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.
- Justine, an additional-rate taxpayer, invested £100,000 into an onshore life assurance bond just over four years ago. The bond’s current value is £150,000 and she now wants to make her first withdrawal. What is the maximum sum that she may withdraw without any risk of an immediate tax liability?
A. £20,000
B. £25,000
C. £30,000
D. £37,500
B. £25,000
- Cecil is over age 55 at the outset of an endowment policy. Under qualifying rules, at least 75% of total premiums is normally payable on death, but is reduced by what percentage for each year that Cecil exceeds age 55?
A. 2%
B. 3%
C. 4%
D. 5%
A. 2%
- Gerard assigned to Lucia a non-qualifying life assurance policy. Ignoring Inheritance Tax implications, what condition(s), if any, must hold in order for there to be no tax charge purely in virtue of the assignment?
A. There are no conditions.
B. Only that the assignment must be an outright gift.
C. That Gerard and Lucia are married at the time of the assignment.
D. That the assignment must be an outright gift and the surrender value at the time does not
exceed £325,000.
B. Only that the assignment must be an outright gift.
- Rachel, a bank employee, has developed a disability resulting from arthritis and had her claim under an income protection insurance policy accepted. However, she only receives a reduced amount of the total benefit possible from the policy. What is the most likely reason for this?
A. Her employer is paying her sick pay.
B. She disclosed the arthritis at the outset of the policy.
C. The policy is still within the deferred period.
D. She is only unable to perform her own occupation.
A. Her employer is paying her sick pay.
- Tom and Jane are twins with no significant health issues. They have identical income protection insurance policies effected on the same date, for the same level of cover, on the same terms. Tom is an accountant and Jane is an office clerk. How, if at all, are their monthly premiums most likely to differ?
A. It is not possible to determine.
B. Their premiums would not differ.
C. Tom’s premiums would be more expensive.
D. Jane’s premiums would be more expensive.
B. Their premiums would not differ.
- A company’s directors are considering offering group critical illness cover to the company’s employees. They have recently heard of the development of severity-based cover. They need to be aware that under such a policy
A. claims would only be valid for employees unable to work as a result of the covered illness.
B. fewer illnesses are covered compared with usual critical illness policies.
C. more than one valid claim may be made regarding a given individual, when the illness progresses in its severity.
D. valid claims would always lead to the full sum insured being paid out.
C. more than one valid claim may be made regarding a given individual, when the illness progresses in its severity.
- Whose responsibility is it to prove a critical illness claim?
A. The insurer’s chief medical officer only.
B. The policyholder’s general practitioner (GP) only.
C. The policyholder only.
D. The policyholder and the insurer’s chief medical officer jointly.
C. The policyholder only.
- The key underwriting factor for a group critical illness scheme is
A. the anticipated number of new entrants.
B. morbidity.
C. the nature of the business.
D. the number of members of the scheme.
B. morbidity.
- The Financial Conduct Authority defines long-term care insurance as essentially providing benefits to policyholders when, through deterioration of health, they
A. are likely to be unable to work for a long term, defined as at least five years.
B. are unable to perform at least five activities of daily living.
C. cannot continue to live independently without assistance.
D. must enter a long-term care home.
C. cannot continue to live independently without assistance.
- Private medical insurance premiums are being paid by the employer for an employee who is a higher-rate taxpayer. What is the employee’s tax position with regard to these premiums?
A. The employee is not liable to tax on the premiums.
B. The employee must pay Income Tax at his marginal rate.
C. The employer must pay all the tax due on behalf of the employee.
D. The employer must pay the tax due, only up to the basic-rate level, on behalf of the employee.
B. The employee must pay Income Tax at his marginal rate.
- What is the essential feature of a capitation scheme relating to a dental plan?
A. It places special restrictions on dental treatments covered.
B. It provides the possibility of cashback.
C. It is a means for people to budget for their dental costs.
D. It is a means of insuring against dental costs.
C. It is a means for people to budget for their dental costs.
- Habib has such a significant role as an employee of a pharmaceutical company that the company has recently effected a key person policy on his life. Habib has since written a will. If he were to die during the term of the policy, typically to whom would the death benefits initially be payable?
A. The company.
B. The company’s nominated beneficiaries according to the policy.
C. The executors of Habib’s will.
D. Habib’s nominated beneficiaries according to the policy.
A. The company.
- What initially happens to a deceased director’s shares in a business?
A. They are held by the company as trustee for beneficiaries.
B. They form part of the deceased’s estate.
C. They pass to the remaining directors.
D. They pass to the remaining shareholders.
B. They form part of the deceased’s estate.
An insurer that offers preferred life policies is most likely to offer:
a. quicker underwriting.
b. more flexible policies.
c. discounted premium rates.
d. more lenient underwriting
c. discounted premium rates.
Chapter 1F2
Sven’s endowment policy has matured but, before paying the policy proceeds, the assurer has asked him to sign a statutory declaration coupled with a document indemnifying them against the consequences of a third-party claim. The most likely reason for these requirements is that:
a.Sven had been made bankrupt during the policy term.
b.the policy had been converted to a paid-up basis.
c.the insurer had received notice of assignment to a lender.
d. the original policy document has been lost.
d. the original policy document has been lost.
Chapter 4F2C
Madge has been told that her benefit payments are subject to the benefit cap. This is most likely because she receives:
a.Employment and Support Allowance [support component].
b.Attendance Allowance.
c.Carer’s Allowance.
d.Jobseeker’s Allowance.
d.Jobseeker’s Allowance.
Chapter 3H2
Jorgen has an existing individual income protection plan. If he changes job, he:
a.must always notify his insurer and he might be expected to pay a higher premium if his new job is higher risk.
b.is not typically required to notify his insurer as the terms of the policy are set at the outset and cannot be changed once the policy is in force.
c.must always notify his insurer and the amount he is able to claim might be reduced if his new job is higher risk.
d.is not typically required to notify his insurer as the definition of incapacity will be based upon his occupation immediately prior to making the claim.
d.is not typically required to notify his insurer as the definition of incapacity will be based upon his occupation immediately prior to making the claim.
