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
