Random Questions Flashcards
If mortality is the biggest cost for a life insurance policy what is the second most expensive factor
Life office expenses
The majority of questions that include the words what can be concluded from this what will be the typical answer
The one where nothing can be concluded
When transferring money into a trust outside of the clients nil rate band, what % tax is payable
Basic rate of 20%
What is a moratorium and what are the conditions of this
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
What is personal accident and sickness insurance
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
The taxation of PAS
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.
What is PAYE
This is the pay as you earn system, which is what deducts tax from policies
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
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
Why might an income policy have 2 different start dates
Statutory sick pay, initially low then rises after sick pay goes
What types of trust will allow a beneficiary to access the money at age 18
Bare or absolute will always allow the beneficiary to access money at 18 as they have an ‘absolute right’ under this type of trust
What is the rule for the minimum sum assured on an endowment policy.
For each year over age 55 the minimum sum assured as a percentage of premiums decreases by 2% starting at 75%
After a claim on a cox policy following a diagnosis of bowel cancer, how long will it be before the claim is paid out
CIC policies have a survival period of 15-30 days
What is the maximum number of years after death that. Deed of variation can be served
Must be done within 2 years
What is a bolt on policy
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
What is the DWP
Department for work and pensions, they pay the state benefits typically
What is support for mortgage interest
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
What are the tax liabilities for a group ASU where the premiums are paid by the company and the benefit goes to the employees
Premiums paid will be taxed on the employee as benefit in kind but benefits are tax free
How will the payments from an impaired life annuity that are being paid directly into the clients bank account taxed
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)
Describe a PET
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
Describe CLTs
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
Describe a health cash plan
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
What are ratings and loadings
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
When dying intestate without a spouse or children, who is first to access the remaining money
Parents
What is the general function of the court of protection
To protect individuals of unsound mind under the mental health act of 1983
Who puts in the claims for the beneficiary of a protection policy in trust
The trustees as it’s their legal property but they won’t always be the beneficiary
What is a single option agreement in relation to a ci partnership protection policy
Where only the ill parter has power to make other parters of company buy the person out
What are the two components which make personal independence payments
Daily living and mobility
Describe the term paid up
Premiums stop and any life cover amount will be reduced however the policy does remain live
What is the cost of assignment for a life assurance policy to a mortgage lender
There is usually no charge for the assignment of a life policy between any two parties
When is the PAYE system used
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
What is the most important factor determining a life offices financial strenbfth
Free asset ratio
Briefly summarise the advantages and disadvantages of employer sourced protection
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
What benefit is awarded to those with a spouse who has passed away and what is the name of the benefit
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
Describe contribution based benefits
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
Describe means based testing of benefits
This is when it’s based off the circumstances of the individual
Why might a Family income benefit policy be cheeper than a level term assurance policy
Because FIB is a form of Decreasing term assurance and so premiums should generally be lowering
Describe natural and level premiums
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
What is the criteria for a qualifying policy, how can they be broken and what are the effects of this
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
What is a relevant capital payment on a chargeable gain calculation?
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
Definitions of incapacity used for income protection
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
What are the rates based on occupation class for Income protection
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
Taxation of IP policies
- 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
When is IP paid free of tax
When paid directly to the claimant under an individual policy
What is the most important factor in IP underwriting and premium rating
Occupation
What are the normal IP cover limits
50 - 60% (I think go back to check this card when know)
Name 5 common disclosures on IP policies
Not following doctor advice, dangerous sports, non disclosure,
Why might an individual take out a policy offering a lower sum assured for critical illness than term assurance
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
Typical survival period for a CIC policy
14-30 days if client dies within this period policy won’t pay out
What is the tax position of the payement of benefits under a CIC policy
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
Where are the guidelines covering charging for residential care to be found?