Chapter 6D2A
Ken died recently leaving an estate of £900,000 owned solely in his name, a civil partner and two grown-up children from a previous marriage. How would his estate be distributed if he died intestate?
a.His partner and the two children would receive a third of his estate each.
b.His partner would receive £585,000 and his children would receive £157,500 each.
c.His partner would receive the full £900,000.
d.His partner would receive £600,000 and his children would receive £150,000 each.
b.His partner would receive £585,000 and his children would receive £157,500 each.
Chapter 5E6
Shalma and Raheed have a joint critical illness policy with a sum assured of £200,000. If this is written on an ‘accelerated death payment basis’ and Raheed were to successfully claim for a critical illness, Shalma should be aware that:
a. it would pay out only if Shalma were to suffer a critical illness.
b. there would be no further payout.
c. it would pay out only if Shalma were to die.
d. it would pay out in the event of either of their subsequent deaths.
b. there would be no further payout.
Chapter 7B3
James and Rita are married. They have a joint life first death policy which is held under an equal tenancy in common arrangement. In the event of the first death, how will the claim proceeds be distributed?
a.The proceeds are split 70/30 in favour of the surviving spouse.
b.The entire proceeds are paid to the surviving spouse.
c.50% to the surviving spouse and 50% to the deceased’s estate.
d.The entire proceeds are paid to the deceased’s estate, to be distributed in accordance with the deceased’s will.
c.50% to the surviving spouse and 50% to the deceased’s estate.
Chapter 4F1B
Rory works for an employer who provides death-in-service benefits which, based on his salary, are worth £160,000. His financial adviser has established that he needs £400,000 to protect his family needs. The financial adviser would typically arrange an additional:
a.£400,000 of life cover and advise Rory to leave his employer’s scheme for tax reasons.
b.£400,000 of life cover in case the employer withdraws the scheme and leaves Rory without protection.
c.£200,000 of life cover on the basis that Rory may move job in the future.
d.£240,000 of life cover.
d.£240,000 of life cover.
Chapter 2E2
Most critical illness policies will, as a minimum, meet a set of standard definitions of critical illnesses published by the:
a.PRA.
b.Association of British Insurers.
c.FCA.
d.Chartered Insurance Institute.
b.Association of British Insurers.
Chapter 7A
When Andrew applied for long-term protection insurance, he was careless when answering the medical questions and failed to declare a material fact. If a claim is made and it is established that correct disclosure would have affected the underwriting decision, what action is the insurer most likely to take?
a.The insurer would apply a proportionate remedy, such as meeting part of the claim.
b.The claim would be avoided but, if appropriate, cover would continue.
c.The claim would be paid in full, as although Andrew acted negligently, he did not intend to mislead.
d.The policy would have been void from inception.
a.The insurer would apply a proportionate remedy, such as meeting part of the claim.
Chapter 4D4
Sergio has a personal accident and sickness policy. Jim has an income protection policy. If they both claim due to sickness, which statement is INCORRECT?
a. The deferred period on Jim’s policy is likely to be longer.
b. Premiums to Sergio’s policy are likely to cost less.
c. Sergio’s policy pays an amount linked to his earnings.
d. Jim’s policy pays an amount linked to his earnings.
c. Sergio’s policy pays an amount linked to his earnings.
Chapter 9A1
Under a partnership protection arrangement, a deceased partner’s share of the business will automatically pass to the surviving partners. Each partner is required to take out and maintain life cover on themselves. What type of legal arrangement is this describing?
a. Double-option agreement.
b. Buy-and-sell.
c. Automatic accrual.
d. Cross-option.
c. Automatic accrual.
Reference 11C3C
On surrender by a UK resident, the proceeds of an offshore insurance policy will be subject to:
a. income tax and capital gains tax on any gains at 20%.
b. income tax only at 45%.
c. income tax only at the individual’s highest marginal rate.
d. capital gains tax only at 20% on any gains.
c. income tax only at the individual’s highest marginal rate.
Bernie has died aged 80 and had been receiving the Basic State Pension. What benefits, if any, could his wife Betty [aged 78] be entitled to?
a. Betty can claim a State Pension based on Bernie’s NI record if this is better than her own.
b. Betty would not be entitled to any of Bernie’s State Pension entitlement.
c. Betty can only claim her current State Pension based on her own National Insurance record.
d. Betty could potentially claim 50% of any protected payment that exists.
a. Betty can claim a State Pension based on Bernie’s NI record if this is better than her own.
Chapter reference 3I5A
Hamish lives in rented accommodation and is seeking to claim Housing Benefit. His claim for this benefit would be ‘passported’ if he was already in receipt of:
a. Disability Living Allowance.
b. income-based Jobseeker’s Allowance.
c. a State pension.
d. Attendance Allowance.
b. income-based Jobseeker’s Allowance.
chapter reference 3G1
Eric is single and does not have children. He is aged 29 and is in receipt of Universal Credit. As part of this, he receives Housing Benefit which is limited to the cost of renting a room:
a. up to £150 per week [outside London].
b. in a self-contained flat.
c. in a shared house.
d. up to £250 per week [outside London].
c. in a shared house.
chapter reference 3G1
Keith has recently died at the age of 44, leaving his wife Linda and a 15 year old child. When considering her entitlement to a Bereavement Support Payment, Linda would receive a lump sum of:
a. £3,500 and a monthly income for 12 months.
b. £3,500 and a monthly income for 18 months.
c. £2,500 and a monthly income for 12 months.
d. £2,500 and a monthly income for 18 months.
b. £3,500 and a monthly income for 18 months.
chapter reference 3C1
Based on the information provided, which applicant may qualify for the Working Tax Credit?
a. Tig who is 23, has no children and works 25 hours a week.
b. Tim who has two children and works 14 hours a week.
c. Tom who is 26, does not have children and works 32 hours per week.
d. Tina who is a single mother working 10 hours a week.
c. Tom who is 26, does not have children and works 32 hours per week.
chapter reference 3F2B
Bereavement Support Payment is:
a. taxable and is included when calculating both the benefit cap and the calculation of income-based benefits.
b. taxable and does not count towards the benefit cap or the calculation of income-based benefits.
c. paid tax-free and does not count towards the benefit cap or the calculation of income-based benefits.
d. paid tax-free but it is included when calculating both the benefit cap and the calculation of income-based benefits.
c. paid tax-free and does not count towards the benefit cap or the calculation of income-based benefits.
