 common disclosures on IP policies

Answer 46

Not following doctor advice, dangerous sports, non disclosure,

Question 47

Why might an individual take out a policy offering a lower sum assured for critical illness than term assurance

Answer 47

To cut down the cost of CIC, working on the premise some cover is better than none, improves affordability. Or because they have different needs for the two types of cover

Question 48

Typical survival period for a CIC policy

Answer 48

14-30 days if client dies within this period policy won’t pay out

Question 49

What is the tax position of the payement of benefits under a CIC policy

Answer 49

On individual CIC Not liable to any taxation other than IHT

Group policy where premium is paid by the employer the premium is taxable as a benefit in kind on the employee

Question 50

Where are the guidelines covering charging for residential care to be found?

Answer 50

Care act 2014

Question 51

What are the two forms of LPA

Answer 51

Health and welfare, property and financial affairs

Question 52

Who can carry out a care assessment in an individual

Answer 52

The local authority or a specialist provider

Question 53

How many NHS funded nursing care bands are there in England for new claimants

Answer 53

Single rate, previously there was 3

Question 54

What type of investment insures against the risk of a client living longer than expected?

Answer 54

Deferred care, long term care policies which are paid out after a few months or years, usually much cheeper as they insure against living longer than expected

Someone may have funds to pay for first 2 years but on the 3rd need the added benefit

Question 55

Name the 6 ADLs

Answer 55

Continence, dressing, feeding, mobility, transferring, washing

Question 56

What is a roll up mortgage

Answer 56

Where the individual takes out a loan that pays cash lump sums or series of payements, secured against the home, interest rolls up at fixed or variable rates, and is not paid by customer until death or permanent care

Question 57

What are the three main types of PMI

Answer 57

Basic, standard and comprehensive

Question 58

What is the purpose of MPPI

Answer 58

To protect a client against an inability to keep up with mortgage payments due to accident sickness or unemployment

Question 59

What is the key difference between ASU and MPPI

Answer 59

MPPI is linked to mortgage where as ASU is not. So really they are similar policies just less freedom in MPPI than ASU

Question 60

What Is a general insurance policy and what tax are general insurance policies subject to

Answer 60

These are the short term which are yearly renewable policies such as PAS, PMI health cash MPPI PPI and ASU

Insurance premium tax at a rate of 12%

Question 61

Describe the tax treatment of PMI group cover paid for by an employer

Question 62

ASU benefit is normally limited by reference to what

Question 63

Group ASU cover arranged by an employer is sometimes restricted to what

Question 64

How is FAR calculated

Answer 64

Surplus of assets held by life office over the value of its liabilities expressed as a percentage of its total assets

(A-L)/A

Question 65

What precedent is there for government reducing state benefits

Question 66

What main criteria must be satisfied if premiums paid to a key persons policy are to attract corporation tax relief?

Answer 66

The key persons relationship with the business is employee and employer (if the life assured has a significant shareholding in the company, relief is unlikely to be given) the policy must be to replace moss of profits and not cover a capital loss (such as loan). The policy is an annual or short term insurance

Question 67

What are the three share protection insurance options

Answer 67

Buy and sell agreement - deceased heirs must sell shares to surviving partners and must be purchased

Cross option - either can request that they are bought or sold and it has been requested then it has to happen

Automatic accrual - where shares are left to partners by accrual instead of to heirs but the heirs will usually get compensated for this

Question 68

What’s re the two main ways of calculating key persons suns assured

Answer 68

Multiple of salary, salary of person multiple by factor usually 5x. Simple approach but has draw back of salary alone may not be true representation of their contribution to business

Proportion of profits, key person salary x profit for last year x no of years to replace key person divided by total salary bill

Question 69

What are the main components to a share protection arrangement

Question 70

How long does statutory sick pay last

Answer 70

Up to 28 weeks

Question 71

What is the guaranteed minimum income for a single pensioner under the pension credit system

Answer 71

£182.60 PW

Question 72

Who pays the working tax credit paid to employees

Answer 72

Directly by HMRC

Question 73

How can the owner of an existing life policy put it in trust

Answer 73

Deed of assignment

Question 74

If terminal illness cover is part of term assurance when will it not normally apply

Answer 74

Final 12-18 month of the contract

Question 75

What proof of title will be retired for a death claim on an unassigned own life policy and to whom will the money be payable

Answer 75

The appropriate grant of administration and the money would be payable to the legal personal representatives and Executors of the will

Question 76

What might be required if a policy holder cannot produce the policy much document on a claim

Answer 76

An indemnity form and or a statutory declaration

Question 77

What is a relevant capital payment for a chargeable gain calculation

Answer 77

Any benefit of a capital nature paid under the policy before the chargeable event

Question 78

What is the current lifetime rate of IHT and when is it applicable

Answer 78

It is 20% and is only used when life time gifts are made and transfers

Question 79

Which two IHT exemptions are often used for policy premiums

Answer 79

Annual £3600 PA and normal expenditure at £3000 PA

Question 80

What amount of a clients wage that can be insured in an IP policy

Answer 80

50-60% or up to 75% in group

Question 81

Common exclusions from IP policy

Answer 81

Criminal activity, alcohol, intentional, pregnancy, AIDS/HIV an fail to follow medical

Question 82

What are IP premiums based on

Answer 82

Morbidity stats

Question 83

What is the tax position on the benefits under a CIC policy

Answer 83

Tax free

Question 84

What sort of care is the NHS in England responsible for providing once someone has left hospital

Answer 84

Continuing health care

Question 85

What is attendance allowance

Answer 85

A benefit from the government, paid to those over state pension age and requiring help with personal care. When an individual pays their own care fees, they are entitled to claim attendance allowance to help with personal care and or supervision

Question 86

What type of investment insures against the risk of a client living longer than expected

Answer 86

Annuity

Question 87

ASU benefit is normally limited by reference to what?

Answer 87

A set percentage of earnings and or a max monthly amount

Question 88

Group ASU cover arranged by an employer is sometimes restricted to what

Answer 88

Incidents in work

Question 89

What are the two main ways of calculating key person sun assured

Answer 89

Multiple of salary and proportion of profits

Question 90

What are the three elements of a share protection arrangement

Answer 90

A transfer of shares agreement, funding for the purchase via insurance and a documentation to ensure the funds are received free of IHT

Question 91

What are the types of WOL with description

Answer 91

Maximum cover plan - fixed premium amounts for a set period, after this premiums are reviewable and either increase or sun assured decreases

Standard cover - premium set at fixed rate for the whole time, no review required, set a higher rate to begin then rely on I vestments making certain level of return per year for cover

Guaranteed cover - guaranteed level of cover due to guaranteed level of premiums

Question 92

What are assurance bonds and what are the types

Answer 92

Investment contracts with no maturity date, nominal life cover offer (101% at point of death)

• standard unit linked/with profit where return is based on fund performance
• guaranteed income bond

Guaranteed growth bond

Question 93

What is a relevant life policy

Answer 93

Mostly pay out life covers capital sun paid on death under age of 75, no surrender value and no other benefits. arranged paid for and written into trust by employer and payable to employees dependants usually.

Question 94

How would you over come the issue of policy length on a life assurance policy

Answer 94

Take advantage of the convertibility option switching the life assurance to WOL

Question 95

What is Terminal illness benefit

Answer 95

This is usually a free add on to WOL, essentially if life assured is diagnosed with terminal illness or disability with life expectancy of less than 12 months accelerates the WOL benefit. This doesn’t apply to the last 12-18 months of contract

Question 96

Qualifying vs non-qualifying policies taxation

Answer 96

Gains in qualifying aren’t subject to tax, non qualifying policies are taxable at higher and additional rates of income tax. Offshore are fully taxable

Question 97

Qualifying policy rules for temporary insurance

Answer 97

Policy run for 10 year minimum and payout must be for total premium amount of 10 years or 3/4 policy length whichever shortest

Policies under 10 years have different rules where capital sum on death must be 100% premiums paid an not more. Policy term min 1 year

Question 98

Qualifying policy rules for WOL

Answer 98

Capital sum on death or early disability, can have bolt ons. Premiums paid for min 10 years with sun payable equaling no less then 75% total premium

Question 99

Qualifying policy rules for endowment assurance

Answer 99

Capital sun payable on survival to end of term or early death. Surrender and bonus enchantments ignored. Premiums paid for at least 10 years or until untimely death. Total premiums in a year cannot be double a previous year.

Question 100

Other qualifying policy rules

Answer 100

£3600 total premium PA
Policy can lapse 13 months but if reinstated within that time it is still qualifying.
Friendly society have max premium of £25 pm which counts towards £3600
Changing life assured can make is non qualifying if there is less than 10 years left on policy
Offshore cannot be considered qualifying

Question 101

What acronym is used to remember the chargeable events on none qualifying policies

Answer 101

DAMPS

Death
Assignment for money/moneys worth
Maturity
Part surrender
Surender

Question 102

Taxation of life funds on and offshore

Answer 102

Onshore - taxes at 20% + CGT
Offshore - possibly little tax during life of policy country dependant, but when surrendered it is chargeable at the basic, higher or additional income tax rates

Question 103

What is a mortgage

Answer 103

Type of assignement take out against an asset for the duration of the loan by the lender. Not absolute as the asset it refined to the borrower once loan repaid in full

Question 104

How are general insurance products taxed usually

Answer 104

Individuals pay premiums out of their after tax income, benefits are not taxable
For group policies any premium paid by employer are business expenses. However mostly premiums will be payable by the employee and this will be out of after tax income. If the employer pays the premiums then employee will pay NICs and tax on benefits received similar to how they revive their salary.