Care act 2014
What are the two forms of LPA
Health and welfare, property and financial affairs
Who can carry out a care assessment in an individual
The local authority or a specialist provider
How many NHS funded nursing care bands are there in England for new claimants
Single rate, previously there was 3
What type of investment insures against the risk of a client living longer than expected?
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
Name the 6 ADLs
Continence, dressing, feeding, mobility, transferring, washing
What is a roll up mortgage
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
What are the three main types of PMI
Basic, standard and comprehensive
What is the purpose of MPPI
To protect a client against an inability to keep up with mortgage payments due to accident sickness or unemployment
What is the key difference between ASU and MPPI
MPPI is linked to mortgage where as ASU is not. So really they are similar policies just less freedom in MPPI than ASU
What Is a general insurance policy and what tax are general insurance policies subject to
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%
Describe the tax treatment of PMI group cover paid for by an employer
ASU benefit is normally limited by reference to what
Group ASU cover arranged by an employer is sometimes restricted to what
How is FAR calculated
Surplus of assets held by life office over the value of its liabilities expressed as a percentage of its total assets
(A-L)/A
What precedent is there for government reducing state benefits
What main criteria must be satisfied if premiums paid to a key persons policy are to attract corporation tax relief?
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
What are the three share protection insurance options
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
What’s re the two main ways of calculating key persons suns assured
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
What are the main components to a share protection arrangement
How long does statutory sick pay last
Up to 28 weeks
What is the guaranteed minimum income for a single pensioner under the pension credit system
£182.60 PW
Who pays the working tax credit paid to employees
Directly by HMRC
How can the owner of an existing life policy put it in trust
Deed of assignment
If terminal illness cover is part of term assurance when will it not normally apply
Final 12-18 month of the contract
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
The appropriate grant of administration and the money would be payable to the legal personal representatives and Executors of the will
What might be required if a policy holder cannot produce the policy much document on a claim
An indemnity form and or a statutory declaration
What is a relevant capital payment for a chargeable gain calculation
Any benefit of a capital nature paid under the policy before the chargeable event
What is the current lifetime rate of IHT and when is it applicable
It is 20% and is only used when life time gifts are made and transfers
Which two IHT exemptions are often used for policy premiums
Annual £3600 PA and normal expenditure at £3000 PA
What amount of a clients wage that can be insured in an IP policy
50-60% or up to 75% in group
Common exclusions from IP policy
Criminal activity, alcohol, intentional, pregnancy, AIDS/HIV an fail to follow medical
What are IP premiums based on
Morbidity stats
What is the tax position on the benefits under a CIC policy
Tax free
What sort of care is the NHS in England responsible for providing once someone has left hospital
Continuing health care
What is attendance allowance
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
What type of investment insures against the risk of a client living longer than expected
Annuity
ASU benefit is normally limited by reference to what?
A set percentage of earnings and or a max monthly amount
Group ASU cover arranged by an employer is sometimes restricted to what
Incidents in work
What are the two main ways of calculating key person sun assured
Multiple of salary and proportion of profits
What are the three elements of a share protection arrangement
A transfer of shares agreement, funding for the purchase via insurance and a documentation to ensure the funds are received free of IHT
What are the types of WOL with description
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
What are assurance bonds and what are the types
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
What is a relevant life policy
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.
How would you over come the issue of policy length on a life assurance policy
Take advantage of the convertibility option switching the life assurance to WOL
What is Terminal illness benefit
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
Qualifying vs non-qualifying policies taxation
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
Qualifying policy rules for temporary insurance
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
Qualifying policy rules for WOL
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
Qualifying policy rules for endowment assurance
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.
