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R05 - Protection > Revision > Flashcards

Revision Flashcards

1
Q

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

A

Aggregate rates

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2
Q

A Partnership agreement with a single option does what?

A

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

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3
Q

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?

A

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

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4
Q

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

A

False

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5
Q

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

A

True

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6
Q

The state pension credit consists of what two elements?

A

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

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7
Q

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

A

Chargeable premium + policy fee + frequency loading

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8
Q

Do insurers discriminate between accidental death and suicide?

A

No

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9
Q

How much can a trustee charge for their services?

A

No charge

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10
Q

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

A

-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

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11
Q

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

A

Occupation

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12
Q

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

A

PAS tends to be cheaper

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13
Q

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?

A

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

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14
Q

Is child benefit tax-free?

A

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

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15
Q

What is a viatical settlement?

A

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.

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16
Q

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

A

Buy and sell agreement

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17
Q

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

A

Loss of business relief for IHT

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18
Q

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

A

Cross option agreement

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19
Q

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?

A

Automatic accrual agreement

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20
Q

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

A

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

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21
Q

Between what ages can individuals claim income support?

A

16 and SPA

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22
Q

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

A

ASAP

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23
Q

What is a statutory declaration?

A

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.

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24
Q

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

A

The lender

25
Q

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

A

Fact find, written recommendations & suitability letters

26
Q

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

A

With-profits WoL + DTA

27
Q

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?

A

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

28
Q

What is the benefit of a dental capitation scheme?

A

Allows clients to budget for dental costs to be incurred

29
Q

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’

A

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

30
Q

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

A

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)

31
Q

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

A

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

32
Q

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

A

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

33
Q

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

A

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

34
Q

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

A

7 days

35
Q

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

A

Premiums are BiK, benefits are tax-free

36
Q

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

A

Whole of Life

37
Q

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

A

Tax-free

38
Q

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

A

30 days

39
Q

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

A

Court of Protection will appoint a deputy

40
Q

In what situations can an LPA be revoked?

A

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

41
Q

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

A

Short-term income replacement

42
Q

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

A

Universal:
-AA
-DLA/PIP

Contributory:
-ESA
-SSP

Means-tested:
-Carer’s allowance
-SMI

43
Q

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

A

Universal:
-Statutory redundancy payments

Contributory:
-JSA

Means tested:
-Income support
-Working tax credit

44
Q

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

A

-Income support
-Working tax credit

45
Q

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

A

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

46
Q

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

A

-Attendance allowance
-DLA/PIP

47
Q

What is the ‘preferred life’ method of underwriting?

A

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

48
Q

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

A

If the sum assured or term changes

49
Q

What is a relevant life plan?

A

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

50
Q

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

A

13 months

51
Q

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

A

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

52
Q

What is an accelerated death benefit?

A

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

53
Q

What is a ‘severity-based’ CIC plan?

A

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

54
Q

How does ‘debt’ work when underwriting a life assurance policy?

A

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

55
Q

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

A

At least 10 years

56
Q

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

A

True

57
Q

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

A

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

58
Q

What is a reversionary bonus?

A

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.

R05 - Protection (1 decks)

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