Premiums are subject to insurance premium tax at 12%

Question 105

What police’s typically can be group protection

Answer 105

Main three are life, income and cic but general insurance can sometimes be group

Question 106

What is an absolute assignment

Answer 106

Complete transfer of policy by way of sale or gift with the assignee being the only person with interest in the policy once completed
- requirements: must be in writing, during the term of the policy and the life of the assured. Must assign the whole of the policy not a portion but can be assigned to multiple people

Question 107

What is an endowment

Answer 107

A type of investment policy taken out with life insurance companies

Pay money in monthly for a set period, policy will pay you a lump sum on maturity, usually long term such as 10-25 years

If you die premature then the policy will pay out to beneficiaries

Value of the lump sum is determined by the investments within the policy so is not Guaranteed

Question 108

What is the annual limit for qualifying policies

Answer 108

You can only put in £3600 per year across all policies Including the friendly society policy with £25pm

Question 109

What are the friendly society policies

Answer 109

Types of qualifying policy with a Max premium of £25pm

Question 110

Taxation of life funds

Answer 110

Onshore - 20% income na CGT
Offshore - little to no tax country dependent but then on surrender there is income tax on the gains at higher/additional rate

Question 111

What is top slicing

Answer 111

When you charge different portions of an amount under each relevant tax bracket when a gain takes a client from one tax bracket to another

Question 112

What Is the rule for taxation when a client starts earning over £100,000 in chargeable gains

Answer 112

For earnings over £100,000, every £2 of income receives £1 of individual personal allowance to be removed.

Referring to the personal allowance tax band which is £12,570. So anyone earning £125,140 will not receive any tax free allowance due to chargeable gains and allows no top slicing

Question 113

Tax on trust policies for chargeable gains

Answer 113

The gain is firstly responsibility of the settler if alive an a UK resident or have died the same year.

Tax will next fall to trustees if settler is dead, at a rate of 25%.

Question 114

What is the regular gifting annual allowance

Answer 114

£3000

Question 115

What is a gift inter vivos policy

Answer 115

A policy which is 7 years long and goes with the tapered relief

Question 116

Due to the rules of Intestency what will happen to any will upon marriage

Answer 116

It will be thrown out, so it’s always best practice to write a will upon marriage

Question 117

What are the 3 factors which IP should be based on

Answer 117

Essential spending

Maximum level of permitted cover

Other expenditures from family

Question 118

What is limited term IP

Answer 118

Short term IP usually 1-5 years long, lower premium but usually lower benefits offered

Question 119

What is day one cover

Answer 119

A type of IP which pays out instantly and so is good for self employed who need weekly pay

There is also back to day one cover where it will back date these payments after 30 days continuous leave

Question 120

What is rehabilitation benefit

Answer 120

A policy which is paid to those to get back in work, as they will be paying lower amounts as encouragement to return to work sooner

Question 121

Proportionate benefit clause

Answer 121

A clause in IP saying that I client takes lower paid job then their own occupation the provider will pay the difference so their earnings are the same

Question 122

What are the free limits on a policy

Answer 122

The countries which the client can claim the policy under and can only be paid for 3-6 months as long as the client has been resident there for less than a year

Question 123

What type of policy would have severity cover

Answer 123

CIC, it’s how the policy pays out typically, with more severe cases paying more of the amount

Question 124

How much more likely are you to revive a critical illness than die

Answer 124

5x

Question 125

What is covered in the statment of best practices

Answer 125

That there should be a standardised set of definitions for core conditions in CIC and that all police’s should cover: cancer, heart attack and strokes

Question 126

What are the types of CIC

Answer 126

guaranteed, reviewable and unit linked

Question 127

What is Life cover buy back

Answer 127

It’s a CIC policy that allows an amount of life cover to be taken out without further underwriting following a claim on a CI policy sold with life cover on first claim basis

Question 128

Reinstatement cover

Answer 128

Where a joint policy can be split into individual policies following a divorce

Question 129

Difference between terminal illness and CIC

Answer 129

Terminal illness is for diagnosis of conditions where client won’t live more than 12 months, CIC is any claim

Question 130

What is nursing care allowance

Answer 130

Non means tested and tax free but payment is paid straight to care home or to registered nurse for care

Question 131

What is involved for the criteria for means testing

Answer 131

Care needs, financial assessment for partial or fully funded care

Question 132

What is personal expenditure allowance

Answer 132

Personal allowance of 24.90 pw to get what they want essentially

Question 133

What can the government do if a client has a to go into a home but hasn’t got the liquid cash for this?

Answer 133

They can take out a deferred payment plan which is payable upon clients death. This is because they cannot force the sale of home if it is occupied by an over 60 or under 18 and can’t force sale of assets worth £23,500 or less

Question 134

What are the 4 main types of long term care insurance

Answer 134

Immediate needs plan - pays a set fee direct to care home, this is a lump sum and is based off clients life expectancy being less for worst condition

Prefunded policy - regular premiums or lump sum used to purchase future care, these are only triggered when client cannot do 3+ adls

WOL - sun assured can be accelerated in certain situations

Equity release plan - release money from property’s to fund living arrangements, policies such as roll up mortgage and interest only mortgage

Deferred care plan - pays out after specific period for peace of mind if you plan to self fund care

Question 135

What type of illnesses is PMI designed for

Answer 135

Acute not chronic

Question 136

What is the planning process

Answer 136

1) is there need for life assurance
2) capital & income needs
3) length of term
4) Existing policies
5) most appropriate policy

Question 137

How are the business assurance policies taxed

Answer 137

Tax relief given on premiums and so is not given on benefits typically, as relief on premiums depends on them being deductible as business expenses

Tax relief - not permitted for key persons unless they are an employee instead of high up member/shareholder or sole trader.

Conditions - must be an employer employee relationship

Question 138

What are the types of insurance a business can provided

Answer 138

• Tern assurance: convertible, renewable and renewable convertible
• WOL
• Key persons: set up on life of another basis so benefit is paid to company not person
• key person Income protection: benefits taxable as regular income to business
• CIC
• share protection insurance

Question 139

What type of company is business insurance typically for?

Answer 139

Smaller businesses where there aren’t many employees so there is bigger impact on the loss of an individual

Question 140

What source of income will typically not be taken into account while applying for local authority care

Answer 140

The value of any possessions

Question 141

What are the options for with a convertibility term assurance

Answer 141

To turn the policy into a WOL or endowment

Question 142

Teresa has put £400,000 into a discretionary trust for her daughter. What is the immediate tax charge if any that would be payable by trustees

Answer 142

£15k

It’s 20% as this is a CLT, it goes over the £325k limit by £75k so that additional is charged at 20% making it £15K

Question 143

3 Equal partners in a Business valued £300k, with capital accounts £30k each and net profits £180k PA. Without an agreeement what would one persons estate be entitled to if died

Answer 143

£130k

So just not profits

Question 144

On a with profits bond, upon death what would be the min amount paid out as life cover

Answer 144

101% of the value of the policy at death

Question 145

Out of the following which does PAS not cover

Mental impairment, loss of an eye, death or loss of limb

Answer 145

Mental impairment

Question 146

What is the sale of a life assurance policy by a terminally Ill person to an intermediary for a cash benefit know as

Answer 146

Viatical settlement

Question 147

How are payments from an immediate needs plan taxed when paid direct to policy holder

Answer 147

As a purchased life annuity

Question 148

After an accelerated benefit is claimed how long does the client have to wait before being able to enact a buy back for the lost life cover

Answer 148

2 years

Question 149

Can MPPI be used on a second home?

Answer 149

No

Question 150

What is the retail distribution review

Answer 150

Basically a rule which splits advisers into 2 categories, restricted and independent

Advisers must be qualified unless pure protection contract

Firms cannot receive commission on any new products that they sell

Question 151

What is the difference between enduring and lasting powers of attorney

Answer 151

Enduring will stop when the client becomes mentally impaired where as lasting does not.

So you want a lasting POA if you don’t want it to stop

And you cannot have joint POA they have to be individually done

Question 152

What is free cover

Answer 152

The amount of cover provided without medical underwriting, as long as all eligible employees join

Question 153

When a client is in local authorty care residential homes receiving personal expense allowances which if the filling is true

Set by government each year
Added to her basic state pension
Added to her attendence allowance
Decided by her local authority

Answer 153

1

Question 154

In calculating the premium payable on a life policy, an actuary will include an amont for each of the following factors except which

Amount for tax payable on policy
Commission paid to intermediate
Admin and regulatory cost
Medical underwriting cost

Answer 154

1

Question 155

What does the term passported relate to and how does it work

Answer 155

This means that when a client has one of the below benefits (the majority of means tested benefits) they will automatically have entitlement to housing benefit

Pension guarantee credit or income based JSA/ income based ESA

Question 156

When is it best to use single option vs double option agreements when protecting against death and serious illness

Answer 156

Single option is best when a critically Ill director needs other directors to buy them out. However this is and in case the client becomes too ill to make the decision in which case double option is beneficial as they could force the sale

Question 157

What is peppercorn rent

Answer 157

A home reversion plan - this is where a client sells partial equity on their property to a company who then she pays ‘peppercorn rent’ to

Question 158

If the life fund of a uk insurer recives income from deposits of £50m how much tax is payable on this income

Answer 158

£10m think 20% you fuckin idiot

Question 159

What is a link period

Answer 159

This applies to IP policies where a client is claiming IP goes back to work realises they aren’t fit for work and claims back on IP, they won’t have to go through deferral period again as the two periods are linked

Question 160

What is redundancy cover

Answer 160

A type of insurance which covers mortgage payments during a period of redundancy in full or partial

Question 161

How is JSA tested

Answer 161

Payable up to 6 months if client has made sufficient NICs contributions so this benefit is contribution based not means

Question 162

What effect will a cic policy paying a claim in instalments as opposed to a Lump sum have on the policy premiums

Answer 162

This will make it cheeper

Question 163

When a spouse dies which have both been in receipt of basic state pension, what benefit would the surviving spouse be entitled to in regards to the deceased spouses state pension

Answer 163

The remaining life can claim state pension based off partners NI record if this is better than their own

Question 164

What is the main advantage of a buy back option

Answer 164

After a claim on the insurance they can buy back the policy win out need for medical underwriting

Question 165

Due to the married women’s act who coud not be the beneficiary to a life policy of a clients spouse

Answer 165

The parents of spouse

Question 166

If there is a 30% reduction in premium costs, what would be the expected increase in the level of suns assured that people would be prepared to buy

Answer 166

15% just remember it’s an inverse

Question 167

Under what circumstances can Ann individual revoke their unregistered enduring power of attorney

Answer 167

Any time as long as they have mental capacity

Question 168

How is the NHS funded nursing care payment paid and assessed

Answer 168

Not means tested and paid tax free

Question 169

What are the annual benefit caps for single parents

Answer 169

London £23k rest £20k

Question 170

When payments from an income protection policy are made directly to an employer how are they taxed

Answer 170

Without deduction of tax by the life office but are taxable in the company’s hands as income

Question 171

A client earns £40k PA and has just started to pay £6k gross PA into his personal pension plan. What Is the maximum gross tax-relivable premium, if any, he can pay PA to a new term assurance policy, given the current pension payements

Answer 171

NONE - these policies are mutually exclusive one does not have an effect on the other

Question 172

What is the most suitable assurance policy type for a company intending to in act key persons life assurance

Answer 172

Renewable term assurance

Question 173

When a benefit is means tested what may the benefits eligibility depend upon

Answer 173

The client and spouses income and/or capital being below certain limits

Question 174

Are benefits taken into account during a IP policy for an unemployed person

Answer 174

State benefits can be taken into account irrespective of a clients tax and employment status

Question 175

The cost of the life cover provided by a whole of life unit linked policy is typically met by?