chapter reference 3C1
Darren entered the assessment phase for Employment and Support Allowance [ESA] after 28 weeks, whereas Vera entered the assessment phase for ESA after three days. This is most likely to be because:
a. This is the first time Darren has claimed ESA, whereas Vera has claimed this allowance before.
b. Darren is employed, whereas Vera is self-employed.
c. Darren is self-employed, whereas Vera is employed.
d. Darren has savings of more than £10,000, whereas Vera does not.
b. Darren is employed, whereas Vera is self-employed.
chapter reference 3D4
Who would NOT be able to be a beneficiary under a life policy executed by Robin and subject to the Married Women’s Property Act?
a. Robin’s parents.
b. Robin’s daughter aged 14.
c. Robin’s son aged 21.
d. Robin’s wife.
a. Robin’s parents.
chapter reference 4C2
Stephen has died intestate. His brother, Edwin, intends to act as Stephen’s personal representative. In order to deal with Stephen’s estate, Edwin will need to obtain a grant of:
a. probate.
b. power of attorney.
c. letters of administration.
d. personal representation.
c. letters of administration.
chapter reference 4G2E
If William has set-up an absolute trust with his son as beneficiary, the main DISADVANTAGE of this is that it:
a.can only have one beneficiary.
b. is expensive to establish.
c. cannot be adapted to changing needs.
d. cannot exist for more than twenty years.
c. cannot be adapted to changing needs.
chapter reference 4C3
Rebecca has placed £10,000 in trust for her son Khalid and so:
a. Rebecca is the settlor and trustee and Khalid is the recipient.
b. Rebecca is the settlor and Khalid is the beneficiary.
c. Rebecca is the trustee and Khalid is the beneficiary.
d. Rebecca is the depositary and Khalid is the trustee.
b. Rebecca is the settlor and Khalid is the beneficiary.
chapter reference 4C
Peter has a qualifying life policy with a term of 20 years. What type of change would potentially result in a chargeable event?
a.
Death after twelve years [giving rise to a benefit].
b.
Assignment for money’s worth within the first ten years.
c.
A policy loan, at any time, at a commercial rate of interest.
d.
A part surrender after sixteen years.
b.
Assignment for money’s worth within the first ten years.
chapter reference 5C1
Neil’s qualifying policy lapsed in July 2022 due to non payment of premiums. The policy can be reinstated with no effect on its qualifying status if reinstated by:
a. January 2024.
b. August 2023.
c. July 2024.
d. October 2023.
b. August 2023.
chapter reference 5A2I
If the life fund of a UK insurer receives income from deposits of £50m, how much tax is payable on this income?
a. £10m.
b. £5m.
c. £19.5m.
d. £9.5m.
a. £10m.
chapter reference 5B
An endowment policy was taken out in 2016. To be a qualifying policy, it must have a term running until at least:
a.
2036.
b.
2026.
c.
2021.
d.
2031.
b.
2026.
chapter reference 5A1
Raud, an additional-rate taxpayer in the UK, has surrendered an offshore bond. What tax, if any, will he be subject to on the gain?
a.
45%.
b.
20%.
c.
No tax is payable.
d.
40%.
a.
45%.
chapter reference 5B1
What is typically the maximum benefit payable on a group income protection staff scheme, as a percentage of income?
a.
75% of income.
b.
45% of income.
c.
55% of income.
d.
65% of income.
a.
75% of income.
chapter reference 6F
Most income protection policies automatically include:
a.
waiver of premium.
b.
indexation.
c.
a renewable option.
d.
reviewable premiums.
a.
waiver of premium.
chapter reference 6B6
Carl, who is self-employed, has recently claimed under his income protection policy. The benefits paid to him will be paid:
a.
gross and not subject to income tax and National Insurance.
b.
net of income tax but not subject to National Insurance.
c.
net of income tax and National Insurance.
d.
gross but subject to income tax and National Insurance.
a.
gross and not subject to income tax and National Insurance.
chapter reference 6G
Based on their occupation only, who would pay the highest premium for income protection insurance cover?
a.
Azil who is a clerical worker.
b.
Lee who is a junior manager.
c.
Jim who is a shop worker.
d.
Janine who is an administrator.
c.
Jim who is a shop worker.
chapter reference 6D2
John has an income protection policy which will pay him 50% of his last year’s earnings if he is off work ill. Last year, he earned £45,500 gross and his net take home pay was £39,000. To the nearest pound, how much per month would he receive from his policy if he needed to make a claim, ignoring any deduction for State benefits?
a.
£1,500.
b.
£1,138.
c.
£1,896.
d.
£1,386.
b.
£1,138.
chapter reference 6C1
On what type of policy is critical illness cover NOT normally available as an optional extra?
a.
A whole life policy.
b.
An endowment policy.
c.
A private medical insurance policy.
d.
A term assurance.
b.
An endowment policy.
chapter reference 7D1
When paid directly to a registered care provider, payments under an immediate needs long-term care plan are:
a.
subject to savings tax.
b.
subject to capital gains tax.
c.
free of tax.
d.
subject to income tax.
c.
free of tax.
chapter reference 8D1
n a local authority financial assessment for care, assets that exceed the lower limit savings threshold by £8,000 will be assessed as giving ‘tariff income’ of:
a.
£40 per week.
b.
£8 per week.
c.
£16 per week.
d.
£32 per week.
d.
£32 per week.
chapter reference 8B5
Fred, aged 76, has been advised to transfer some of his assets to his children to minimise his inheritance tax liability. If he then needed to be assessed for local authority funded care two years later, how would they treat his earlier transfer?
a.
It would be ignored.
b.
The amount transferred previously would be fully assessable.
c.
As the transfer took place over six months ago, the local authority has the option to regard it as deliberate asset deprivation and seek to assess it.
d.
The local authority could include the assets in the assessment and seek to have them repaid.
a.
It would be ignored.
