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RO5 2017-2018 TESTS > TEST 2 > Flashcards

TEST 2 Flashcards

1
Q

People’s confidence in long-term financial arrangements is undermined by which of
the following factors?

A

Inflation

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2
Q

Morag is considering a policy that would enable her to maintain her mortgage
payments if she was made redundant. She should be aware that such policies:

A

will only provide benefits for a maximum of two years

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3
Q

James makes a lifetime gift into a trust which isn’t an absolute/bare or disabled trust. How much tax is due immediately?

A

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

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4
Q

Where a business is considering protection for one of its employees, the need will
depend on:

A

the individual employee’s role in the business

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5
Q

Which of the following statements relating to the personal independence payment is
true?

A

Eligibility is based on an assessment of individual need

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6
Q

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

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7
Q

Mark and Joanne are making a claim in November 2017 for child tax credit having had their first child in June 2017. Their claim can be backdated:

A

for no more than one month

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8
Q

Which of the following is a term assurance policy which may be used as an alternative
to a whole life policy?

A

Term 100

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9
Q

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

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

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10
Q

Carla is placing a life assurance policy into trust. Which of the following statements is
correct in relation to her selection of trustees?

A

The trustees should have an understanding of her wishes

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11
Q

Craig has had a life assurance policy assigned to him. By when should he notify the life office of the assignment?

A

As soon as possible

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12
Q

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 only

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13
Q

In which of the following circumstances would the claimant on a life assurance policy normally be asked to sign a Statutory Declaration?
A. When receiving the proceeds of a death claim
B. When receiving the proceeds of a maturity claim
C. When a policy document has been lost
D. When a policy has been assigned

A

C. When a policy document has been lost

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14
Q

Shona has been advised to take out an increasing term assurance as protection for her dependants. The reason for this would be:

A

to ensure that the sum assured keeps pace with inflation

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15
Q

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

frequency loading

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16
Q

Where a claim is made under a mortgaged life policy, who will the life office make the
payment to?

A

The mortgagee

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17
Q

Who is responsible for declaring a chargeable gain on a life policy to HMRC?

A

The policyholder only

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18
Q

Helen has made a chargeable gain of £4,500 on the surrender of her non-qualifying life assurance policy. If her taxable income in 2017/2018 is £40,000 she will be liable for which of the following taxes on the gain?

A

Income tax at 20%

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19
Q

John is paying regular monthly premiums on a life assurance policy to protect a
potential inheritance tax liability. Which of the following exemptions from
inheritance tax could he claim against the annual premiums totalling £3,200?

A

The annual exemption and the normal expenditure out of income

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20
Q

Frances has made a claim on the maturity of a second-hand life assurance policy and
made a chargeable gain. Which of the following taxes will she be liable for?

A

Capital gains tax

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21
Q

Andrew died in May 2017, leaving £81,250 to his niece and the remaining £285,000 to
his wife Mary. Mary’s estate is to be left to their niece. If Mary’s estate is now worth
£590,000 and she wants to take out a policy to cover the inheritance tax liability on this, she should take out a policy for which of the following amounts?

A

£8,500

22
Q

The life fund of a UK insurer is liable for capital gains tax at which of the following
rates?

A

20%

23
Q

Kevin is employed and receives sick pay from his employer. This is paid at full pay for six months and then half pay for a further six months. In arranging an income
protection policy, he will be able to take out cover based on:

A

half pay for months 7 - 12 and full pay from month 13

24
Q

The usual limitation on the amount of benefit that can be paid from an individual
income protection policy is that the total of all policies does not exceed:

A

50% - 60% of average monthly gross earnings in the year prior to incapacity

25
Q 
Jennifer, who works in the hotel and catering industry, is applying for an income
protection policy. In which occupational class will she be placed for the calculation
of her premium rate?
A

Class 2

26
Q

Daniel’s company provides income protection for him and they pay the premiums. For how long will the benefits usually be paid if he becomes ill?

A

To the earliest of his recovery or normal retirement date

27
Q

Arlene has started a second 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

It will mean that her benefits will only be paid in relation to her occupation at the time the policy started

28
Q

Sean has an income protection policy with a deferred period of 13 weeks. When
should he notify the insurance company in the event that he becomes incapacitated
and needs to make a claim?

A

As soon as possible

29
Q

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

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

30
Q

Neil’s critical illness policy has been set up on a reviewable basis. Which of the
following is the new rate based on when the reviews are undertaken?

A

Claims experience of the insurer

31
Q

Emily, a higher rate taxpayer, has received the benefits from her critical illness policy
after making a valid claim. Which of the following taxes will she be liable for?

A

There is no tax liability

32
Q

Where a combined life assurance and critical illness policy allows for a buy back of the sum assured on death after the payment of benefits on a critical illness claim, this is typically allowed for what period of time?

A

Up to six months from the end of any treatment for the diagnosed critical illness

33
Q

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

14 – 30 days

34
Q

Under total and permanent disability, which of the following definitions is the strictest in terms of when a critical illness cover would pay out?

A

Unable to look after oneself ever again

35
Q

Which of the following conditions is usually excluded from critical illness cover?
A. Heart valve replacement
B. HIV infection caused by a blood transfusion administered in the UK
C. Temporary loss of speech
D. Terminal illness

A

C. Temporary loss of speech

36
Q

Which of the following factors should be carefully examined by the potential
policyholder before taking out a long-term care policy?

A

The number of activities of daily living (ADLs) used to assess the need for care

37
Q

Belinda, a single parent, has 2 children aged 8 and 10, has taken out a personal
accident and sickness policy for herself. If she wanted to extend the cover of the
policy to cover her children, what restriction might there be?

A

The cover may be restricted to accidents only

38
Q

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

there may be limits on the cost of treatment covered in one year

39
Q

A mortgage payment protection insurance policy is designed to cover:

A

All mortgage related costs

40
Q

Which of the following additional benefits may also be paid from an accident,
sickness and unemployment insurance policy?

A

A lump sum benefit for loss of a limb or sight

41
Q

Systemis 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

It is treated as an allowable business expense

42
Q

Which of the following is not an argument in favour of taking out private medical
insurance?

A

It is more suitable for a patient with a chronic medical condition

43
Q

Vivienne wants to apply for a mortgage payment protection insurance policy. Which
of the following is a typical eligibility condition?

A

She must have been employed/self-employed continuously for the last 6 months

44
Q

In quantifying the protection needs of a client on death, which of the following
should be considered first?

A

Capital to settle liabilities

45
Q

James has completed a sales process with a client and sold a protection product. To meet the FCA rules he should keep copies of:

A

The fact-find, written recommendations and suitability letters

46
Q

Tax relief can generally be given on premiums for a key person policy where the life assured is classed as:

A

an employee

47
Q

Where policies are written on a life of another basis in relation to share protection
insurance, the main advantage is that:

A

there is no need for trusts

48
Q

Caledon Ltd has an agreed overdraft facility with their bank of £50,000. They have only ever used £20,000 of it occasionally to cover short term cash flow problems. In considering the insurance cover, they should have on this, the cover should be for:

A

£50,000

49
Q

Tim is in a partnership with Nigel and they have agreed to set up a buy and sell
agreement. The associated life assurance policies should be written as:

A

own life policies in trust for the other partner

50
Q

DDB Ltd has made a claim on a company held life policy. How is this treated in
relation to taxation?

A

The profit is treated as income of the company and subject to corporation tax

RO5 2017-2018 TESTS (2 decks)

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