Answer 175

A variable level of unit cancellation throughout the life of the policy

Question 176

If a life assurance policy with terminal illness benefit is written under a discretionary trust,Then any death benefits would initially be paid to who

Answer 176

Trustees, not the beneficiary’s

Question 177

Which possible tax advantage would most likely be sought when using a will for financial planning purposes

Answer 177

An inheritance tax reduction

Question 178

The life assurance fund of a uk insurer had relaies a £300,000 gain on disposal of some shares which tax if any could apply to this gain

Answer 178

Corporation tax as it’s the corporation doing it not CGT as this is not personal shares it’s corporate

Question 179

Beep

Answer 179

Boop

Question 180

How long after a critical illness occurs do you have to claim on a CIC policy

Answer 180

There is no time limit as long as the claim meets the criteria of the policy

Question 181

Samantha has critical illness insurance cover paid for by her employer. What is Samantha’s tax position with regard to the policy?

A. The premiums are treated as a benefit in kind and any benefits paid are tax exempt.
B. The premiums generate no tax liability but any benefits paid are liable to Capital Gains Tax.
C. The premiums generate no tax liability but any benefits paid are liable to Income Tax.
D. The premiums generate no tax liability and any benefits paid are tax exempt.

Answer 181

Answer is A

In the case of a group policy, payment is usually made directly to the employee and no tax is due at the-point of claim. Where the premium is paid by the employer, that premium is taxable as a benefit in kind on the employee.

Question 182

A company’s directors are considering offering group critical illness cover to the company’s employees. They have recently heard of the development of severity-based cover. They need to be aware that under such a policy

A. claims would only be valid for employees unable to work as a result of the covered illness.
B. fewerillnesses are covered compared with usual critical illness policies.
C. more than one valid claim may be made regarding a given individual, when the illness progresses in its severity.
D. valid claims would always lead to the full sum insured being paid out.

Answer 182

C

Question 183

Ludmilla had a stand-alone guaranteed critical illness policy. She suffered a heart attack which is an event covered by the policy, yet no payment was made, despite a claim being made. Why was this?
A. The attack occurred when she was residing outside the free limits.
B. The attack occurred within the first six months of the policy.
C. She died before the end of the policy’s survival period.
D. She died when she was residing outside the free limits.

Answer 183

C, the free limits doesn’t apply here as we don’t know info I assume? If she doesn’t last the survival period then there will be no benefit typically

Question 184

The key underwriting factor for a group critical illness scheme is

A. the anticipated number of new entrants.
B. morbidity.
C. the nature of the business.
D. the number of members ofthe scheme.

Answer 184

B the morbidity is

Question 185

Under a long-term care insurance policy, the benefit normally becomes payable if the claimant
A. cannot carry out a number of specified activities of daily living (ADIS).
B. is diagnosed as having a specified illness.
C. is unable to work due to long-term sickness or accident.
D. suffers an illness requiring a minimum period of convalescence care.

Answer 185

A is correct as Long term is based of ADLS

Question 186

An uncle has recently given his niece a Lasting Power of Attorney (LA) to deal with his welfare needs if he loses mental capacity. What action should the niece take in anticipation of that possible loss?
A. Apply for a deed of variation.
B. Appoint a co-attorney.
C. Register the LPA with the Office of the Public Guardian.
D. Require him to complete a Property and Financial Affairs LA depositing both LPAs with his solicitor.

Answer 186

C, the daughter must have this registered for it to be active

Question 187

The Financial Conduct Authority defines long-term care insurance as essentially providing benefits to policyholders when, through deterioration of health, they
A. are likely to be unable to work for a long term, defined as at least five years.
B. are unable to perform at least five activities of daily living.
c. cannot continue to live independently without assistance.
D. must enter a long-term care home.

Answer 187

C is correct, this is misleading as the policy’s are based off ADLs but this is not the definition

Question 188

John and Amy, both aged 42, are getting divorced. They currently have a family income benefit policy which is effected on a joint life first death basis. As a result of the divorce, what will happen to the policy, if anything?
A. Nothing, the policy may continue unaltered.
B. The policy must be cancelled.
C. The policy will be transferred into one of their names, as decided by the court.
D. The terms of the policy must be revised.

Answer 188

A as divorce does not dissolve protection automatically

Question 189

Sarah is a higher-rate taxpayer whose realised gains already fully use up her Capital Gains Tax (CGT)
exemption for the tax year 2022/2023. Her dividend income exceeds her dividend allowance and her savings income exceedsher personal savings allowance. She has her own private medical insurance which is paying for the treatment of an acute condition. What is her tax liability, if any, regarding these payments during this year?
A. None.
B. 20% CGT.
C. 20% Income Tax.
D. 40% Income Tax.

Answer 189

A is the answer as there is no tax liability on the claims of PMI

Question 190

Jessica started an accident, sickness and unemployment (ASU) policy in February 2021 when she had just turned 54. She was employed, full time, in a call centre. She had been paying into a personal pension plan for many years and continued to do so. In March 2022, she became unemployed, but the provider of the ASU policy rejected her claim for benefits. The rejection was justified because her
A. policy had been in force for under two years.
B. unemploymentarose as part of a mass redundancy.
C. unemployment arose when she could take the benefits from her pension plan.
D. unemploymentwas her voluntary decision

Answer 190

D is the answer as voluntary redundancy is a common exclusion

Question 191

Jessica started an accident, sickness and unemployment (ASU) policy in February 2021 when she had just turned 54. She was employed, full time, in a call centre. She had been paying into a personal pension plan for many years and continued to do so. In March 2022, she became unemployed, but the provider of the ASU policy rejected her claim for benefits. The rejection was justified because her
A. policy had been in force for under two years.
B. unemploymentarose as part of a mass redundancy.
C. unemployment arose when she could take the benefits from her pension plan.
D. unemploymentwas her voluntary decision

Answer 191

D is the answer as voluntary redundancy is a common exclusion

Question 192

Private medical insurance premiums are being paid by the employer for an employee who is a higher-rate taxpayer. What is the employee’s tax position with regard to these premiums?
A. The employee is not liable to tax on the premiums.
B. The employee must pay Income Tax at his marginal rate.
C. The employer must pay all the tax due on behalf of the employee.
D. The employer must pay the tax due, only up to the basic-rate level, on behalf of the employee.

Answer 192

B is the answer,

Question 193

What is normally a requirement for a private medical insurance claim to be valid?
A. The insured must not have claimed for the condition previously.
B. The policy must have been in effect for at least two years.
C. The policy must have at least six months of the premium paid.
D. A referral must have been made by the insured’s general practitioner (GP).

Answer 193

D

Question 194

An insurer is concerned about the validity of a claim made by one of its Income Protection Insurance policy holders. This view is despite the fact the claim is supported by the policy-holder’s General Practitioner (GP). The most likely action the insurer would take would be to
pay the claim based on the GP’s confirmation
ask for the client to be examined by a doctor of its own choosing
reject the claim based on their initial concerns
contact the fraud division of the local police
Submit answer
Clear
Go to linked

Answer 194

They can get in their own doctors to look at the client

Question 195

36) The policy type most likely to include an option where part of the sum assured is paid early should the life assured meet the definition of care as set out in the policy is
an income protection insurance policy
a critical illness policy
a decreasing term policy
a whole of life policy

Answer 195

A whole of life policy will have an option for a portion of the benefit to be accelerated

Question 196

What minimum cooling-off period, if any, is required following the setting up of an Immediate needs annuity
None
7 days after the capital is deposited
14 days
30 days

Answer 196

There is a 30-day ‘cooling-off’ period (also known as the cancellation period) associated with Immediate Needs Annuities

Question 197

What is the key benefit of a dental capitation scheme

Answer 197

It allows individuals to budget for their expected dental costs as opposed to true insurance against dental cost

Question 198

Example Company Ltd are trying to establish the key person sum assured for a director, but are unable to use the ‘proportion of profits formula’. This is most likely to be because

the director is paid by a mixture of salary and dividends
the company has been established for less than two years
the company is not officially quoted on an exchange
the company has, to date, only shown losses in their end of year accounts

Answer 198

The company has only shown losses so they can’t do it this way

Question 199

47) A director has taken out a life assurance policy including critical illness cover for share protection purposes. She is likely to utilise a split trust so that

the benefits can only be paid to her dependants
she has a choice, following a critical illness claim, to maintain ownership of shares in the company
the other directors can force her to sell the shares to them in all situations, thereby protecting the company
she can renew the policy without underwriting after a set term

Answer 199

she has a choice, following a critical illness claim, to maintain ownership of shares in the company

Question 200

What does it mean when a policy is being assigned for ‘no consideration’

Answer 200

This basically means it’s a gift and so should not create a tax liability

Question 201

Insurable interest between divorcees -.