When setting up a new lasting power of attorney [LPA], the role of ‘certificate provider’ is to certify that the:
a.
attorney fulfils their role and responsibilities under the LPA.
b.
attorney understands the role and responsibilities.
c.
donor has the mental capacity to make the LPA.
d.
donor understands the LPA and is not being coerced.
d.
donor understands the LPA and is not being coerced.
chapter reference 8F8
If a client wants to fund any future long-term care costs by paying a regular amount each month, she could contribute to a[n]:
a.
whole life policy where part of the sum assured is paid out in the event of needing care.
b.
immediate needs plan.
c.
equity release plan.
d.
care bond.
a.
whole life policy where part of the sum assured is paid out in the event of needing care.
chapter reference 8D
The NHS-funded nursing care payment is:
a.
not means-tested and is paid tax-free.
b.
means-tested but is paid tax-free.
c.
not means-tested but is taxable.
d.
means-tested and is taxable.
a.
not means-tested and is paid tax-free.
A ‘named person’ on a lasting power of attorney [LPA] is the:
a.
person who completes the Part B Certificate in the LPA form.
b.
attorney.
c.
donor.
d.
person to be notified when the LPA is registered.
d.
person to be notified when the LPA is registered.
chapter reference 8F8
Payments under an immediate needs plan made direct to the policyholder are:
a.
paid net of 10% tax.
b.
taxed as a purchased life annuity.
c.
paid free of all taxes.
d.
paid gross but subject to income tax.
b.
taxed as a purchased life annuity.
chapter reference 8D1
nder what circumstances can an individual revoke their unregistered enduring power of attorney [EPA]?
a.
It is not possible to revoke an EPA.
b.
At any time as long as they have mental capacity.
c.
At any time if the attorney[s] agree.
d.
Only if the Court of Protection agrees.
b.
At any time as long as they have mental capacity.
8F7
Feedback
Premiums for a personal accident and sickness insurance policy are:
a.
subject to insurance premium tax but the benefits are paid tax-free.
b.
not subject to insurance premium tax and the benefits are paid tax-free.
c.
subject to insurance premium tax and the benefits are subject to income tax.
d.
not subject to insurance premium tax but the benefits are subject to income tax.
a.
subject to insurance premium tax but the benefits are paid tax-free.
chapter reference 9A4
When comparing private medical insurance and long-term care insurance:
a.
private medical insurance is designed to be suitable for both chronic and acute conditions.
b.
private medical insurance is primarily aimed at chronic conditions and long-term care insurance is better placed to cover acute conditions.
c.
long-term care insurance covers both chronic and acute conditions.
d.
private medical insurance is primarily aimed at acute conditions and long-term care insurance is better placed to cover chronic conditions.
d.
private medical insurance is primarily aimed at acute conditions and long-term care insurance is better placed to cover chronic conditions.
chapter reference 9B
When underwriting mortgage payment protection insurance, normally:
a.
pre-existing medical conditions are excluded.
b.
there is no underwriting given the relatively low levels of benefits payable.
c.
it is fully underwritten and this could include a report from the applicant’s doctor and a medical.
d.
underwriting is restricted purely to the proposal and potentially a report from the applicant’s doctor only.
a.
pre-existing medical conditions are excluded.
chapter reference 9C1B
When looking at the cover provided with private medical insurance:
a.
home nursing during recovery is not covered.
b.
policies are only available on an individual basis.
c.
outpatient treatment is generally included.
d.
excesses tend to be lower on basic plans.
c.
outpatient treatment is generally included.
chapter reference 9B2
If an insurance company has total assets of £37bn and total liabilities of £34bn, what is its free asset ratio?
a.
8.11%.
b.
9.19%.
c.
8.82%.
d.
4.27%
a.
8.11%.
chapter reference 10F2E
Jade and Peter have recently finalised their divorce. When they consider the future post-divorce, they should be aware that:
a.
an obligation to make maintenance payments does not necessarily create an insurable interest.
b.
neither will have an automatic insurable interest in the other’s life.
c.
Peter will have an insurable interest in Jade’s life if he is paying her maintenance.
d.
Jade will continue to automatically have an insurable interest in Peter’s life until he remarries.
b.
neither will have an automatic insurable interest in the other’s life.
chapter reference 10A2
XYZ Ltd is paying the premiums in a share protection arrangement on behalf of the directors. As a result the premiums are treated as:
a.
additional income for the directors and subject to income tax but exempt from National Insurance.
b.
a benefit in kind for the directors and subject to income tax but exempt from National Insurance.
c.
a benefit in kind but exempt from income tax and National Insurance.
d.
additional income for the directors and subject to both income tax and National Insurance.
a.
additional income for the directors and subject to income tax but exempt from National Insurance.
chapter reference 11B7
Alexis, Hugo and Serena are equal partners in a business that is valued at £300,000. In addition, the capital accounts for each partner are valued at £30,000 and net profits are £180,000 per annum. If there is no partnership agreement in place and Alexis were to die what, if anything, would his estate receive?
a.
£90,000.
b.
£100,000.
c.
The full value of his share would automatically pass to Hugo and Serena as the surviving partners.
d.
£130,000.
d.
£130,000.
chapter reference 11C1
The capital account of each partner in a business:
a.
does not form part of the assets of each partner’s estate.
b.
is contained in the profit and loss account.
c.
reflects any profits retained in the business.
d.
generally consists of liquid assets.
c.
reflects any profits retained in the business.
chapter reference 11C1
KPL Ltd is looking to arrange some key person level term assurance for four equal directors. How should the cover be arranged?
a.
KPL Ltd should arrange a policy on each director on a ‘life of another’ basis.
b.
KPL Ltd should arrange a policy on each director on an ‘own life basis’ written under trust for the benefit of KPL Ltd.
c.
Each director should arrange an ‘own life’ policy written under trust for the benefit of the surviving directors.
d.
Each director should arrange an ‘own life’ policy written under trust for the benefit of KPL Ltd.
a.
KPL Ltd should arrange a policy on each director on a ‘life of another’ basis.
chapter reference 11A5
M&B Ltd has decided that, on the death of a shareholder, the business will purchase the deceased shareholder’s shares by using life assurance on the life of each shareholder. If M&B Ltd does NOT receive HMRC approval for the arrangement, how will the proceeds from the policies be taxed?
a.
They would potentially be subject to income tax.
b.
They would always be subject to income tax.
c.
They would potentially be subject to corporation tax.
d.
They would potentially be subject to capital gains tax.
b.
