Test Questions Flashcards
If a couple divorce and have a joint critical illness policy that allows policy splitting, then two single policies can be arranged:
a. on the same sum assured as the original but will be based on the premium rates at the time of the split.
b. on the same terms as the original.
c. but will always need to have a higher sum assured than the original policy.
d.but will require underwriting at the date they are set up.
b. on the same terms as the original.
Chapter 2C
When calculating a life assurance premium, what is the ‘pure’ premium?
a. It is the loading that must be added on for expenses.
b. The premium required to pay for the risk benefit, including office expenses, but not allowing for commission.
c. The full premium that the life office will charge the policyholder.
d. The premium required just to meet claims for those who die during the year.
d. The premium required just to meet claims for those who die during the year.
Chapter 4B1
According to the Care and Support [Charging and Assessment of Resources] Regulations 2014, the local authority has to assess an individual’s financial eligibility to receive financial assistance with care costs. What type of asset would be DISREGARDED from this assessment?
a. Shares at their market value.
b. The value of a business.
c. A second overseas property.
d. The capital value of an investment bond.
d. The capital value of an investment bond.
Chapter 8B6
Where a life office receives an enquiry from a policyholder regarding the surrender of an endowment policy, the FCA requires the life office to:
a. recommend that the policyholder receives financial advice with regard to the surrender proceeds.
b. reply within ten working days.
c. make the policyholder aware of alternative options available.
d. recommend that the policyholder receives independent legal advice before proceeding with surrender.
c. make the policyholder aware of alternative options available.
Chapter 4G4
If a civil partnership is dissolved what, if anything, would happen to a joint-life protection policy?
a.
The policy would need to be cancelled.
b.
Nothing, the dissolution does not alter a person’s interest in a policy unless a court decides otherwise.
c.
The policy would automatically be split into individual policies.
d.
One of the parties would need to be removed from the policy in order for it to continue.
b.
Nothing, the dissolution does not alter a person’s interest in a policy unless a court decides otherwise.
Chapter 2C
Which of Ravindra’s clients has a non-qualifying policy?
a. Javid, who has a fifteen year whole of life policy.
b. Bini, who has a term assurance policy with a term of nine months.
c. Samantha, who has a five year reviewable term assurance.
d. George, who has an existing twelve year endowment policy.
b. Bini, who has a term assurance policy with a term of nine months.
Chapter 5A1
Ten years ago John took out an own life, whole life policy for the benefit of his wife, Mary. They are now divorcing and Mary is seeking guidance on how the divorce affects the policy and her right to benefits. Mary should be advised that:
a. the policy will categorise the beneficiary as ‘John’s wife’, so John’s estate will benefit unless he remarries.
b. the policy becomes null and void, and she will receive the surrender value or the equivalent of the premiums paid, whichever is the greater.
c. her position as a beneficiary does not change, unless a court intervenes.
d. the policy will become ‘paid up’, and she will receive the accumulated value on John’s death.
c.
her position as a beneficiary does not change, unless a court intervenes.
Chapter 2C
The main advantage of the level premium system, when compared with the natural premium system, is that it:
a. results in lower initial expenses incurred by the policy provider.
b. reduces the level of claims faced by the policy provider.
c. avoids the need for loading premiums, where the policyholder opts for monthly payment.
d. builds up an investable reserve from which future claims can be paid.
d. builds up an investable reserve from which future claims can be paid.
Chapter 4B2
With reviewable income protection insurance, why is it important to establish the client’s attitude to risk?
a. Future premium levels depend on the life assurer’s operating costs and may vary.
b. Changes to future mortality and morbidity could result in changes to future premiums.
c. Changes to future regulation could result in changes to future premiums.
d. Future premium levels depend on stock market returns and may vary.
b. Changes to future mortality and morbidity could result in changes to future premiums.
Chapter 10B
Dan was made redundant on 1 September 2022. If he fails to find an alternative job, he knows that he will struggle to maintain his mortgage payments. From when would he be eligible to receive a Support for Mortgage Interest loan?
a. 1 October 2022.
b. 1 December 2022.
c. 1 June 2023.
d. 1 September 2023.
c. 1 June 2023.
