Revision

Question 1

If a life office offers the same rates for smokers and non smokers they are known as?

Answer 1

Aggregate rates

Question 2

A Partnership agreement with a single option does what?

Answer 2

Allows one partner to force the others to buy their share but protects their right not to sell

Question 3

Jonathan has an endowment policy that is due to mature but he can’t find the original documents. What would normally happen in these circumstances?

Answer 3

The insurer will normally expect a search to take place but will usually pay out if they have records of the plan.

Question 4

True or false? Most people die within 12 months of being diagnosed with a critical illness.

Answer 4

False

Question 5

True or false? The court can make any order that it sees fit regarding policies and other assets.

Answer 5

True

Question 6

The state pension credit consists of what two elements?

Answer 6

Guaranteed credit - those reaching SPA after 2016
Savings credit - those reaching SPA before 2016

Question 7

The monthly premium quoted to customers for their life assurance policy is composed of…

Answer 7

Chargeable premium + policy fee + frequency loading

Question 8

Do insurers discriminate between accidental death and suicide?

Answer 8

No

Question 9

How much can a trustee charge for their services?

Answer 9

No charge

Question 10

Where someone dies intestate with a spouse and children, how are they assets distributed?

Answer 10

-Spouse inherits all jointly owned property & personal chattels
-Plus the first £270k
-Plus half of any remainder
-Children inherit the other half of the remainder, held in trust until they reach 18

Question 11

What is normally the most important consideration in the pricing and underwriting of IPP?

Answer 11

Occupation

Question 12

How do the premiums tend to differ between PAS and IPP?

Answer 12

PAS tends to be cheaper

Question 13

A firm has gross profits of £75m with a wage bill of £45m. They would like to take out Key Person insurance on an employee who earns £500k and would take 6 years to replace. Using the proportion of profits formula, what would be an appropriate sum assured?

Answer 13

75/45=1.67
1.67 x 500,000 x 6 = £5,000,000

Question 14

Is child benefit tax-free?

Answer 14

Yes, but a high-income child benefit charge applies if income is over £50k

Question 15

What is a viatical settlement?

Answer 15

If the life assured is terminally ill, they can sell their life policy to a viatical company for an immediate cash payout as a % of the sum assured.

Question 16

What type of partnership agreement states that the deceased’s estate must sell their share to the existing partners (who must buy)?

Answer 16

Buy and sell agreement

Question 17

What is the main drawback of a buy and sell agreement?

Answer 17

Loss of business relief for IHT

Question 18

What type of partnership agreement allows either party to invoke their right to buy/sell, and if they do, the other party must comply?

Answer 18

Cross option agreement

Question 19

What type of partnership agreement occurs where the partner wills shares to the remaining partners, with a life policy taken out on the partner’s life being paid to their dependants?

Answer 19

Automatic accrual agreement

Question 20

How are final premiums calculated for someone taking out a life policy?

Answer 20

Natural/level premiums
plus
Loadings (life co expenses + profit margin)

Question 21

Between what ages can individuals claim income support?

Answer 21

16 and SPA

Question 22

At what point should an individual notify the life office of the assignment of a life policy to them?

Answer 22

ASAP

Question 23

What is a statutory declaration?

Answer 23

Document signed by the claimant on a policy stating that they’ve lost their policy documents and that the policy has been neither changed nor assigned.

Question 24

Who is the claim normally made to under a mortgaged life policy?

Answer 24

The lender

Question 25

What documents should an adviser keep copies of after the sale of a protection product?

Answer 25

Fact find, written recommendations & suitability letters

Question 26

What is a traditional, low-cost whole of life policy composed of?

Answer 26

With-profits WoL + DTA

Question 27

Other than following a blood transfusion in a UK hospital, when is the only time a CI policy will pay out if the policyholder contracts HIV/AIDS?

Answer 27

When it is contracted by specific occupations in the course of their duties

Question 28

What is the benefit of a dental capitation scheme?

Answer 28

Allows clients to budget for dental costs to be incurred

Question 29

Where information has been omitted when applying for a protection policy, what is likely to happen to the claim in the following three scenarios: 'reasonable' 'careless' 'deliberate'

Answer 29

Reasonable - claim likely paid in full Careless - claim likely to be proportionately reduced Deliberate - claim likely declined

Question 30

What is the minimum sum assured to qualify for a whole of life policy?