Other qualifying policy rules
£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
What acronym is used to remember the chargeable events on none qualifying policies
DAMPS
Death
Assignment for money/moneys worth
Maturity
Part surrender
Surender
Taxation of life funds on and offshore
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
What is a mortgage
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
How are general insurance products taxed usually
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%
What police’s typically can be group protection
Main three are life, income and cic but general insurance can sometimes be group
What is an absolute assignment
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
What is an endowment
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
What is the annual limit for qualifying policies
You can only put in £3600 per year across all policies Including the friendly society policy with £25pm
What are the friendly society policies
Types of qualifying policy with a Max premium of £25pm
Taxation of life funds
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
What is top slicing
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
What Is the rule for taxation when a client starts earning over £100,000 in chargeable gains
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
Tax on trust policies for chargeable gains
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%.
What is the regular gifting annual allowance
£3000
What is a gift inter vivos policy
A policy which is 7 years long and goes with the tapered relief
Due to the rules of Intestency what will happen to any will upon marriage
It will be thrown out, so it’s always best practice to write a will upon marriage
What are the 3 factors which IP should be based on
Essential spending
Maximum level of permitted cover
Other expenditures from family
What is limited term IP
Short term IP usually 1-5 years long, lower premium but usually lower benefits offered
What is day one cover
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
What is rehabilitation benefit
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
Proportionate benefit clause
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
What are the free limits on a policy
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
What type of policy would have severity cover
CIC, it’s how the policy pays out typically, with more severe cases paying more of the amount
How much more likely are you to revive a critical illness than die
5x
What is covered in the statment of best practices
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
What are the types of CIC
guaranteed, reviewable and unit linked
What is Life cover buy back
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
Reinstatement cover
Where a joint policy can be split into individual policies following a divorce
Difference between terminal illness and CIC
Terminal illness is for diagnosis of conditions where client won’t live more than 12 months, CIC is any claim
What is nursing care allowance
Non means tested and tax free but payment is paid straight to care home or to registered nurse for care
What is involved for the criteria for means testing
Care needs, financial assessment for partial or fully funded care
What is personal expenditure allowance
Personal allowance of 24.90 pw to get what they want essentially
What can the government do if a client has a to go into a home but hasn’t got the liquid cash for this?
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
What are the 4 main types of long term care insurance
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
What type of illnesses is PMI designed for
Acute not chronic
What is the planning process
1) is there need for life assurance
2) capital & income needs
3) length of term
4) Existing policies
5) most appropriate policy
How are the business assurance policies taxed
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
What are the types of insurance a business can provided
- 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
What type of company is business insurance typically for?
Smaller businesses where there aren’t many employees so there is bigger impact on the loss of an individual
What source of income will typically not be taken into account while applying for local authority care
The value of any possessions
What are the options for with a convertibility term assurance
To turn the policy into a WOL or endowment
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
£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
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
£130k
So just not profits
On a with profits bond, upon death what would be the min amount paid out as life cover
101% of the value of the policy at death
Out of the following which does PAS not cover
Mental impairment, loss of an eye, death or loss of limb
Mental impairment
What is the sale of a life assurance policy by a terminally Ill person to an intermediary for a cash benefit know as
Viatical settlement
How are payments from an immediate needs plan taxed when paid direct to policy holder
As a purchased life annuity
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
2 years
Can MPPI be used on a second home?