Chapter 10
William has a reviewable critical illness policy which is just coming up to the review period. If he is asked to pay higher premiums, the most likely reason for this will be the:
a. poor performance of investments.
b. life office’s expenses having increased.
c. deterioration of his health.
d. life office’s claims experience.
d. life office’s claims experience.
Chapter 7E1
Dean is unlikely to be eligible for private medical insurance because:
a. there is a family history of chronic medical conditions.
b. he is not a resident of the UK.
c. he is over age 60.
d. he is unemployed.
b. he is not a resident of the UK.
Chapter 9B2
A potential DRAWBACK of arranging key person insurance on a major shareholder in the company is that:
a. the sum assured could be directly liable to inheritance tax.
b. the key person’s estate would need to pay income tax on the sum assured.
c. business relief would not then be allowable on the estate.
d. it could increase the value of the company and so create an inheritance tax problem for the deceased shareholder’s estate.
d. it could increase the value of the company and so create an inheritance tax problem for the deceased shareholder’s estate.
Chapter 11A2B
In England for 2022/23, how much of their income is someone in local authority funded care allowed to retain per week to meet their personal expenses?
a. £23.90.
b. £24.90.
c.£24.40.
d. £25.65.
d. £25.65.
Chapter 8B4
John owns a qualifying whole life policy which lapsed three months ago due to non-payment of premiums. How many more months does John have to reinstate the policy if the qualifying status is to remain unaffected?
a.Six.
b. Nine.
c.Three.
d.Ten.
d.Ten.
Chapter 5A2I
Where a life policy is written under trust, from whom can the life office accept a valid discharge for the maturity proceeds?
a.The settlor.
b.The beneficiaries of the trust.
c.The trustees.
d.The settlor and trustees, jointly.
c.The trustees.
Chapter 4G1
Ophelia is worried about the financial risk to which she is exposed because of the hazardous pursuits that Benjamin undertakes. A necessary requirement for Ophelia to be able to effect an assurance policy on Benjamin’s life is that
A. Benjamin agrees to a trust being set up in which to settle the policy.
B. Benjamin is either her husband or her son or her father.
C. she has an insurable interest in Benjamin’s life at policy commencement.
D. she secures Benjamin’s consent to such policy.
C. she has an insurable interest in Benjamin’s life at policy commencement.
Within a life assurance fund, what rate of tax, if any, applies to the interest received from corporate bonds?
A. None.
B. 10%
C. 20%
D. 40%
C. 20%
Lucasta, single, has £500,000 assurance cover through her employment. She also has loans amounting to £750,000. Currently, she pays the interest on her loans from her regular earnings. Her mother, recently widowed, has assets of £2,000,000. Lucasta is the sole beneficiary of her mother’s will. What, if anything, can be inferred regarding Lucasta’s current life assurance needs?
A. Nothing can be inferred.
B. She has no need for any life assurance cover.
C. She needs life assurance cover of at least £250,000.
D. She needs life assurance cover of not more than £750,000.
A. Nothing can be inferred.
Harold, a married man, is wondering about what is meant when State benefits are described as means tested. He should be aware that, because of means testing, eligibility for such benefits may depend upon
A. his own income being below a certain limit only.
B. his and his wife’s income being below certain limits only.
C. his and his wife’s income and/or capital being below certain limits.
D. his National Insurance contribution record having reached a certain threshold.
C. his and his wife’s income and/or capital being below certain limits.
- The cost of the life cover provided by a whole of life unit-linked policy is typically met by
A. a fixed level of unit cancellation throughout the life of the policy.
B. a variable level of unit cancellation throughout the life of the policy.
C. an increased level in the standard annual management charge.
D. regular deductions from the standard annual management charge.
B. 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 the
A. assured.
B. beneficiaries of the trust.
C. life assured’s estate.
D. trustees.
D. trustees.
- What type of interest do the beneficiaries of a trust have with regard to the assets?
A. Equitable.
B. Insurable.
C. Legal.
D. Power of appointment.
A. Equitable.
- Which possible tax advantage would most likely be sought when using a will for financial planning purposes?
A. A better use of the potentially exempt transfer (PET) rules.
B. A Capital Gains Tax reduction.
C. An Income Tax reduction.
D. An Inheritance Tax reduction.
D. An Inheritance Tax reduction.