Answer 201

there is an insurable interest to a degree, but it has to be a quantifiable loss to a party not just because they have joint children

Question 202

What amount of capital built up effects the clients access to benefits -

Answer 202

between £6000 and £16000

Question 203

To Whom does working tax credit pay out to -

Answer 203

People age over 16 who work at least 16 hours per week

Question 204

What is a traditional low cost WOL made up of -

Answer 204

A with profits sum assured + decreasing term assurance policy

Question 205

What is the likely reason for a life policy to not be able to be written into trust -

Answer 205

its already assigned to a third party

Question 206

What is a viatical settlement and what policy will you find it on -

Answer 206

A viatical I settlement is the sale of a term assurance policy by a terminally ill person for money upfront instead of upon death

Question 207

What is a lifetime gift with reservation for inheritance tax purposes -

Answer 207

this is a gift where by the owner still has access to it and so is not viewed as a real life time gift meaning that it will still form a part of the deceaseds estate

Question 208

How much is it possible to have in the annual IHT allowance -

Answer 208

so annually you get £3000 as you know, however you can also carry this on from a previous year meaning that a total possible allowance of £6000 is possible

Question 209

Will a qualifying policy bought on the secondhand market still be exempt from tax? -

Answer 209

No the transfer of ownership for money or moneys worth means that the client may be open to CGT

Question 210

What is a Holloway policy -

Answer 210

a type of IP policy which builds up a cash revser and so forms an investment too

Question 211

John has an income protection policy which will pay him 50% of his last year’s earnings if he is off work ill. Last year, he earned £45,500 gross and his net take home pay was £39,000. To the nearest pound, how much per month would he receive from his policy if he needed to make a claim, ignoring any deduction for State benefits?
a. £1,138
b. £1,500.
•c. £1896
d. £1,386.

Answer 211

C because u use the gross amount not the net

Question 212

An insurer is most likely to use Continuing Personal Medical Exclusions (CPME) when underwriting

whole of life assurance policies
family income benefit policies
income protection insurance policies
private health insurance policies

Answer 212

Private health insurance policies

Question 213

Olivia gifted £300,000 to her son. She has other assets that total £700,000, including a £400,000 property. The most appropriate form of life cover to meet any IHT liability generated by the gift alone is

a whole of life policy
a decreasing term ássurance policy with a 7-year term
a level term assurance policy with a 7-vear term
a gift inter-vivos policy
LO5: Describe the tax treatment

Answer 213

A level term assurance policy with a 7 year term

Question 214

Seib is an additional rate taxpayer. Should he make a gain on his onshore non-qualifying life assurance policy he has owned since commencement, his liability on the gain could be
20% capital gains tax
25% income tax
45% income tax
both 20% capital gains tax and 25% income tax

Answer 214

25% income tax as the client is an additional rate tax payer and the 20% is always paid within the fun so any remaining amount of tax is due on the client, if they were standard then 0% and higher it would be 20%

Question 215

Tristan has transterred assets worth £150,000 in to a discretionary trust, which excludes any settlor interest. Although he always uses his £3,000 Inheritance Tax (I HI) exemption, this is Tristan’s first transter to a trust. What category of transter would this be for HI purposes?

Exempt
Gift with reservation
Potentially exempt
Chargeable lifetime

Answer 215

Chargeable lifetime as this was into a discretionary trust not a bare, absolute or disabled persons

In gifts always check the trusts!

Question 216

Sarai, who is 64 and non-UK domiciled, has just inherited £900,000 following the death of her Uk-domiciled husband, James. to her surprise, the inheritance has generated an Inheritance Tax (HI) liability. What action can she take to avoid paying the IHT due during her lifetime?

she can elect for James to be treated as a non-UK domicile within 7 years of his death
she can elect for James to be treated as a non-UK domicile within 2 years of his death
she can elect for herself to be treated as a UK domicile within 7 years of James death
she can elect for herself to be treated as a UK domicile within 2 years of James death

Answer 216

she can elect for herself to be treated as a UK domicile within 2 years of James death

Question 217

Graham is a member of a Group Income Protection Insurance plan. He has recently been incapacitated and has submitted a claim on his policy. The benefit will be paid, in the first instance,

Granam
Graham’s employer
the trustees of Graham’s employer’s pension scheme
the remuneration panel established by Graham’s employer

Answer 217

Grahams employer

Question 218

Prior to being badly injured in a traftic accident, Yuset earned £3,500 gross a month. Having recuperated for over a year, he is planning to return to work doing the same job. However, his doctor has suggested a ‘staged’ process, where Yusef will work progressively more hours over a number of months, before returning fully to his previous role. He currently receives £1,750 a month from his Income Protection Insurance (P) policy, which had a 6-month deferred period. The IP policy is likely to

cease benefit payments as soon as Yuset returns to paid employment
pay a lesser benehit amount, as part of their ‘proportionate benefit’
pay a lesser benefit amount, as part of their ‘rehabilitation benefit’
continue paying the full monthly benefit until Yusef returns to work fully

Answer 218

pay a lesser benefit amount, as part of their ‘rehabilitation benefit’, this is rehabilitation benefit as it is encouraging the return to work, it’s not proportional benefit because that would mean taking a lower paid job but subsiding the difference

Question 219

When comparing an Income Protection Insurance policy (IPI) application to a life assurance application, it is likely that there will be

exactly the same amount of health and occupation questions on both
more health questions on the life assurance application, but fewer occupation questions
more health questions on the PI application, but fewer occupation questions
more health and occupation questions on the IP application

Answer 219

More health and occupational questions on the IPI as this has the most rigorous underwriting

Question 220

Duncan and Debra have three children, aged 17, 14 and 11. The parents have recently started a critical illness insurance policy with a sum assured of £90,000. The integral children’s cover is most likely to provide a maximum sum assured

of £25,000 per claim, with up to two children’s claims per policy and one claim per child
of £30,000 per claim, with up to two children’s claims per policy and one claim per child
of £25,000 per claim, with claims allowed for all three children, but with one claim per child
of £30,000 per claim, with claims allowed for all three children, but with one claim per child

Answer 220

of £25,000 per claim, with up to two children’s claims per policy and one claim per child, this is because £25k per child is the general amount or a %

Question 221

Melanie lives in England, does not own a property, and has savings of £15,900. She is seeking local authority support to help pay her care home fees. The tariff income, if any, applied to Melanie’s situation is
none
£6 a week
£7 a week
£20 a week

Answer 221

£7 per week this is because of the tariffed income rule, anything over £14,250 for every £250 they are charged a tarif of £1

So 15900-14250= 1650

1650/250= 6.6 which is always rounded to £7PW

Meaning that local authority would therefore expect her to pay an additional £7 per week towards her care, but they will also contribute towards it

Question 222

It is an FCA regulation that recommendations for Mortgage Payment Protection Insurance policies must be separated from any loan agreements by a minimum of

3 days
7 days
14 days
30 days

Answer 222

7 days

Question 223

Daniel made a claim on his Mortgage Payment Protection Insurance policy within 45 days of its commencement. The claim was automatically and immediately rejected. This is most likely to be because

the claim was in respect of an injury suffered at work
the claim was in respect of an injury suffered outside of work
Daniel also owns an Income Protection Insurance policy with a 1 month deferred period
the claim was in respect of Daniel being made redundant

Answer 223

the claim was in respect of Daniel being made redundant

MPPI doesn’t pay out on voluntary redundancy

Question 224

Stephen, a financial advisor is reviewing his client’s protection needs. One of Stephen’s main concerns when looking at his client’s current assets vs their need for protection should be
A are the client’s current assets liquid, as this will alter his protection recommendations
B. what the client is willing to spend on their insurance policy over the term of the policy
C. how the client’s current assets might impact on their eligibility for the personal independence payment
D. the client’s existing debt to income ratio and how that will impact on his recommendation

Answer 224

A are the client’s current assets liquid, as this will alter his protection recommendations

Question 225

calculating the amount of premium to be paid for a life assurance policy, what is normally added to a loaded premium to arrive at the final premium payable?
A. Initial percentage charge
B. Underwriting fee
C.
Policy charge
D. Mortality adjustment

Answer 225

C.
Policy charge

Question 226

12. The Policies of Assurance Act 1867 covers all forms of assignment except
    A. voluntary assignments for no consideration
    B. assignments by operation of law
    C. assignments by way of a mortgage
    D. assignments to trustees

Answer 226

assignments by operation of law

Question 227

13. Caroline held an own life with-profits life assurance policy. On her death, the amount payable on the claim may vary depending on which of the following factors?
    A. The amount of premiums paid over the term
    B. Her age at death
    C.
    The basic sum assured
    D. The exact date of death

Answer 227

D. The exact date of death

The claim value on a with-profits life assurance policy will vary according to the precise date of death.

Question 228

14. Most life offices will pay death claims without a grant where the sum assured and the value of the estate is small, if the proceeds are being paid to
    A. immediate family members
    B. a surviving spouse
    C. any relations of the deceased
    D. a trust for the benefit of minor children

Answer 228

B. a surviving spouse

Most life offices will pay death claims without a grant where the sum assured and the value of the estate is small, if the proceeds are being paid to a surviving spouse.

Question 229

How is the cover provided under a whole of life policy affected if premiums cease at a pre-set age?
A. It remains in force for a maximum period of 10 years
B.
It reduces to 50% when premiums cease
C. It reduces by a stated percentage in each future year
D. It is not affected - the cover continues until death

Answer 229

D. It is not affected - the cover continues until death

Even if premiums cease at a pre-set age (one agreed in the policy at outset), the cover itself is not affected and continues until death.