They would always be subject to income tax.
chapter reference 11B5D
The insurance industry looks at ‘risks’ in terms of their impact and frequency. Protection products, such as private medical insurance, cover risks which are described as:
a.
low impact and high frequency.
b.
low frequency and low impact.
c.
low frequency and high impact.
d.
high impact and high frequency.
c.
low frequency and high impact.
chapter reference 1A
Sergio has been advised that he is UNABLE to claim Statutory Sick Pay. This is because he:
a.
is employed.
b.
earns £100 gross per week.
c.
has been off work for four consecutive days.
d.
has savings of more than £16,000.
b.
earns £100 gross per week.
Health screening as a part of medical underwriting would typically include a:
a.
tele-underwriting interview.
b.
diabetes questionnaire.
c.
saliva swab.
d.
medical examination.
c.
saliva swab.
chapter reference 4D2
Kevin completed a proposal for life assurance on 1 August 2022. He backdated the effective date of his policy. What was the earliest effective date he could select, whilst ensuring the policy’s qualifying status was not affected?
a.
1 June 2022.
b.
1 April 2022.
c.
1 July 2022.
d.
1 May 2022.
d.
1 May 2022.
chapter reference 5A2H
ohn is a carpenter by trade but has had to give up his work because of a repetitive strain injury. If he is able to claim successfully on his income protection policy, even though he could take up an office job, he is most likely to have which type[s] of cover?
a.
Any occupation only.
b.
Own occupation only.
c.
Suited occupation or any occupation.
d.
Suited occupation or own occupation.
d.
Suited occupation or own occupation.
chapter reference 6B1
Life cover buy-back allows a:
a.
life assured to replace the full sum assured under their policy without the need for further medical underwriting.
b.
life company to cancel the critical illness cover under a policy in return for a repayment of the premiums made.
c.
life company to pay a reduced lump sum on the early diagnosis of a critical illness before it fully develops.
d.
life assured to take out a restricted form of life cover without the need for further medical underwriting.
d.
life assured to take out a restricted form of life cover without the need for further medical underwriting.
chapter reference 7C4
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.
deterioration of his health.
b.
life office’s claims experience.
c.
life office’s expenses having increased.
d.
poor performance of investments.
b.
life office’s claims experience.
chapter reference 7E1
Virat is aware that his health is deteriorating. He can undertake many aspects of independent living but he has fallen a few times and needs to be able to call upon assistance. His family do not live locally. Which form of care provision will be most appropriate to meet his current needs?
a.
Care in a residential home.
b.
Care in a nursing home.
c.
Sheltered care.
d.
Domiciliary care provided by his family.
c.
Sheltered care.
chapter reference 8C5
A ‘basic’ private medical insurance policy would NOT typically cover the costs of:
a.
drugs.
b.
doctor’s fees.
c.
outpatient treatments.
d.
hospital accommodation.
c.
outpatient treatments.
chapter reference 9B2A
A client’s attitude to investment risk is most likely to be relevant when considering:
a.
inheritance tax planning.
b.
protecting mortgage payments.
c.
protecting income if unable to work.
d.
meeting medical costs.
a.
inheritance tax planning.
chapter reference 10B
An insurer that offers preferred life policies is most likely to offer:
a.
more flexible policies.
b.
quicker underwriting.
c.
discounted premium rates.
d.
more lenient underwriting.
c.
discounted premium rates.
chapter reference 1F2
If Mark has a unit-linked whole life policy on a maximum cover basis:
a.
this will offer little flexibility to amend the sum assured and /or premiums.
b.
his premiums are guaranteed throughout the policy term.
c.
the first policy review will typically be in 15 years.
d.
the insurer can reduce the life cover level at a policy review date.
d.
the insurer can reduce the life cover level at a policy review date.
chapter reference 4A1
When claiming on a life assurance policy, executors will be required to provide proof of title by producing:
a.
a grant of letters of administration.
b.
a grant of probate.
c.
the original policy document.
d.
a certified copy of the will.
b.
a grant of probate.
chapter reference 4G2E
ohn 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.
Nine.
b.
Ten.
c.
Six.
d.
Three.
b.
Ten.
chapter reference 5A2I
A life policy with a premium of £2,500 per annum was taken out eight years ago to cover any future inheritance tax liability. Taking just these premiums into account, if death occurs today how much inheritance tax, if any, has been saved?
a.
£20,000.
b.
Nil.
c.
£8,000.
d.
£12,000.
c.
£8,000.
chapter reference 5E2
An incapacity counsellor:
a.
advises proposers on what type of cover they should effect.
b.
monitors income protection claims and visit claimants to assist in their rehabilitation.
c.
liaises with the General Medical Council so that the company has up-to-date knowledge on medical treatments.
d.
advises underwriting on complex cases.
b.
monitors income protection claims and visit claimants to assist in their rehabilitation.
Eddie is a member of his employer’s group income protection scheme. In the event of a claim, benefits are paid to Eddie’s employer. How will any benefit that is passed on to Eddie be taxed?
a.
Benefits are free of all taxes.
b.
National Insurance contributions only are deducted.
c.
Income tax only is deducted.
d.
Income tax and National Insurance contributions are deducted.
d.
Income tax and National Insurance contributions are deducted.
chapter reference 6G
Typically, how much cheaper at the outset is a reviewable critical illness policy compared to a guaranteed critical illness policy?
a.
10%.
b.
40%.
c.
25%.
d.
50%.
d.
50%.
chapter reference 7E1
Conor submitted a claim on his private medical insurance policy that was refused by the insurer. This is because the claim was for:
a.
the cost of staying in a nursing home to assist in the recovery from a serious accident.
b.
consultants’ fees.
c.
a routine check-up.
d.
the accommodation and the drugs he received whilst in hospital.
c.
a routine check-up.
chapter reference 9B4
mortgage payment protection insurance policy will typically only pay mortgage interest costs for a maximum of:
a.
six months.
b.
eighteen months.
c.
one year.
d.
two years.
d.
two years.
chapter reference 9C1
Sam has had a claim on his mortgage protection policy turned down. This is most likely because:
a.
the benefit is for the full amount of his mortgage repayments.
b.
he is age 61.
c.
he is self-employed.
d.
he works less than 16 hours per week.
d.
he works less than 16 hours per week.
chapter reference 9C1B
With what type of protection product would it be necessary to establish the client’s attitude to risk?
a.
Family income benefit.
b.
Non-reviewable premium income protection insurance.
c.