No
What is the retail distribution review
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
What is the difference between enduring and lasting powers of attorney
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
What is free cover
The amount of cover provided without medical underwriting, as long as all eligible employees join
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
1
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
1
What does the term passported relate to and how does it work
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
When is it best to use single option vs double option agreements when protecting against death and serious illness
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
What is peppercorn rent
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
If the life fund of a uk insurer recives income from deposits of £50m how much tax is payable on this income
£10m think 20% you fuckin idiot
What is a link period
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
What is redundancy cover
A type of insurance which covers mortgage payments during a period of redundancy in full or partial
How is JSA tested
Payable up to 6 months if client has made sufficient NICs contributions so this benefit is contribution based not means
What effect will a cic policy paying a claim in instalments as opposed to a Lump sum have on the policy premiums
This will make it cheeper
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
The remaining life can claim state pension based off partners NI record if this is better than their own
What is the main advantage of a buy back option
After a claim on the insurance they can buy back the policy win out need for medical underwriting
Due to the married women’s act who coud not be the beneficiary to a life policy of a clients spouse
The parents of spouse
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
15% just remember it’s an inverse
Under what circumstances can Ann individual revoke their unregistered enduring power of attorney
Any time as long as they have mental capacity
How is the NHS funded nursing care payment paid and assessed
Not means tested and paid tax free
What are the annual benefit caps for single parents
London £23k rest £20k
When payments from an income protection policy are made directly to an employer how are they taxed
Without deduction of tax by the life office but are taxable in the company’s hands as income
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
NONE - these policies are mutually exclusive one does not have an effect on the other
What is the most suitable assurance policy type for a company intending to in act key persons life assurance
Renewable term assurance
When a benefit is means tested what may the benefits eligibility depend upon
The client and spouses income and/or capital being below certain limits
Are benefits taken into account during a IP policy for an unemployed person
State benefits can be taken into account irrespective of a clients tax and employment status
The cost of the life cover provided by a whole of life unit linked policy is typically met by?
A variable level of unit cancellation throughout the life of the policy
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
Trustees, not the beneficiary’s
Which possible tax advantage would most likely be sought when using a will for financial planning purposes
An inheritance tax reduction
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
Corporation tax as it’s the corporation doing it not CGT as this is not personal shares it’s corporate
Beep
Boop
How long after a critical illness occurs do you have to claim on a CIC policy
There is no time limit as long as the claim meets the criteria of the policy
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 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.
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.
C
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.
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
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.
B the morbidity is
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.
A is correct as Long term is based of ADLS
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.
C, the daughter must have this registered for it to be active
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.
C is correct, this is misleading as the policy’s are based off ADLs but this is not the definition
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.
A as divorce does not dissolve protection automatically
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.
A is the answer as there is no tax liability on the claims of PMI
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
D is the answer as voluntary redundancy is a common exclusion
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
D is the answer as voluntary redundancy is a common exclusion
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.
B is the answer,
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).
D
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
They can get in their own doctors to look at the client
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
A whole of life policy will have an option for a portion of the benefit to be accelerated
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
There is a 30-day ‘cooling-off’ period (also known as the cancellation period) associated with Immediate Needs Annuities
What is the key benefit of a dental capitation scheme
It allows individuals to budget for their expected dental costs as opposed to true insurance against dental cost
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
The company has only shown losses so they can’t do it this way
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
she has a choice, following a critical illness claim, to maintain ownership of shares in the company
What does it mean when a policy is being assigned for ‘no consideration’
This basically means it’s a gift and so should not create a tax liability
Insurable interest between divorcees -.
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
What amount of capital built up effects the clients access to benefits -
between £6000 and £16000
To Whom does working tax credit pay out to -
People age over 16 who work at least 16 hours per week
What is a traditional low cost WOL made up of -
A with profits sum assured + decreasing term assurance policy
What is the likely reason for a life policy to not be able to be written into trust -
its already assigned to a third party
What is a viatical settlement and what policy will you find it on -
A viatical I settlement is the sale of a term assurance policy by a terminally ill person for money upfront instead of upon death
What is a lifetime gift with reservation for inheritance tax purposes -
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
How much is it possible to have in the annual IHT allowance -
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
Will a qualifying policy bought on the secondhand market still be exempt from tax? -
No the transfer of ownership for money or moneys worth means that the client may be open to CGT
What is a Holloway policy -
a type of IP policy which builds up a cash revser and so forms an investment too
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.
C because u use the gross amount not the net
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
Private health insurance policies
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
A level term assurance policy with a 7 year term
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
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%
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
Chargeable lifetime as this was into a discretionary trust not a bare, absolute or disabled persons
In gifts always check the trusts!