Question 230

Alan has made a gain of £6,000 on his non-qualifying life assurance policy. This gain could be liable for
A. higher and additional rates of income tax only
B. capital gains tax
C. income tax at Alan’s appropriate rates
D. income tax at Alan’s appropriate rates and capital gains tax

Answer 230

A. higher and additional rates of income tax only

The gain on a non-qualifying life assurance policy is potentially liable to the higher and additional rates of income tax only (with the basic rate liability having already been met at source). Gains on these policies are liable to income tax, not CGT.
Question 18
Surrendering the policy after only six years is less than three quarters

Question 231

18. Melvin has a ten-year qualifying life assurance policy. Which of the following situations would give rise to a chargeable event?
    A. Assignment for money’s worth in year 9
    B. Payment of any critical illness benefit
    C. A policy loan to buy a life annuity where the interest is eligible for tax relief
    D. A surrender of the policy after 6 years

Answer 231

D. A surrender of the policy after 6 years

Surrendering the policy after only six years is less than three quarters of its original term and would mean the policy losing its qualifying status. The surrender would therefore be a chargeable event.

Question 232

19. Colin and Evelyn want a life assurance policy to meet the potential inheritance tax bill on their joint estate of €1,150,000 which they own in equal shares and includes the family home. On the first death, they plan to leave their estate to each other and then on the second death to their children. If they were both to die in the current tax year, the most effective policy would be a
    A. joint life second death policy for £150,000
    B. joint life first death policy for £140,000
    C. joint life first death policy for £32,000
    D. joint life second death policy for £60,000

Answer 232

D. joint life second death policy for £60,000

There will be no IHT due on first death as the couple are leaving everything to each other, and this will be exempt under the spousal exemption. On second death, the IHT bill will be £1,150,000 less 2 x nil rate bands (£650,000 in 2021/22) less 2 x residence nil rate bands (£350,000 in 2021/22) = £150,000 @ 40% (the rate at which IHT is due on death) = £60,000. The policy required is therefore a joint life second death with a sum assured of £60,000. This should be written under trust.

Question 233

21. Paul made a PET of £450,000 in June 2017. If he dies in September 2021, how much inheritance tax would the done be liable for? (Assume no annual allowances are available)
    A. £30,000
    B. £180,000
    C.
    £50,000
    D. £102,000

Answer 233

A. £30,000

Paul died just over 4 years afler making the £450,000 PET. The PET has therefore failed, and the amount in excess of Paul’s available nil rate band is subject to IHT. €450,000 - £325,000 = £125,000 @ 40% = £50,000. However, because Paul died between 4 and 5 years after making the PET, only 60% of the tax due is payable thanks to taper relief.
£50,000 @ 60% = £30,000. The done is therefore liable to IHT of £30,000.

Question 234

22. A life office is making a payment to a policyholder on the surrender of a life assurance policy that involved a chargeable gain. How will the life office pay the proceeds?
    A. After deduction of basic rate income tax only
    B. After deduction of any tax due
    C. Gross but with a tax invoice for the amount due
    D. Without deduction of any further tax due

Answer 234

D. Without deduction of any further tax due

Although the life office is deemed to have deducted 20% at source from the life fund, it will not deduct any income tax from the chargeable gain itself. The policyholder will need to pay any further income tax due to HMRC via self-assessment.

Question 235

In which of the following circumstances might an income protection policy provider pay a commuted lump sum to the insured rather than continue paying the benefits on a regular basis?
A. It is not expected that the client will recover from their incapacity
B. The client has a life expectancy of less than 6 months
C. If the insured recovered from a condition initially expected to be terminal
D. Where the insured is aged over 55 at the time of the first claim

Answer 235

A. It is not expected that the client will recover from their incapacity

If a claimant is not expected to recover from their incapacity, an income protection policy provider may decide to pay out a commuted lump sum rather than continue paying benefits on a regular basis.

Question 236

Tom is receiving benefits from his employer’s group income protection scheme. How will these be treated in relation to his personal tax liability?
A. The benefits will be free of tax if Tom has been a member of the scheme for more than 2 years before receiving the benefits
B. Any benefits will be completely free of any liability for tax
C. They will be taxed in the same way as normal pay
D. The benefits will only be taxed if Tom is still receiving them after 12 months

Answer 236

C. They will be taxed in the same way as normal pay

Benefits from a group income protection scheme are paid out under PAYE, meaning that income tax and National Insurance contributions are deducted in the same way as for normal pay.

Question 237

Emma took out an income protection policy in June 2016 and has now been living and working in Thailand for the last 15 months. How is this likely to affect her policy?
A. The benefits would only be paid for a maximum of six months
B. Any benefits payable will likely be suspended or cancelled
C. Her premiums will have to be substantially increased
D. The term of the policy will be reduced to a maximum of age 50

Answer 237

B. Any benefits payable will likely be suspended or cancelled

Because Emma has been outside her provider’s free limits for more than a year, it is very likely that they will suspend or cancel her policy.

Question 238

Where a life office is calculating a proportionate benefit under an income protection policy, how will they usually define previous earnings?
A. Average earnings in the tax year in which incapacity started
Total earnings for the year prior to incapacity
C. Average earnings for the year or six months prior to incapacity
D. Total earnings for the six months up to when incapacity started

Answer 238

C. Average earnings for the year or six months prior to incapacity

Where a life office is calculating a proportionate benefit under an income protection policy, previous earnings are usually defined as average earnings for the year or six months prior to incapacity.

Question 239

If a claim is made on a critical illness policy, which of the following factors will NOT be checked by the office that issued the policy?
A. The diagnosed illness is likely to cause death
B. If the diagnosed illness is covered by the policy
C. Whether the diagnosed illness was not a pre-existing condition
D. Whether the policyholder disclosed all relevant facts when applying for the policy

Answer 239

A. The diagnosed illness is likely to cause death

Providing the claimant outlives the 14 - 30 days survival period, whether their illness is likely to be terminal is not relevant to the claim.

Question 240

Income Protection is likely to be a higher priority than Critical Illness cover for most people because
A. it has a shorter deferred period
B. income protection policies allow higher sums assured
C. an income protection plan covers significantly more medical conditions
D. the plan pays the benefits tax free

Answer 240

C. an income protection plan covers significantly more medical conditions

Income protection is likely to be a higher priority than critical illness for most people because it covers significantly more medical conditions, including mental health and muscular-skeletal conditions that aren’t covered by critical illness policies.

Question 241

Which of the following is true in relation to critical illness premiums?
A. Premiums are more expensive for women
B. Premiums are based on mortality statistics
C. Reviewable premiums are dependent on the health of the insured
D. Guaranteed premiums tend to be higher than reviewable premiums

Answer 241

D. Guaranteed premiums tend to be higher than reviewable premiums

Guaranteed premiums on critical illness policies tend to be higher than reviewable premiums. Premiums are unisex (gender neutral), based on morbidity statistics (not mortality) and reviewable premiums are based on the provider’s overall claims experience, not on the health of the individual life insured.

Question 242

Where an employer takes out group critical illness cover for their employees, a claim will usually only be paid where the employee survives for how many days after diagnosis?
A. 10
B. 14
C.
21
D. 30

Answer 242

D 30
For group critical illness cover, the survival period is typically 30 days.

Question 243

35. Which of the following is disregarded for long term care purposes according to the
    Care Act 2014?
    A. Surrendering an Insurance (investment) bond
    B. Selling a Capital redemption bond
    C. Individual Savings Accounts income
    D. Selling a Unit trust

Answer 243

A. Surrendering an Insurance (investment) bond

According to the Care Act 2014, insurance (commonly known as investment bonds) are still disregarded when assets are taken into account for care assessment purposes.

Question 244

Maureen has taken out a budget plan private medical insurance policy. If she makes a claim, which of the following costs is unlikely to be covered?
A. Home nursing
B.
Doctor’s fees
C. Drugs
D. Accommodation

Answer 244

A. Home nursing

A budget plan private medical insurance policy provides the very minimum of cover. It is therefore highly unlikely that home nursing will be available.

Question 245

Susan has a mortgage payment protection insurance policy. If she makes a claim on becoming unemployed, the very maximum amount of time for which benefits will be paid is usually
A. 9 months
B. 12 months
C. 18 months
D. 24 months

Answer 245

D. 24 months

The maximum benefit pay-out period for a mortgage payment protection insurance policy is typically 2 years (24 months).

Question 246

41. Ben has a budget private medical insurance policy and Claire has a comprehensive plan. Which of the following statements is TRUE?
    A. Ben’s policy has limited extra benefits
    B. Claire’s policy will have lower limits on the costs of treatments covered in any one year
    C. If there is an excess on the policy, it will be higher on Ben’s
    D. There will be no exclusions on Claire’s policy

Answer 246

C. If there is an excess on the policy, it will be higher on Ben’s

As Ben has the cheapest form of cover, his policy is unlikely to have any extra benefits. As Claire has comprehensive cover, any limits placed on the cost of treatments in a single year are likely to be higher than Ben’s. Ben’s excess is, in fact, likely to be higher than Claire’s as he has a budget plan. Claire’s policy will still have the standard exclusions.

Question 247

42. A mortgage payment protection insurance provider can cancel the policy at a minimum of how many days’ notice?
    A. 14
    B.
    21
    C.
    30
    D. 90

Answer 247

D. 90

A mortgage payment protection insurance provider can cancel a policy with a minimum of 90 days’ notice.

Question 248

43. For which type of protection policy could future risk be a factor?
    A. All contracts for longer than 10 years
    B.
    Contracts with reviewable premiums
    C.
    Contracts with add on benefits
    D. All contracts where the insured is over age 40 at the outset

Answer 248

B.
Contracts with reviewable premiums

Future risk is a factor in contracts with reviewable premiums, as the issue of affordability after a premium rise raises its head.

Question 249

47. A cross-option arrangement for a partnership is most beneficial for
    A. situations where own life policies in trust are to be used for the protection policies
    B. obtaining tax relief on the premiums of associated life assurance policies
    C. obtaining tax free benefits from associated life assurance policies
    D. preserving business property relief for inheritance tax purposes

Answer 249

D. preserving business property relief for inheritance tax purposes

A cross option arrangement for a partnership is most beneficial for preserving business property relief for IHT purposes.