Unit-linked whole of life assurance.
d.
Level term assurance.
c.
Unit-linked whole of life assurance.
chapter reference 10B
When referring to partnership insurance, what does a buy-and-sell agreement mean?
a.
The deceased partner’s family can decide to sell the share of the business to the remaining partners, but those partners can refuse to buy.
b.
The remaining partners have the option to buy the deceased partner’s share of the business, but the deceased partner’s family can refuse.
c.
The remaining partners must buy out the deceased partner’s share of the business and the family of the deceased partner must sell that share of the business.
d.
Both the surviving partners and the deceased partner’s family have the option to buy-and-sell the deceased partner’s share of the business. If so, the other party must agree.
c.
The remaining partners must buy out the deceased partner’s share of the business and the family of the deceased partner must sell that share of the business.
What is LEAST likely to be a factor that influences consumer demand for protection?
a.
Underwriting restrictions.
b.
The housing market.
c.
Affordability.
d.
Economic factors.
a.
Underwriting restrictions.
chapter reference 1D2
A UK price-comparison website has seen the sales of term assurance increase dramatically over the last few years. This is most likely to be the result of:
a.
more generous underwriting.
b.
falling expenses for insurance companies.
c.
the commoditisation of the product.
d.
an ageing population who are more likely to buy insurance.
c.
the commoditisation of the product.
chapter reference 1F5
If Susie decides that she needs to take advice to meet her protection needs, what type of product is she most likely to be considering?
a.
Level term assurance.
b.
Payment protection insurance.
c.
Mortgage protection insurance.
d.
Critical illness cover written under trust.
d.
Critical illness cover written under trust.
chapter reference 1G
When calculating the premium for a life assurance policy, a life company will apply a loading to the pure premium. What would be regarded as the major part of this loading?
a.
Provision for a fall in interest rates.
b.
Life office expenses.
c.
Allowance for an unexpected level of claims.
d.
Frequency of premium payments.
b.
Life office expenses.
chapter reference 4B4
A client cancelled his term assurance cover with Trident Life, and has proposed for identical cover with Olympus Life. The underwriters of Olympus have accepted the risk on a ‘continuing personal medical exclusions’ basis, which means that they have:
a.
provided cover without requesting evidence of the client’s medical history.
b.
adopted the underwriting decision applied by Trident Life.
c.
excluded all pre-existing conditions.
d.
applied a moratorium, excluding all pre-existing conditions for a set period.
b.
adopted the underwriting decision applied by Trident Life.
chapter reference 4D1
he individual residence nil-rate band will reduce the value of an estate by:
a.
£150,000 when passed to a spouse on death.
b.
£175,000 when passed to a spouse on death.
c.
£150,000 when passed to direct descendants on death.
d.
£175,000 when passed to direct descendants on death.
d.
£175,000 when passed to direct descendants on death.
chapter reference 5E1
With income protection insurance, which definition of incapacity will provide the highest level of cover?
a.
Any occupation.
b.
Activities of daily living.
c.
Suited occupation.
d.
Own occupation
d.
Own occupation
chapter reference 6B1
Which option is NOT included in a stand-alone critical illness policy?
a.
Waiver of premium benefit.
b.
Linked periods of illness.
c.
Children’s cover.
d.
Index-linking.
b.
Linked periods of illness.
chapter reference 7C
Both Gemma and Steve have budget private medical insurance plans. What would typically be the position if Gemma pays the first £400 of each claim and Steve pays the first £200?
a.
Steve’s policy is more likely to have limits placed upon the costs of treatment covered in any policy year.
b.
Steve’s plan is more likely to offer a discount if he joins the gym.
c.
Gemma’s policy will offer wider cover.
d.
Gemma’s premium will be less.
d.
Gemma’s premium will be less.
chapter reference 9B2A
When private medical insurance is set-up without the need to disclose medical facts, this is known as a:
a.
point of claim basis.
b.
simplified basis.
c.
moratorium underwriting basis.
d.
deferred underwriting basis.
c.
moratorium underwriting basis.
chapter reference 9B8
If the policyholder has an incapacity, waiver of premium benefits will typically pay premiums after a period of:
a.
twelve months.
b.
three months.
c.
one month.
d.
six months.
d.
six months.
chapter reference 10C1B
The main purpose of shareholder protection is to provide money on the death of a shareholder to enable their shares to be bought:
a.
by other shareholders from their estate.
b.
so the company can repay outstanding company loans.
c.
by the company so it can replace the deceased with someone else who is able to undertake the role.
d.
by the company from their estate to then redistribute.
a.
by other shareholders from their estate.
chapter reference 11B1
A firm with four partners has set up a partnership protection agreement on a buy-and-sell basis. The main disadvantage of this type of arrangement is that:
a.
the deceased partner’s share does not qualify for business relief.
b.
each partner pays the same life policy premium, regardless of their stake in the business.
c.
there is a need for multiple life policies.
d.
there is no means of allowing for the possibility that the value of a partner’s stake in the business may increase.
a.
the deceased partner’s share does not qualify for business relief.
chapter reference 11C3A
The reason virtually every life company offers smoker and non-smoker rates is to:
a.
comply with European Union and UK anti-discrimination legislation.
b.
avoid anti-selection and a major imbalance in their portfolio of life policies.
c.
meet the requirements under the FCA’s rules on the fair treatment of customers.
d.
ensure they are able to market their products to a broad cross-section of the population.
b.
avoid anti-selection and a major imbalance in their portfolio of life policies.
Ismail is 36 and is off work long-term due to a serious accident. What State benefit would he NOT potentially be able to claim?
a.
Personal Independence Payment.
b.
Support for Mortgage Interest.
c.
Income Support.
d.
Jobseeker’s Allowance.
d.
Jobseeker’s Allowance.
Universal Credit is being introduced to replace a range of existing State benefits. Which benefit will remain unaffected?
a.
Income Support.
b.
Working Tax Credit.
c.
Attendance Allowance.
d.
Child Tax Credit.
c.
Attendance Allowance.
ron is a director of a successful family-owned limited company. He has accumulated existing pension arrangements of £1.1m. Why might a relevant life policy [RLP] be of benefit to him?
a.
He would be able to claim tax relief on the premiums he pays.
b.
The benefit payable from the RLP will not count towards his lifetime pension allowance.
c.
