Topic 11: Life Assurance Flashcards
Where a claim is made on a term assurance policy the benefits payable are always free of income tax. True or false
True – term assurances have no investment element so proceeds are paid tax‑free
What is the main benefit of a convertible term assurance
A convertible term assurance allows conversion of some or all of the plan to a different type of plan, at a later date, without the life assured having to provide evidence of their state of health
Which of the following statements relating to term assurance is correct?
a) A decreasing term assurance will pay benefits only if the insured dies within the policy term.
b) Gift inter vivos cover is maintained at the same level for seven years.
c) A convertible term assurance policy can be converted to an endowment or whole‑of‑life assurance only within two years of the date of the original policy.
d) If a convertible term assurance policy is converted to an endowment, the maturity date of the new policy must not be more than five years later than that of the original policy.
a) A decreasing term assurance will pay benefits only if the insured dies within the policy term
Which of the following is true of a whole‑of‑life policy?
a) It is designed to provide protection rather than investment.
b) Premiums are always payable throughout the full term of the policy.
c) It can only be used on a with‑profits basis.
d) It will pay out only on the death of the insured and cannot be surrendered
a) It is designed to provide protection rather than investmen
Duncan and Alice, who are married, are taking out a whole‑of‑life plan to provide for payment of inheritance tax liabilities on their deaths. The policy would normally be set up in which of the following ways?
a) Two single lives.
b) Single life
c) Joint‑life first‑death.
d) Joint‑life second‑death
d) Transfers between husband and wife are free of IHT so any liability generally arises on second death. A plan being set up to provide the funds to pay IHT would be set up on a joint‑life second‑death basi
The main advantage of writing a life assurance policy in trust is to:
a) increase personal allowances.
b) ensure the policy obtains qualifying status.
c) create a tax‑exempt fund.
d) ‘ring‑fence’ the proceeds outside the individual’s estate
d) ‘Ring‑fence’ the proceeds outside the individual’s estate
Which type of whole‑of‑life policy offers a fixed level of life cover at outset that may be increased by the addition of bonuses?
a) With‑profits.
b) Non‑profit.
c) Unit‑linked.
d) Low‑cost.
a) A with‑profits whole‑of‑life plan has a certain level of life cover at outset which can then be increased as bonuses are added during the term.
What other type of life assurance is combined with a with‑profits plan in a low‑cost whole‑of‑life plan?#
a) Non‑profits.
b) Decreasing term assurance.
c) Level term assurance.
d) Increasing term assurance
b) A low‑cost whole‑of‑life plan combines with‑profits with a decreasing term assurance.
If a policy benefits from ‘waiver of premium’, what does it mean?
a) No premiums are paid for the first 12 months of a life assurance plan.
b) Reduced premiums are paid for the first 12 months of a life assurance plan.
c) No premiums are payable if the life assured is unable to work as a result of accident or sickness.
d) Any increase in premium as a result of medical underwriting is added as a debt to the policy.
c) Waiver of premium cover means that premiums are not payable (ie they are waived) in the event that the insured is unable to work due to accident or sickness
Which of the following is incorrect in respect of low‑cost endowment policies?
a) The basic sum assured increases with the addition of bonuses.
b) The basic sum assured is lower than the amount borrowed.
c) The policy is made up of a with‑profits endowment and a decreasing term assurance.
d) The policy is guaranteed to repay the mortgage in full at the end of the term.
The answer is d). The policy is not guaranteed to repay the mortgage in full at the end of the term