Answer 30

Generally 75% of premiums paid up to age 75, reduced by 2% for every year over 55 member is at outset of the policy (using older life for 1st death, & younger life for 2nd death)

Question 31

If investment returns exceed expectations on a unit-linked protection policy, what will this likely lead to?

Answer 31

An increase in the potential cash-in value of the policy

Question 32

What is the limit for a children's CI cover payout in terms of frequency & amount?

Answer 32

-£25,000 or a % of the sum assured -Two claims total/one claim per child

Question 33

How is tariff income calculated for those looking for local authority support?

Answer 33

£1pw for every £250 assets are above £14,250

Question 34

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

Answer 34

7 days

Question 35

What is the tax treatment of an employer-funded PMI plan?

Answer 35

Premiums are BiK, benefits are tax-free

Question 36

What type of policy may pay out early in the event of the life assured meeting the definition of long term care?

Answer 36

Whole of Life

Question 37

What is the tax treatment of an immediate needs annuity if paid directly to the care home?

Answer 37

Tax-free

Question 38

What is the cooling off period associated with immediate needs annuities?

Answer 38

30 days

Question 39

What will happen to someone who has no LPA but has lost mental capacity?

Answer 39

Court of Protection will appoint a deputy

Question 40

In what situations can an LPA be revoked?

Answer 40

-Donor cancels with capacity -Donor bankruptcy (only for P&A) -Death/incapacity of attorney -Attorney bankruptcy (only for P&A) -Divorce/separation (usually)

Question 41

Do general insurance products, such as PAS/ASU, tend to pay out lump sums or income replacement?

Answer 41

Short-term income replacement

Question 42

Which of the following sickness/disability benefits are universal, contributory or means-tested? -Attendance allowance -Carer's allowance -DLA/PIP -ESA -SSP -SMI

Answer 42

Universal: -AA -DLA/PIP Contributory: -ESA -SSP Means-tested: -Carer's allowance -SMI

Question 43

Which of the following low income state benefits are universal, contributory or means-tested? -Income support -JSA -Statutory redundancy payments -Working tax credit

Answer 43

Universal: -Statutory redundancy payments Contributory: -JSA Means tested: -Income support -Working tax credit

Question 44

Which of the following state unemployment benefits are tax-free? -Income support -JSA -Working tax credit

Answer 44

-Income support -Working tax credit

Question 45

What is the tax & NI treatment of a redundancy payment?

Answer 45

First £30k tax-free then any excess subject to IT and employer NI only

Question 46

Which of the following sickness/disability benefits are tax-free? -Attendance allowance -Carer's allowance -DLA/PIP -ESA -SSP -SMI

Answer 46

-Attendance allowance -DLA/PIP

Question 47

What is the 'preferred life' method of underwriting?

Answer 47

High fitness/health protocols are established, providing premium discounts to those who can meet them

Question 48

In what situation would someone lose the tax relief on a pension term assurance?

Answer 48

If the sum assured or term changes

Question 49

What is a relevant life plan?

Answer 49

-Life only term assurance -Paid by the employer -Written in trust for employee's dependants

Question 50

If someone ceases paying premiums for a qualifying policy, how long do they have to reinstate them and retain the qualifying status?

Answer 50

13 months

Question 51

What would happen to an insurance plan if the policyholder moved outside of the 'free limits' area?

Answer 51

The policy will be cancelled but may be maintained for up to a year

Question 52

What is an accelerated death benefit?

Answer 52

-Joint life + CIC plan -Sum assured paid on first event

Question 53

What is a 'severity-based' CIC plan?

Answer 53

-Policy pays % of sum assured based on severity of illness -Additional payments may be made as disease progresses

Question 54

How does 'debt' work when underwriting a life assurance policy?

Answer 54

-Full sum assured agreed -Decreasing debt applied to sum assured for a set period -i.e. 90% 1st year, 80% 2nd etc

Question 55

How long must the initial policy term be on a qualifying policy?

Answer 55

At least 10 years

Question 56

True or false? A normal pregnancy is usually excluded on an IPP claim.

Answer 56

True

Question 57

What is the tax treatment of group CIC for the individual in terms of the premiums and benefits?

Answer 57

-Benefit in kind for employee -Payout will be tax-free

Question 58

What is a reversionary bonus?

Answer 58

A bonus that is only payable in full at the same time as the sum assured but which will increase the surrender value by a proportion of the full amount.