He would benefit from simplified underwriting.
d.
The benefit payable from the RLP will count towards his annual allowance but not his lifetime pension allowance.
b.
The benefit payable from the RLP will not count towards his lifetime pension allowance.
Henry has taken out an endowment policy with a 15-year term. In order for the policy to be qualifying, total premiums paid in one year must NOT exceed twice the total premiums paid in any other year, or:
a.
12% of premiums paid over the whole term.
b.
one-twelfth of premiums paid over the whole term.
c.
one-eighth of premiums paid over the whole term.
d.
8% of premiums paid over the whole term.
c.
one-eighth of premiums paid over the whole term.
John made a potentially exempt transfer of £445,000 to his daughter, Kate. He had made no previous lifetime transfers. Kate arranged a gift inter vivos policy to cover the potential inheritance tax liability. After two years, the amount of cover offered by the policy would be:
a.
£40,000.
b.
£48,000.
c.
£32,000.
d.
£56,000.
b.
£48,000.
Under which definition of incapacity is the premium on an income protection policy likely to be lowest, for the same level, duration and scope of cover?
a.
Any occupation
b.
Activities of daily living.
c.
Suited occupation.
d.
Own occupation.
b.
Activities of daily living.
Which of the definitions that are typically used with permanent disability under a critical illness policy is most likely to pay out?
a.
Any occupation.
b.
Own occupation.
c.
Suited occupation.
d.
Unable to look after oneself ever again.
b.
Own occupation.
chapter reference 7C7
Reggie is applying for local authority funded care. He has the following assets: his home which he shares with his wife worth £180,000; £20,000 in the building society owned jointly with his wife; £10,000 in an investment bond; and £15,000 in unit trusts. How much capital would he be assessed as owning?
a.
£115,000.
b.
£25,000.
c.
£35,000.
d.
£45,000.
b.
£25,000.
What type of long-term care insurance product is most likely to ensure that all future care costs are met in full?
a.
Home reversion plan.
b.
Immediate needs plan.
c.
Deferred care plan.
d.
Care cash plan.
b.
Immediate needs plan.
When advising on mortgage payment protection insurance [MPPI], if the customer has NOT received a personalised illustration, it is possible to sell MPPI but not until:
a.
fifteen days after the mortgage sale.
b.
ten days after the mortgage sale.
c.
seven days after the mortgage sale.
d.
twenty one days after the mortgage sale.
c.
seven days after the mortgage sale.
Alan and Denise are about to marry. Denise was previously married and has an existing will that was written many years ago. What will happen to her existing will when she remarries?
a.
The will would cease to be valid in any part once Denise remarries.
b.
The will would continue to be valid but the interest of her former husband would cease.
c.
The will would have ceased to be valid before the marriage when it was clear she would remarry.
d.
The will would continue and would be unaffected.
a.
The will would cease to be valid in any part once Denise remarries.
When considering share protection insurance, the starting point should be reference to the company’s:
a.
memorandum of association.
b.
articles of association.
c.
audited accounts.
d.
budget and cash flow forecasts.
b.
articles of association.
When he died, Joe held a lasting power of attorney for his aunt. As he knew there would be no-one to act in this capacity if he died, Joe had insured his life to cover the costs of his responsibilities passing to a deputy appointed by the:
a.
Office of the Public Guardian.
b.
executors of his will.
c.
Court of Protection.
d.
Department for Health.
c.
Court of Protection.
Henrik, 48, has recently had a heart attack and will need ongoing care for a couple of years to fully recover. What State benefit would he be able to claim for the duration of his sickness?
a.
Carer’s Allowance.
b.
Statutory Sick Pay.
c.
Personal Independence Payment.
d.
Attendance Allowance.
c.
Personal Independence Payment.
Which term assurance policy should be used with a capital and repayment mortgage?
a.
Increasing term.
b.
Decreasing term.
c.
Level term.
d.
Family income benefit.
b.
Decreasing term.
A life policy on which John is the insured and Miriam the assured is said to be set up as:
a.
joint life last survivor.
b.
own life.
c.
joint life first death.
d.
life of another.
d.
life of another.
When applying for a new critical illness policy, the underwriters have applied continuing personal medical exclusions. This means that:
a.
the policy simply excludes all pre-existing conditions.
b.
the underwriters exclude pre-existing conditions from the past five years.
c.
the applicant has an existing critical illness policy and the underwriter simply adopts the same underwriting decision applied by the previous underwriters.
d.
there is little or no underwriting as the protection is part of a group scheme.
c.
the applicant has an existing critical illness policy and the underwriter simply adopts the same underwriting decision applied by the previous underwriters.
Where terminal illness benefit is included in a term assurance policy, it will typically not apply for a maximum of the final:
a.
12 months of the contract.
b.
6 months of the contract.
c.
24 months of the contract.
d.
18 months of the contract.
d.
18 months of the contract.
What are the qualifying conditions, if any, for a term assurance policy with a term of ten months?
a.
The total premiums payable in any one year must not exceed one-eighth of the total premiums payable over the whole term.
b.
The policy must secure a capital sum on death or earlier disability, and no other non-permitted benefits.
c.
The total premiums payable in any one year must not exceed three times the total premiums payable over the whole term.
d.
There are no qualifying conditions, as this can never be a qualifying policy.
d.
There are no qualifying conditions, as this can never be a qualifying policy.
chapter reference 5A1
To meet qualifying rules for whole life and temporary assurances, the sum assured on death must be at least 75% of the premiums that would be payable on the life assured’s 75th birthday. In applying this rule for policies taken out on a joint life basis, the 75th birthday is used for the:
a.
older life on both a first and second death policy.
b.
younger life on a first death policy; and the older life on a second death policy.
c.
older life on a first death policy; and the younger life on a second death policy.
d.
younger life on both a first and second death policy.
c.
older life on a first death policy; and the younger life on a second death policy.
If James has a potential inheritance tax [IHT] liability:
a.
IHT is based solely on the value of his estate on death that exceeds the nil-rate band.
b.
a policy used to pay an IHT liability that is held in trust will not form part of his estate.
c.
on his death, assets of the estate can be sold before grant of probate to pay the tax due.
d.
a gift inter vivos term policy could be used to pay for the IHT due on his estate.
b.
a policy used to pay an IHT liability that is held in trust will not form part of his estate.
