Topic 11&12

Question 1

The MAIN benefit of increasing term assurance is that it:

A. qualifies for life assurance premium relief
B. provides a hedge against inflation
C. guarantees cover for the whole of the policyholder’s life
D. offers the possibility of a terminal bonus on death

Answer 1

B. provides a hedge against inflation

Question 2

What is the principal purpose of whole-of-life plans?

A. Savings
B. Investment
C. Retirement planning
D. Protection

Answer 2

D. Protection

Question 3

How is life cover paid for on a flexible whole-of-life assurance?

A. Via the bid offer spread
B. Within the plan fee
C. By cancellation of units
D. As a direct deduction from the monthly premium

Answer 3

C. By cancellation of units

Question 4

Flexible whole of life policies are best suited to which of the following scenarios?

A. Primarily as a savings vehicle
B. As a protection plan only
C. As a protection plan with some allowance for savings
D. As a way of including other forms of protection policy

Answer 4

C. As a protection plan with some allowance for savings

Question 5

For which one of the following situations might a joint whole-of-life policy be the most suitable recommendation?

A. Ken and Sheila, a recently retired couple, wish to provide a tax-free legacy

B. Simon and Lois, a middle-aged couple who wish to maximise their savings

C. Vince and Lucy, a married couple requiring a lump sum for their old age

D. Bernard and Rita, a newly married couple seeking a mortgage

Answer 5

A. Ken and Sheila, a recently retired couple, wish to provide a tax-free legacy

Question 6

Stewart wants to start a whole-of-life assurance, which will also provide critical illness cover. Which specific type of plan should he choose?

A. Flexible
B. With-profit
C. Universal
D. Unitlinked

Answer 6

C. Universal

Question 7

What is the main difference between accident sickness and unemployment (ASU) policies and income protection insurance policies?

A. ASU provides short-term cover only

B. ASU does not have a deferred payment period

C. ASU provides for other employment scenarios not just redundancy

D. ASU provides total protection for all income

Answer 7

A. ASU provides short-term cover only

Question 8

Benefits from a critical illness policy are usually payable as:

A. a lump sum to the policyholder.

B. regular income to the policyholder.

C. a lump sum to the policyholder’s estate.

D. regular income to the policyholder’s dependents.

Answer 8

A. a lump sum to the policyholder.

Question 9

Which one of the following illnesses would NOT normally result in benefits being paid out from a critical illness policy?

A. Heart attack
B. Stroke
C. Skin cancer
D. Kidney failure

Answer 9

C. Skin cancer

Question 10

What type of insurance policy can provide a daily rate of income if treatment involving an overnight stay in an NHS hospital is involved?

A. Permanent health
B. Private medical
C. Long-term care
D. Critical illness

Answer 10

B. Private medical

Question 11

Julian wishes to make sure that he can meet all of his essential outgoings if he is unable to work due to medium- or long-term illness. Which of the following insurance products would be most suitable?

A. Accident and sickness
B. Critical Illness
C. Income Protection
D. Private Medical

Answer 11

C. Income Protection

Question 12

What is usually the MAXIMUM benefit payment period for accident, sickness and unemployment (ASU) policies?

A. 1 year
B. 2 years
C. 5 years
D. 7 years

Answer 12

B. 2 years

Question 13

Which of the following is normally regarded as a standard peril in the majority of buildings insurance policies?

A. Accidental damage
B. Third party liability
C. Riot or civil commotion
D. Civil war or insurrection

Answer 13

C. Riot or civil commotion

Question 14

Which of the following statements is true in relation to either income protection insurance or critical illness cover?

A. There is no limit to the level of benefit that can be arranged under an income protection plan.

B. Premiums on a critical illness policy qualify for tax relief for retired policyholders.

C. Critical illness cover provides a taxable lump sum on diagnosis of a prescribed illness.

D. There is no limit to the number of claims that can be made on an income protection insurance policy provided premiums are paid up to date.

Answer 14

D. There is no limit to the number of claims that can be made on an income protection insurance policy provided premiums are paid up to date.

Question 15

Matthew has been given various pieces of information regarding critical illness insurance. Which of the following is correct?

A. The monthly benefit received from a critical illness policy is taxed as income

B. The lump sum benefit received under critical illness insurance is free from all UK taxes

C. Premiums on a CIC plan attract tax relief at the policyholder’s highest marginal rate

D. Monthly benefit under a critical illness plan is limited to 60% of the policyholder’s pre-disability monthly income

Answer 15

B. The lump sum benefit received under critical illness insurance is free from all UK taxes

Question 16

Christopher is employed in an occupation that requires him to be fully active and physically fit. He is concerned that he will not be able to maintain his new mortgage if he were to suffer an illness that might force him to take lower paid employment. Which of the following products would provide him with a long-term income in such an event?

A. Critical illness cover
B. Income Protection
C. MPPI
D. Whole of life plan

Answer 16

B. Income Protection

Question 17

When will benefit payments under a family income benefit plan stop?

A. Upon the death of the recipient
B. State pension age
C. At the end of the plan term
D. After 10 years

Answer 17

C. At the end of the plan term

Question 18

What type of assurance is a family income benefit plan?

A. Level term
B. Whole-of-life
C. Decreasing term
D. Endowment

Answer 18

B. Whole-of-life