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
she can elect for herself to be treated as a UK domicile within 2 years of James death
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
Grahams employer
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
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
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
More health and occupational questions on the IPI as this has the most rigorous underwriting
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
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 %
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
£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
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
7 days
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
the claim was in respect of Daniel being made redundant
MPPI doesn’t pay out on voluntary redundancy
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
A are the client’s current assets liquid, as this will alter his protection recommendations
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
C.
Policy charge
- 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
assignments by operation of law
- 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
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.
- 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
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.
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
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.
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
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
- 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
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.
- 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
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.
- 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
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.
- 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
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.
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
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.
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
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.
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
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.
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
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.
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
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.
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
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.
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
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.
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
D 30
For group critical illness cover, the survival period is typically 30 days.
- 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
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.
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
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.
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
D. 24 months
The maximum benefit pay-out period for a mortgage payment protection insurance policy is typically 2 years (24 months).
- 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
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.
- 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
D. 90
A mortgage payment protection insurance provider can cancel a policy with a minimum of 90 days’ notice.
- 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
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.
- 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
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.
- 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
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
- 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
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.
- The type of trust usually used with shareholder protection is a
A. flexible trust
B. bare trust
C. statutory trust
D. resulting trust
A. flexible trust
The type of trust usually used With shareholder protection is a flexible trust.
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.
c. There is no tax relief on premiums and no tax on benefits.
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.
b. a proposer to be employed or self-employed for at least 16 hours a week.
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
d.outpatient treatment is generally included
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.
c. pre-existing medical conditions are excluded
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
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).
- 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
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.
- 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
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.
- 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
D. month before only
A claim for child tax credit can be backdated for no more than one month.
- 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
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.
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%
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.
- 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
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.
- 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
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.
- 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
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.
- 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
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.
- 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
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).
- 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%
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.
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
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.
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
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.
- 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
D. 14 - 30 days
The typical range of survival periods for critical illness cover on the market is 14 - 30 days.
- 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
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.
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
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
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
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
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
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
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
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
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
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
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
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.
- 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
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.
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
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.
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
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.
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
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.
- 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
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.
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
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
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
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.
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
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.
- 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
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.
Which of the following benefits is not means tested?
A. Income support
B. Working tax credits
C. Attendance Allowance
D. Housing benefit
C. Attendance Allowance
Attendance allowance is not means tested. It is also not taxed or subject to a claimant’s national insurance contributions.
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
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.
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
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.
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
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.
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
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.
- 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
C. Donald’s
As Donald is both alive and a UK resident, he would be liable for any income tax now due.
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
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.
- An assignment may be a chargeable event if it is
A. for consideration
B. a gift
C. to a trust
D. via a will
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.
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
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.
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
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.
- 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
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.
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
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.
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
C. £18,000 per year
Homemaker’s cover is typically in the region of £15,000 - £18,000 a year.
- 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
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.
- 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
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.
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
C. 2 years
Pre-existing conditions are usually excluded from cover for the first two years
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
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.
- 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
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.
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
A. 30 days
an insurer wishes to make an amendment to a mortgage payment protection insurance
(MPPI) policy, they must give 30 days’ notice
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
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.
What form of WOL doesn’t require a risk profiling questionnaire
Guaranteed cover, as there is no investment element
What is a pension term assurance and what are the benefits of this policy
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
How will a claim judged to be reasonable, careless or deliberate be paid
Reasonable - paid in full
Careless - paid in part
Deliberate - not paid at all
What amounts can be paid into a freindly life policy
Either £25 per month or £270 per year
Under laws of intestency if client dies without a will but leaves behind a child and spouse how is the money split
First £270,000 goes to wife remaining with half of any excess, the other excess is for children split equal
What is meant by deliberate deprivation
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
What is a shared responsibility PMI
This is where the client will pay some amount towards the cost of treatment, also known as co-payment
Who is working tax credit for
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.
Who is employment and support allowance for
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
Who is attendance allowance for
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.
What are passported claims and how do they work
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.
The types of assurance bonds
.
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.
