Revision Flashcards
If a life office offers the same rates for smokers and non smokers they are known as?
Aggregate rates
A Partnership agreement with a single option does what?
Allows one partner to force the others to buy their share but protects their right not to sell
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?
The insurer will normally expect a search to take place but will usually pay out if they have records of the plan.
True or false? Most people die within 12 months of being diagnosed with a critical illness.
False
True or false? The court can make any order that it sees fit regarding policies and other assets.
True
The state pension credit consists of what two elements?
Guaranteed credit - those reaching SPA after 2016
Savings credit - those reaching SPA before 2016
The monthly premium quoted to customers for their life assurance policy is composed of…
Chargeable premium + policy fee + frequency loading
Do insurers discriminate between accidental death and suicide?
No
How much can a trustee charge for their services?
No charge
Where someone dies intestate with a spouse and children, how are they assets distributed?
-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
What is normally the most important consideration in the pricing and underwriting of IPP?
Occupation
How do the premiums tend to differ between PAS and IPP?
PAS tends to be cheaper
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?
75/45=1.67
1.67 x 500,000 x 6 = £5,000,000
Is child benefit tax-free?
Yes, but a high-income child benefit charge applies if income is over £50k
What is a viatical settlement?
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.
What type of partnership agreement states that the deceased’s estate must sell their share to the existing partners (who must buy)?
Buy and sell agreement
What is the main drawback of a buy and sell agreement?
Loss of business relief for IHT
What type of partnership agreement allows either party to invoke their right to buy/sell, and if they do, the other party must comply?
Cross option agreement
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?
Automatic accrual agreement
How are final premiums calculated for someone taking out a life policy?
Natural/level premiums
plus
Loadings (life co expenses + profit margin)
Between what ages can individuals claim income support?
16 and SPA
At what point should an individual notify the life office of the assignment of a life policy to them?
ASAP
What is a statutory declaration?
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.
Who is the claim normally made to under a mortgaged life policy?
The lender
What documents should an adviser keep copies of after the sale of a protection product?
Fact find, written recommendations & suitability letters
What is a traditional, low-cost whole of life policy composed of?
With-profits WoL + DTA
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?
When it is contracted by specific occupations in the course of their duties
What is the benefit of a dental capitation scheme?
Allows clients to budget for dental costs to be incurred
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’
Reasonable - claim likely paid in full
Careless - claim likely to be proportionately reduced
Deliberate - claim likely declined
What is the minimum sum assured to qualify for a whole of life policy?
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)
If investment returns exceed expectations on a unit-linked protection policy, what will this likely lead to?
An increase in the potential cash-in value of the policy
What is the limit for a children’s CI cover payout in terms of frequency & amount?
-£25,000 or a % of the sum assured
-Two claims total/one claim per child
How is tariff income calculated for those looking for local authority support?
£1pw for every £250 assets are above £14,250
It is an FCA regulation that recommendations for Mortgage Payment Protection Insurance policies must be separated from any loan agreements by a minimum of:
7 days
What is the tax treatment of an employer-funded PMI plan?
Premiums are BiK, benefits are tax-free
What type of policy may pay out early in the event of the life assured meeting the definition of long term care?
Whole of Life
What is the tax treatment of an immediate needs annuity if paid directly to the care home?
Tax-free
What is the cooling off period associated with immediate needs annuities?
30 days
What will happen to someone who has no LPA but has lost mental capacity?
Court of Protection will appoint a deputy
In what situations can an LPA be revoked?
-Donor cancels with capacity
-Donor bankruptcy (only for P&A)
-Death/incapacity of attorney
-Attorney bankruptcy (only for P&A)
-Divorce/separation (usually)
Do general insurance products, such as PAS/ASU, tend to pay out lump sums or income replacement?
Short-term income replacement
Which of the following sickness/disability benefits are universal, contributory or means-tested?
-Attendance allowance
-Carer’s allowance
-DLA/PIP
-ESA
-SSP
-SMI
Universal:
-AA
-DLA/PIP
Contributory:
-ESA
-SSP
Means-tested:
-Carer’s allowance
-SMI
Which of the following low income state benefits are universal, contributory or means-tested?
-Income support
-JSA
-Statutory redundancy payments
-Working tax credit
Universal:
-Statutory redundancy payments
Contributory:
-JSA
Means tested:
-Income support
-Working tax credit
Which of the following state unemployment benefits are tax-free?
-Income support
-JSA
-Working tax credit
-Income support
-Working tax credit
What is the tax & NI treatment of a redundancy payment?
First £30k tax-free
then any excess subject to IT and employer NI only
Which of the following sickness/disability benefits are tax-free?
-Attendance allowance
-Carer’s allowance
-DLA/PIP
-ESA
-SSP
-SMI
-Attendance allowance
-DLA/PIP
What is the ‘preferred life’ method of underwriting?
High fitness/health protocols are established, providing premium discounts to those who can meet them
In what situation would someone lose the tax relief on a pension term assurance?
If the sum assured or term changes
What is a relevant life plan?
-Life only term assurance
-Paid by the employer
-Written in trust for employee’s dependants
If someone ceases paying premiums for a qualifying policy, how long do they have to reinstate them and retain the qualifying status?
13 months
What would happen to an insurance plan if the policyholder moved outside of the ‘free limits’ area?
The policy will be cancelled but may be maintained for up to a year
What is an accelerated death benefit?
-Joint life + CIC plan
-Sum assured paid on first event
What is a ‘severity-based’ CIC plan?
-Policy pays % of sum assured based on severity of illness
-Additional payments may be made as disease progresses
How does ‘debt’ work when underwriting a life assurance policy?
-Full sum assured agreed
-Decreasing debt applied to sum assured for a set period
-i.e. 90% 1st year, 80% 2nd etc
How long must the initial policy term be on a qualifying policy?
At least 10 years
True or false? A normal pregnancy is usually excluded on an IPP claim.
True
What is the tax treatment of group CIC for the individual in terms of the premiums and benefits?
-Benefit in kind for employee
-Payout will be tax-free
What is a reversionary bonus?
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.