Question 250

48. Peter a self-employed plumber has taken out a loan of £40,000 to buy new equipment for his business. Why might he want any associated insurance policy to repay it on his death to have a sum assured greater than the amount of the loan?
    A. To ensure that it keeps pace with inflation
    B. To take account of changes in interest rates affecting the amount to be repaid
    C. There may be early redemption penalties involved
    D. To provide funds for his dependants

Answer 250

C. There may be early redemption penalties involved

If there are early redemption penalties involved, these should be taken into account when determining the sum assured

Question 251

49. If a company has an agreement to purchase its own shares on the death of a shareholder, subject to HMRC agreement the sale will normally count as a
    A. trading receipt for corporation tax purposes
    B. disposal for capital gains tax purposes
    C. chargeable transfer for inheritance tax purposes
    D. distribution for income tax purposes

Answer 251

B. disposal for capital gains tax purposes

If a company has an agreement to purchase its own shares on the death of a shareholder, then subject to HMRC agreement, the sale will normally count as a disposal for capital gains tax purposes.

Question 252

50. The type of trust usually used with shareholder protection is a
    A. flexible trust
    B. bare trust
    C. statutory trust
    D. resulting trust

Answer 252

A. flexible trust

The type of trust usually used With shareholder protection is a flexible trust.

Question 253

What is the tax position regarding mortgage payment protection insurance?
a. There is tax relief on premiums and no tax on benefits.
b.
There is tax relief on premiums and tax on benefits.
c. There is no tax relief on premiums and no tax on benefits. d.
There is no tax relief on premiums and there is tax on
benefits.

Answer 253

c. There is no tax relief on premiums and no tax on benefits.

Question 254

Valid conditions to pay out MPPI

a proposer to have been employed or self-employed continuously for at least the last three months.
b. a proposer to be employed or self-employed for at least 16 hours a week.
c. that pre-existing conditions are included.
d. individuals to be aged between 16 and 60.

Answer 254

b. a proposer to be employed or self-employed for at least 16 hours a week.

Question 255

When looking at the cover provided with private medical insurance:
a. home nursing during recovery is not covered.
b. policies are only available on an individual basis.
C. excesses tend to be lower on basic plans.
d.outpatient treatment is generally included

Answer 255

d.outpatient treatment is generally included

Question 256

When underwriting mortgage payment protection insurance, normally:
a. it is fully underwritten and this could include a report from the applicant’s doctor and a medical b.
underwriting is restricted purely to the proposal and potentially a report from the applicant’s doctor only.
c. pre-existing medical conditions are excluded.
d. there is no underwriting given the relatively low levels of benefits payable.

Answer 256

c. pre-existing medical conditions are excluded

Question 257

James makes a lifetime gift into a trust which is not an absolute/bare or disabled trust. How much tax is due immediately? Assume no annual exemptions are available
A. 20% on the amount gifted into trust
B. 20% on the amount gifted into trust that exceeds the available nil rate band
C. 40% on the amount gifted into trust that exceeds the available nil rate band
D. 40% on the amount gifted into trust

Answer 257

B. 20% on the amount gifted into trust that exceeds the available nil rate band

A lifetime gift into an absolute/bare or disabled trust is a potentially exempt transfer (PET) and no tax is due immediately. However, gifts into other types of trusts are chargeable lifetime transfers (CLTs). Ignoring exemptions, IT is due at 20% on the amount of the CLT that exceeds James’s available nil rate band (NRB).

Question 258

6. Which of the following statements relating to the personal independence payment is true?
   A. It is a taxable benefit
   B. It is a means-tested benefit
   C. Eligibility is based on an assessment of individual need
   D. Eligibility is based on the claimant’s National Insurance contribution history

Answer 258

C. Eligibility is based on an assessment of individual need

A personal independence payment (PIP) is neither taxable nor means-tested. Eligibility is based on assessment of individual need and is not based on the claimant’s NI record.

Question 259

7. In relation to the State pension credit, an individual reaching State pension age on or after 6 April 2016 may normally be entitled to
   A. the guarantee credit only
   B. the savings credit only
   C. both the guarantee and the savings credit
   D. neither the guarantee nor the savings credit

Answer 259

C. both the guarantee and the savings credit

A person reaching State pension age on or after 6 April 2016 may normally be entitled to the guarantee credit of the State pension credit only. Those who reached State pension age before that date may be entitled to the savings credit as well.

Question 260

8. Mark and Joanne are making a claim in November 2021 for child tax credit having had their first child in June 2021. Their claim can be backdated to the
   A. start of the 2021/22 tax year
   B. date of birth of their child
   C. start of the month following the birth of their child
   D. month before only

Answer 260

D. month before only

A claim for child tax credit can be backdated for no more than one month.

Question 261

9. With regard to decreasing term assurances, which of the following statements is TRUE?
   A. Premiums will often be payable for a period slightly longer than the duration of
   *
   the cover
   B.
   Escalating payments are available on a family income benefit policy
   C.
   Mortgage protection insurance is suitable for protecting interest-only mortgages
   D.
   Gift inter vivos term assurance is appropriate to protect against the IHT potentially payable on an estate on death

Answer 261

B.
Escalating payments are available on a family income benefit policy

Premiums will often be payable for a period slightly shorter than the duration of the cover, not longer. Mortgage protection insurance is suitable for protecting capital and interest (repayment mortgages), rather than interest-only mortgages. Gift inter vivos term assurances are designed to pay the IHT payable on potentially exempt transfers (PETs), not the estate. The only true statement is that escalating payments are available on a family income benefit policy.

Question 262

L. Which of the following statements CORRECTLY defines the pure or net premium calculated for life assurance policies by actuaries from mortality tables?
A. The premium required just to meet the claims of those who die during the year
B.
The actual premium that will be paid by the policyholder
C. The premium for all policyholders in good health
D. The premium required to meet claims each year including an assumed interest rate of 5%

Answer 262

A. The premium required just to meet the claims of those who die during the year

The pure or net premium calculated for life assurance policies by actuaries from mortality tables is the premium required just to meet the claims of those who die during the year.

Question 263

12. Craig has had a life assurance policy assigned to him. By when should he notify the
    life office of the assignment?
    A. Within 30 days of the date of the assignment
    B.
    As soon as possible
    C. At any time before making a claim
    D. By the end of the month in which the assignment took place

Answer 263

B.
As soon as possible

Craig should notify the life office of the assignment as soon as possible to ensure that his interest is noted in the correct priority order.

Question 264

13. Jack, who is married to Vera, has an endowment policy approaching maturity. The life office’s form of discharge can be signed by A.
    Jack or his solicitor
    B.
    Jack or Vera
    C.
    Jack or anyone appointed by him
    D. Jack only

Answer 264

D. Jack only

As the policyholder, Jack has legal title to the maturity proceeds of his endowment policy. He should, therefore, be the person who signs the life office’s form of discharge.

Question 265

14. Shona has been advised to take out an increasing term assurance as protection for her dependants. The reason for this would be to ensure the A.
    sum assured keeps pace with inflation
    B. premium increases are in line with salary increases each year
    C. original sum assured can be maintained over the term of the policy
    D. premiums and the sum assured rise in line with interest rates

Answer 265

A.
sum assured keeps pace with inflation

An increasing term assurance will help Shona’s sum assured keep pace with inflation by automatically increasing it each year, usually in line with an inflation-related index or a fixed percentage.

Question 266

15. Julie has decided to pay the premiums on her life assurance policy by monthly instalments. This means that the premium she pays will have a
    A handling fee
    B. frequency loading
    C. net premium adjustment
    D. natural premium reduction

Answer 266

B. frequency loading

Premiums are usually calculated on a yearly basis and assume that the whole premium is available to the life office for investment at the start of the policy year. Julie’s premium will include a frequency loading to compensate the life office for not having access to her full premium up-front.

Question 267

16. Where a claim is made under a mortgaged life policy, who will the life office make the payment to?
    A.
    The policyholder
    B.
    The mortgagee
    C.
    The mortgagor
    D. The life assured

Answer 267

B.
The mortgagee

Where a claim is made under a mortgaged life policy, the life office will make the payment to the mortgagee (the lender).

Question 268

18. Helen has made a chargeable gain of £4,500 on the surrender of her non-qualifying life assurance policy. If her taxable income in 2021/22 is £40,000 she will be liable for which of the following taxes on the gain?
    A. Capital gains tax at 10%
    B.
    Capital gains tax at 20%
    C. Income tax at an extra 20%
    D. Income tax at an extra 40%

Answer 268

C. Income tax at an extra 20%

Helen’s taxable income (her income after the personal allowance) is already in excess of the basic rate tax band (£37,700 in 2021/22). The full amount of the gain is therefore subject to higher rate tax. 20% is deemed to have been taken in the life fund, so Helen will owe an additional 20% on the £4,500 gain.

Question 269

Aisling has started a new occupation on a part-time basis, three years after taking out her income protection policy. How will this change be treated by most providers?
A. Her benefits will always be reduced
B. Her premiums will always be reduced
C. The cover will cease due to non-disclosure
D.
The benefits will only be paid in relation to her new job

Answer 269

D.
The benefits will only be paid in relation to her new job

For most providers, the definition of incapacity will be based on the occupation immediately prior to making the claim, i.e., Aisling’s new occupation.

Question 270

Amanda has a term assurance policy that includes Waiver of Premium (WOP). For how long will the waiver of premiums continue when a valid claim is made?
A. For a maximum of 2 years
B. Until she returns to work, the expiry of the policy or a specified age-
C. Until she returns to work
D. For a period of between 2 and 5 years depending on the reason for her claim

Answer 270

B. Until she returns to work, the expiry of the policy or a specified age-

Waiver will continue until Amanda returns to work, her policy expires or she reaches a specified age - whichever happens first.