Aila and Rameez are in the process of jointly setting up a joint life and critical illness policy under a split benefit trust for their children Habib and Khalid, and their grandchildren. Who would have an absolute interest in the policy?
a.
Aila and Rameez.
b.
The grandchildren.
c.
Habib and Khalid.
d.
Rameez only.
a.
Aila and Rameez.
In the future, what are most likely to result in changes to the design of critical illness policies?
a.
Medical developments.
b.
Changing demographics.
c.
Stock market returns.
d.
Regulations
a.
Medical developments.
Ryan lives in Burnley and needs local authority funded care. He has capital of £16,800. How much tariff income does he have?
a.
£10 per week.
b.
£8 per week.
c.
£11 per week.
d.
£6 per week.
c.
£11 per week.
Harold is self-funding residential care which costs £700 per week in Watford. He has assets of £29,550 but no sources of income. If he were to apply for local authority funded care, what are they most likely to tell him?
a.
He is currently eligible for fully funded local authority care.
b.
He is currently ineligible but he should re-apply in around nine weeks’ time.
c.
He is currently ineligible but he should re-apply in around twelve weeks’ time.
d.
He is currently eligible for partially funded local authority care.
b.
He is currently ineligible but he should re-apply in around nine weeks’ time.
A feature of a personal accident and sickness policy is that:
a.
full medical expenses can be recovered when the insured suffers an accident.
b.
some policies extend cover to the insured’s children.
c.
if necessary, sickness benefit will continue to be paid up to the policyholder’s normal retirement age.
d.
a lump sum is payable to the policyholder for loss of income.
b.
some policies extend cover to the insured’s children.
The marketing of private medical insurance [PMI] is changing because:
a.
policies are starting to cover chronic conditions as well as acute ones.
b.
excesses are increasing to keep the premiums down.
c.
the cost of PMI is gradually reducing.
d.
group PMI schemes are usually more expensive but will always offer better cover.
b.
excesses are increasing to keep the premiums down.
With reviewable income protection insurance, why is it important to establish the client’s attitude to risk?
a.
Changes to future regulation could result in changes to future premiums.
b.
Future premium levels depend on the life assurer’s operating costs and may vary.
c.
Future premium levels depend on stock market returns and may vary.
d.
Changes to future mortality and morbidity could result in changes to future premiums.
d.
Changes to future mortality and morbidity could result in changes to future premiums.
When using the free asset ratio [FAR] to establish the financial strength of an insurer:
a.
the FAR is unaffected by stock market movements.
b.
the FAR is equally relevant to both unit-linked and with-profit policies.
c.
a low FAR indicates strength.
d.
the FAR indicates the company’s capacity for growth by investing in new business
d.
the FAR indicates the company’s capacity for growth by investing in new business
Which best describes the situation under a cross-option partnership arrangement?
a.
If the partners wish to buy, the estate must sell but if the estate wishes to sell the partners do not have to buy.
b.
If the partners wish to buy, the estate does not have to sell and if the estate wishes to sell the partners do not have to buy.
c.
If the partners wish to buy, the estate does not have to sell but if the estate wishes to sell the partners must buy.
d.
If the partners wish to buy, the estate must sell and if the estate wishes to sell the partners must buy.
d.
If the partners wish to buy, the estate must sell and if the estate wishes to sell the partners must buy.
Robin puts an asset into trust for Flo and Geoff. Helen and Maria will ensure the assets are distributed in accordance with the trust. Who would be the settlor[s]?
a.
Flo and Geoff.
b.
Robin, Helen and Maria.
c.
Robin.
d.
Maria and Helen.
c.
Robin.
When giving notice to a life office that a policy has been assigned:
a.
a life office specific form must be completed.
b.
notice can be provided in any form.
c.
only documentation that meets the requirements of The Policies of Assurance Act 1867 can be used.
d.
any form of documentation is allowed as long as it is witnessed by at least two people.
b.
notice can be provided in any form.
A deed of variation allows the:
a.
beneficiary of a trust to vary the terms of it, usually to reduce or avoid tax.
b.
settlor of a trust to vary the terms of it, usually to reduce or avoid tax.
c.
beneficiary of a will to vary the terms of it, usually to reduce or avoid tax.
d.
person who sets the will up to vary the terms of it, usually to reduce or avoid tax.
c.
beneficiary of a will to vary the terms of it, usually to reduce or avoid tax.
Rita is looking to arrange an income protection policy but is concerned about the cost. What type of policy would typically offer the cheapest option?
a.
Limited term cover.
b.
Investment-linked policies.
c.
Back to day one’ cover.
d.
Standard policy with a four week deferred period.
a.
Limited term cover.
Premiums for critical illness policies are based on:
a.
mortality statistics with expenses being less important and investment minimal.
b.
morbidity statistics with expenses being more important and investment minimal.
c.
morbidity statistics with expenses being less important and investment minimal.
d.
mortality statistics with expenses being less important and investment maximised.
c.
morbidity statistics with expenses being less important and investment minimal.
When establishing whether an individual will need to fund their own care costs or not, a local authority will take into account:
a.
the value of the home, irrespective of whether a spouse lives there.
b.
State pension income.
c.
all of the occupational pension income, even though the spouse relies on some of it to continue to live at home.
d.
the surrender value of any life policies.
b.
State pension income.
Sven had blackouts seven years ago and as a result, he has annual check-ups. When applying for a private medical insurance policy which is underwritten on a moratorium basis, how will this condition be treated?
a.
It will be excluded from the cover offered because he will be regarded as still receiving treatment.
b.
It will be included in the cover offered from outset as it occurred more than five years ago.
c.
It will be excluded from cover at outset but will be allowed after the first four years of the policy.
d.
It will be treated as a pre-existing condition and excluded from cover for the first two years of the policy.
a.
It will be excluded from the cover offered because he will be regarded as still receiving treatment.
A limited company has arranged a key person policy using a five year term assurance policy. How will the death benefit normally be taxed?
a.
The business will be liable to corporation tax on the benefit.
b.
The business will be liable to capital gains tax on the benefit.
c.
No tax is ever payable.
d.
Income tax is potentially payable based on the tax position of the key person.
a.
The business will be liable to corporation tax on the benefit.