Question 271

33. Although no set survival period is specified in the ABI best practice, which of the following reflects the typical range of survival periods for critical illness cover on the market?
    A. 7 - 14 days
    B. 10 - 14 days
    C. 14 - 21 days
    D. 14 - 30 days

Answer 271

D. 14 - 30 days

The typical range of survival periods for critical illness cover on the market is 14 - 30 days.

Question 272

34. Under total and permanent disability, the strictest definition in terms of when a critical illness cover would pay out, is that the client would be unable to
    A. work in a suited occupation ever again
    B. look after themselves ever again
    C. do their own occupation ever again
    D. complete three specified work tasks ever again

Answer 272

B. look after themselves ever again

The strictest definition is being unable to look after oneself ever again. This is a very severe level of incapacity.

Question 273

Which of the following conditions is usually excluded from critical illness cover?
A. Heart valve replacement
B. Major organ transplant
C. Temporary loss of speech
D. Alzheimer’s disease before age 60

Answer 273

A temporary loss of speech will not be classified as a critical illness and will therefore be excluded from cover. The other three options are likely to be covered.

C. Temporary loss of speech

Question 274

Which of the following factors should be carefully examined by the potential policyholder before taking out a long-term care policy?
A. The underwriting requirements
B. The charges included in the premium
C. The maximum level of benefits available
D. The number of activities of daily living (ALs) used to assess the need for care

Answer 274

The policyholder should carefully examine how many activities of daily living they will need to be unable to complete before a claim can be made - the greater the number, the harder it will be to claim on the policy.

D. The number of activities of daily living (ALs) used to assess the need for care

Question 275

Which of the following is not a main type of long-term care?
A. Family care
B.
Care in a care home
C. Care provided by a registered charity
D. Care at home

Answer 275

The main types of long-term care are: family care, professional care, care at home, sheltered housing, extra housing and close care.

C. Care provided by a registered charity

Question 276

A client who is in poor health and already needs care will most likely benefit from which of the following policies?
A. Immediate needs plan
B. Pre funded policies
C. Deferred care plan
D. Traditional insurances

Answer 276

If the individual is in poor health and already needs care, or is about to go into a nursing home, it is possible to buy a policy that will begin paying for care immediately.

A. Immediate needs plan

Question 277

Avril wants a low-cost policy that will help to pay for any medical care she requires. A disadvantage of a basic private medical insurance plan rather than a comprehensive policy is
A. the cost of drugs required in treatment is not covered
B. treatment relating to substance abuse is unlikely to be covered
C. normal pregnancy will not be covered
D. there may be fairly low limits on the cost of treatment covered in one year

Answer 277

Under a basic private medical insurance plan there is likely to be fairly low limits on the cost of treatment covered in any one policy year. If there are limits on a comprehensive plan, they will be much higher

D. there may be fairly low limits on the cost of treatment covered in one year

Question 278

With regard to mortgage payment protection insurance, which of the following statements is FALSE?
A. The cover is tied to the mortgage being taken out
B. The deferred period is often between 30 and 180 days
C. MPPI is easy to buy because there is usually limited underwriting
D. MPPI covers unemployment, as well as sickness and accident

Answer 278

A. The cover is tied to the mortgage being taken out

The cover is not tied to a specific mortgage and is portable to a new mortgage. The rest of the statements are true.

Question 279

42. Which of the following additional benefits may also be paid from an accident, sickness and unemployment insurance policy?
    A. A lump sum benefit for total and permanent disability
    B. A daily amount for each day spent in hospital
    C. A lump sum benefit for loss of a limb or sight
    D. A weekly amount for each week requiring home nursing care

Answer 279

C. A lump sum benefit for loss of a limb or sight

An accident, sickness and unemployment (ASU) policy may also pay out a lump sum benefit for loss of a limb or of sight.

Question 280

Systems Ltd pays the premiums for a group personal accident and sickness insurance for their employees. How is this treated in relation to the company’s taxation?
A. There is no tax advantage for the company
B.
They receive tax relief at 20% on the premiums paid
C. The cost is deducted from their tax liability
D. It is treated as an allowable business expense

Answer 280

D. It is treated as an allowable business expense

The employer’s premiums are treated as an allowable business expense. This means they can be deducted from the employer’s profits before those profits are charged to tax.

Question 281

Vivienne wants to apply for a mortgage payment protection insurance policy. A typical eligibility condition is that she must
A. be aged between 21 and 60
B. have been employed/self-employed continuously for the last 6 months
C. be currently working for at least 30 hours per week
D. not have any pre-existing medical conditions

Answer 281

B. have been employed/self-employed continuously for the last 6 months

One typical eligibility condition for a mortgage payment protection insurance (MPPI) policy is that the applicant must have been employed / self-employed continuously for the last 6 months. Other conditions include: applicants must generally be aged between 18 and 64, they must currently be working for at least 16 hours a week and, while they can have pre-existing medical conditions, these will be excluded from cover.

Question 282

In quantifying the protection needs of a client on death, which of the following should be considered first?
A. Capital to make lifestyle changes
B. Income for dependants in the long-term
C. Capital to settle liabilities
D. Income for dependants in the short-term

Answer 282

C. Capital to settle liabilities

The provision of a lump sum to pay off debts that will become due in full on death should be the first consideration.

Question 283

48. Where policies are written on a life of another basis in relation to share protection insurance, the main advantage is that
    A. policies will be cheaper
    B. no trusts are required
    C. tax relief will be available on the premiums
    D. there is no underwriting involved

Answer 283

B. no trusts are required

Life of another policies negate the need for trusts, because the proceeds are paid to the policyholder rather than the life assured, and it is the policyholder who needs the funds to buy the deceased’s share of the business.

Question 284

The improvements in mortality rates over the last 30 years has led to more aggressive underwriting processes which result in more lives being
A. rated
B. declined
C. accepted at lower rates
D. accepted at normal rates

Answer 284

A. rated

The improvements in mortality rates over the last 30 years have led to more aggressive underwriting practices. These have resulted in more lives being rated with only the very healthiest paying lower premiums

Question 285

Changes in society have meant that attitudes to insurance have changed too. Which of the following is NOT one of the background drivers?
The UK’s welfare state
B.
Technical developments
C. The growth of consumerism
D. An increase in client’s affordability

Answer 285

D. An increase in client’s affordability

The changes in society have meant that attitudes have changed too. The main drivers for this are the UK’s welfare state, significantly changed family models, the growth of consumerism, technological developments, changes in attitude to personal risk and an increased range of options for other ways to spend income.

Question 286

Which of the following reasons CORRECTLY explains why protection against an inheritance tax liability may be beneficial?
Estates over the value of the nil rate band are charged on an increasing scale
Unused allowances of spouses are lost
C. Executors are liable for paying any IHT before the estate is distributed
D. Transfers between spouses are only exempt up to the value of the nil rate band

Answer 286

C. Executors are liable for paying any IHT before the estate is distributed

Protection against an IHT liability may be beneficial, because executors are liable to pay the tax before they get access to the money in the estate itself. This means they generally cannot use the deceased’s own assets to pay off the IHT and may otherwise need to take out a loan to pay it.

Question 287

6. Carla aged 20 cares for her disabled mother who receives disability living allowance.
   She applied for carer’s allowance but her claim was refused. This was because Carla
   A. is under age 21
   B. has net earnings of £75 per week
   C. has savings given to her by her mother
   D. is on a full-time course at college

Answer 287

D. is on a full-time course at college

Carer’s allowance is only payable to full-time carers (i.e., those who provide care for at least 35 hours a week). Carla is therefore ineligible due to her being a full-time student.

Question 288

Which of the following benefits is not means tested?
A. Income support
B. Working tax credits
C. Attendance Allowance
D. Housing benefit

Answer 288

C. Attendance Allowance

Attendance allowance is not means tested. It is also not taxed or subject to a claimant’s national insurance contributions.

Question 289

Jane is in receipt of State pension credit. If she receives support for mortgage interest loan payments, they will be paid
A. immediately, up to £100,000 of any mortgage covered with no limits on the length of claim
B. after 39 weeks and until her mortgage is paid off
C. after 26 weeks for interest on mortgages up to £100,000
D. after 39 weeks for a maximum of 2 years

Answer 289

A. immediately, up to £100,000 of any mortgage covered with no limits on the length of claim

For pension credit claimants, Support for mortgage interest (SMI) loan payments are paid immediately, there is no maximum length of claim, and it will be paid on the first £100,000 of any mortgage.

Question 290

Robert has life assurance provided by his employer through his pension scheme which includes a continuation option. This means that Robert can
A. pay to continue the cover if he leaves the company
B. take out a new policy if he leaves the company based on his age at the time
C. continue to receive the cover at no cost if he leaves the company
D. transfer the cover to a new employer if he leaves the company

Answer 290

B. take out a new policy if he leaves the company based on his age at the time

A continuation option will entitle Robert to take out a new policy if he leaves the company. The premium will be based on his age at the date of leaving. He will need to pay the premium himself. The existing cover will not usually continue for Robert.

Question 291

Which of the following statements correctly explains the guaranteed insurability option on a life assurance policy?
A. It provides a guaranteed increase to the sum assured by a stated percentage every five years
B. It allows the policyholder to increase the sum assured by the rate of inflation every ten years without the need for further underwriting
C. It allows the policyholder to increase the sum assured on stated events within a specified time period without the need for further underwriting
D. It guarantees to increase the sum assured every year in line with the increase in prices

Answer 291

C. It allows the policyholder to increase the sum assured on stated events within a specified time period without the need for further underwriting

The quaranteed insurability option allows the policyholder to increase the sum assured on stated events (such as childbirth or moving house) within a specified time period, without the need for further underwriting.

Question 292

A mortgage is distinguished from an absolute assignment by a right known as the
A. law of reassignment
B. equity of redemption
repayment of security
D. power of retention

Answer 292

B. equity of redemption

If a life policy is assigned as security for a loan, the borrower keeps an interest in it and can have it reassigned to them on repayment of the loan. This is known as the equity of redemption.

Question 293

18. Donald, a UK resident, placed a life assurance policy in trust in July 2011 for his grandchildren and appointed his two sons, also UK residents, as the trustees. A chargeable event occurred on the policy in July 2021 giving rise to a chargeable gain.
    Donald is alive and well. On whose income, would the gain be chargeable?
    A. His grandchildren’s
    B. Both his sons equally
    C. Donald’s
    D. The gain would not be chargeable as the policy is in trust

Answer 293

C. Donald’s

As Donald is both alive and a UK resident, he would be liable for any income tax now due.

Question 294

Peter made a PET of E240,000 in September 2019. Which of the following statements CORRECTLY explains the inheritance tax implications on his estate if he died in March 2021 assuming no annual allowances were available?
A. The tax payable on his estate would be increased by £96,000
B. Taper relief reduces the gift value to £192,000, leaving a nil rate band of E133,000
C. The tax payable on his estate would be reduced by E96,000
D. The nil rate band available against his estate would be reduced to £85,000

Answer 294

D. The nil rate band available against his estate would be reduced to £85,000

The nil rate band available against his estate would be reduced by the value of the PET to
E85,000 (i.e., £325,000 - 240,000). This could potentially increase the tax payable on his estate by £85,000 @ 40% = £34,000. Taper relief is only available after 3 years, and it reduces the amount of tax payable on the PET, not the value of the PET itself.

Question 295

20. An assignment may be a chargeable event if it is
    A. for consideration
    B. a gift
    C. to a trust
    D. via a will

Answer 295

A. for consideration

An assignment for consideration, e.g. for money, is a chargeable event. The other three scenarios do not give rise to chargeable events.

Question 296

John assigns a qualifying endowment policy set up in 2014 with premiums of £500
per month to his 21-year-old son on 6th April 2021. His son must complete and return a written statement to the provider to determine whether it is non -qualifying or a restricted relief qualifying policy by the
A. 6th May 2021
B. 6th July 2021
C. 31st July 2021
D. 30th October 2021

Answer 296

B. 6th July 2021

John’s son has three months from the date of assignment to complete and return a written statement to the provider.

Question 297

Irene has taken out an income protection policy. If she becomes incapacitated and is unable to work, when will her benefits be paid?
A. After a deferred period chosen by her
B. From day one of her claim
C. After a deferred period stated by the insurer
D. If she is incapacitated for a continuous period of 3 months or more

Answer 297

A. After a deferred period chosen by her

The benefits from an income protection policy start to be paid out once the deferred period has expired. The defered period is selected by the policyholder at outset.

Question 298

25. Christopher, a doctor, has taken out an income protection policy to insure against the costs of employing a locum if he is ill, therefore the premiums qualified as a deductible business expense. The benefits he receives on a claim will be paid
    A. gross and free of any liability for income tax
    B. gross but taxable as a business receipt
    C. net of basic rate income tax
    D. net of corporation tax

Answer 298

B. gross but taxable as a business receipt

Where the premiums of an income protection policy are claimed as a business expense, the benefit will be paid gross and be taxable as a business receipt.

Question 299

Norma is about to start receiving benefits from her income protectionbolicy. How
will the payments be made to her?
A. Gross but liable for income tax at her appropriate rates
B. After the deduction of income tax at her appropriate rates
C. After the deduction of income tax at basic rate
D. Gross with no liability for income tax

Answer 299

D. Gross with no tax liability

The benefits from an individual income protection policy are paid gross, with no liability to income tax. This contrasts with a group policy, which is taxable and paid net.

Question 300

Maureen who is currently on a sabbatical from work wants an income protection policy. Which of the following is the maximum amount of benefit likely to be available?
A. £1,000 per month
B. £100,000 over the lifetime of the policy
C. £18,000 per year
D. £250 per month

Answer 300

C. £18,000 per year

Homemaker’s cover is typically in the region of £15,000 - £18,000 a year.

Question 301

37. A local authority may assess an individual as being able to meet the full cost of their own care if the persons notional and actual capital is in excess of
    A. £42,157
    B. £29,422
    C. £23,250
    D. £52,500

Answer 301

C. £23,250

If a person’s actual and notional capital added up to more than £23,250 the local authority may assess the individual as being able to meet the full cost of their care.

Question 302

38. It is most likely that the benefits provided from a personal accident and sickness policy would be linked to salary rather than fixed sums when the policy is
    A. provided as a group scheme by an employer
    B. a short-term policy
    C. offering a weekly sickness benefit
    D. taken out as a standalone contract

Answer 302

A. provided as a group scheme by an employer

The benefits under a personal,
accident and sickness policy are most likely to be linked to salary when the policy is provided as a group scheme by an employer.

Question 303

The usual process with private medical insurance policies is that pre-existing conditions are excluded from cover for the first
A. 6 months
B. 1 year
C. 2 years
D. 5 years

Answer 303

C. 2 years

Pre-existing conditions are usually excluded from cover for the first two years

Question 304

Who from the following would be ineligible for a typical Mortgage Payment
Protection Insurance policy?
A. Kathleen, aged 32, with her main residence on the Isle of Man
B. Norma, aged 66, with her main residence in the England
C. Daniel aged 62, with his main residence in the Channel Islands
D. Peter, aged 42, with his main residence in the Scotland

Answer 304

B. Norma, aged 66, with her main residence in the England

Norma is likely to be ineligible, as a
typical mortgage payment protection insurance (MPPI) policy is available from age 18 years to 64 years. Cover is typically available to those resident in the UK, the Channel Islands and the Isle of Man.

Question 305

40. Who from the following would be ineligible for a typical Mortgage Payment
    Protection Insurance policy?
    A. Kathleen, aged 32, with her main residence on the Isle of Man
    B.
    Norma, aged 66, with her main residence in the England
    C.
    Daniel aged 62, with his main residence in the Channel Islands
    D. Peter, aged 42, with his main residence in the Scotland

Answer 305

B.
Norma, aged 66, with her main residence in the England

Norma is likely to be ineligible, as a typical mortgage payment protection insurance (MPPI) policy is available from age 18 years to 64 years. Cover is typically available to those resident in the UK, the Channel Islands and the Isle of Man.

Question 306

How many days’ notice must an insurer give if they want to make an amendment to a mortgage payment protection policy?
A. 30 days
B. 60 days
C. 90 days
D. 120 days

Answer 306

A. 30 days

an insurer wishes to make an amendment to a mortgage payment protection insurance
(MPPI) policy, they must give 30 days’ notice

Question 307

The factors used to calculate the amount of capital required under a protection policy to generate the net income needed are broadly based on
A.
inflation rates
B. interest rates
C. temporary annuity rates
D. average earnings indexes

Answer 307

C. temporary annuity rates

The factors used to calculate the amount of capital required under a protection policy, to generate the net income needed, are broadly based on temporary annuity rates.

Question 308

What form of WOL doesn’t require a risk profiling questionnaire

Answer 308

Guaranteed cover, as there is no investment element

Question 309

What is a pension term assurance and what are the benefits of this policy

Answer 309

This is a term assurance policy which is linked to a pension plan, where the client benefited from tax relief prior to April 2006. Now only legacy policies hold this benefit and renewals of the policy will hence lose this benefit

Question 310

How will a claim judged to be reasonable, careless or deliberate be paid

Answer 310

Reasonable - paid in full
Careless - paid in part
Deliberate - not paid at all

Question 311

What amounts can be paid into a freindly life policy

Answer 311

Either £25 per month or £270 per year

Question 312

Under laws of intestency if client dies without a will but leaves behind a child and spouse how is the money split

Answer 312

First £270,000 goes to wife remaining with half of any excess, the other excess is for children split equal

Question 313

What is meant by deliberate deprivation

Answer 313

This is where a client who is seaking to claim long term care is deliberately trying to put money into a life assurance bond so that they can gain more benefit, this is not a good idea

Question 314

What is a shared responsibility PMI

Answer 314

This is where the client will pay some amount towards the cost of treatment, also known as co-payment

Question 315

Who is working tax credit for

Answer 315

WTC is a payment to top up the earnings of working people on low incomes, including those who do not have children.
It is payable to:
•those responsible for a child, who themselves are over 16 and work at least 16 hours per week;
• those without children, who themselves are over 25 and work at least 30 hours per week; and
• those without children, who themselves are over 16, work at least 16 hours per week and have a disability.

Question 316

Who is employment and support allowance for

Answer 316

Employment and Support Allowance (ESA) is paid to people unable to work due to illness or disability, with the stated aim of helping them return to work.

Like JSA, ESA was traditionally paid in two forms - contribution-based and income-based - with the latter being replaced by Universal Credit. Contributions-based ESA is now known as ‘new-style’ ESA and is not means-tested, is dependent on the claimants NiC history and is taxable. Conversely, income-based ESA does not depend on NiCs, is means-tested and is not taxable

Question 317

Who is attendance allowance for

Answer 317

Attendance Allowance is payable to people aged over SPA who have been suffering from severe disability for a period of six months or longer.

Two levels of benefit are available

. a higher rate of £92.40 (2022/23) if care is needed on a 24-hour basis;
. a lower rate of £61.85 (2022/23) if care is needed by night or by day, but not both.

The other key facts about Attendance Allowance are that it is:

• not taxed;
• paid on top of other benefits and is not means-tested;
• not based on the claimant’s NICs history; and
• not available while a person is in an NHS hospital or a local authority-funded home.

Question 318

What are passported claims and how do they work

Answer 318

Entitlement to certain other means-tested benefits - such as pension guarantee credit or income-based JSA/income-based ESA - will automatically ‘passport’ a claimant’s entitlement to Housing Benefit The overall amount of benefits payable to an individualis however, limited by the benefit cap. Where total benefits exceed this amount, the level o Housing Benefit may be restricted.

Question 319

The types of assurance bonds

Answer 319

.
standard unit linked or with-profits bonds - offering a return by reference to the performance of a fund or funds;

guaranteed income bonds - guaranteeing a certain level of income to the investor; and

• guaranteed growth bonds - similar to the above but guaranteeing a level of growth rather than income.