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cemap unit 1 > Topic 11 Life Assurance > Flashcards

Topic 11 Life Assurance Flashcards

1
Q

What is Assurance?

A

Protection against events that will happen in the future

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2
Q

What is insurance?

A

Protection against events that may happen in the future

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3
Q

What is the most basic form of life assurance?

A

Term Assurance

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4
Q

Why is Term Assurance cheap?

A

Offers protection for a limited period and it is not invested

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5
Q

In what situation can Term Assurance be used?

A
  • Person Protection
  • Family Protection
  • Business Situations (Key Person insurance)
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6
Q

What is the Sum Assured?

A

The amount to be paid out under policy terms

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7
Q

What is the Life Assured?

A

The person covered by the policy

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8
Q

Who is the Policyholder?

A

The person who owns and pays the premium

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9
Q

What happens if the life assured survives the policy?

A

Cover ceases and no premiums are returned

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10
Q

What happens if payments are missed (30 days or more) what happens to the Term Assurance policy?

A

Cover ceases and policy lapses

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11
Q

What is Level Term Assurance?

A

When the sum assured remain constant through the policy term

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12
Q

When is Level Assurance paid?

A

Annually or Monthly

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13
Q

Why would Level Term be used to provide family cover?

A

It may be used to cover a child’s time in education

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14
Q

What is Decreasing Term Assurance?

A

Sum assured reduces to nothing over policy term

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15
Q

Would payments in a Decreasing Term Assurance Policy remain the same?

A

Maybe but can also be reduced to shorter period

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16
Q

Where are Decreasing Term Assurance Policies most commonly used?

A

Capital Repayment Mortgages

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17
Q

What is Gift Inter Vivos Policy?

A

Term assurance policy that covers IHT liability from a PET

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18
Q

At the beginning of a Gift Inter Vivos Policy what is the sum assured set against?

A

IHT that is due

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19
Q

True or False

The Gift Inter Vivos Policy reduces along with the taper relief system?

A

True

20
Q

What is Convertible Term Assurance (CTA)?

A

Allows CTA policy to be changed to a whole-or-life or an endowment policy

21
Q

How much of the premium is charged on Convertible Term Assurance Policies to change them?

A

10%

22
Q

The sum assured on a new policy is allowed to change exceed the sum assured on the Convertible Term Assurance policy.

True or False

A

False. Any extra is subject to normal underwriting

23
Q

What is Increasing Term Assurance?

A

Is where the sum assured increases by a fixed amount or percentage each year

24
Q

When is Increasing Term Assurance likely to be used?

A

When temporary cover of a fixed amount is required

25
Q

What is Renewable Term Assurance?

A

Option to renew a policy at the end of the initial term

26
Q

Is a Renewable Term Assurance policy for a different amount assured to the original policy?

A

No it is for the same amount assured & term

27
Q

If a policy is renewed using Renewable Term Assurance the customer needs to provide new medical information.

True or False?

A

False. They do not need to provide new medical information

28
Q

What is the usual maximum age limit for a renewable term assurance?

A

65

29
Q

How is the premium for a renewable term assurance calculated?

A

It is based on the life assured’s age at renewal

30
Q

What percentage do Renewable & Increasing policies normally allow?

A

50% or 100% of the previous sum assured amount

31
Q

What is Family Income Benefit (FIB)?

A

A policy that replaces replaces the income of the deceased with a regular income

32
Q

Is Family Income Benefit (FIB) taxable?

A

No it is tax free

33
Q

When is Family Income Benefit (FIB) paid?

A

Monthly or Quarterly from the date of death until the policy ends

34
Q

What is a Whole-of-Life Assurance Policy?

A

A policy that covers the life assured during the whole of their lifetime

35
Q

These benefits are linked to which type of policy?

  • Protect dependants from financial loss
  • Provide tax free legacy
  • Cover death expenses
  • Funds provided in the event of IHT
A

Whole-of-Life Policy

36
Q

What are the premiums for Whole-of-Life policies?

A
  • Payable for the whole policy term
  • Limited to fixed term
  • Limited to a specified age (60 or 65)
37
Q

If somebody chooses a limited premium for a Whole-of-Life Policy what is the minimum term?

A

10 years

38
Q

Why are companies who offer Whole-of-Life policies able to offer surrender values?

A

They will have to pay out eventually so they can build up a reserve so a policy can be cancelled at any time (saving money if policy is cancelled)

39
Q

What is a Joint-Life Second-Death Policy (Last Survivor) Policy?

A

Policy that pays out on the death of the second spouse’s estate

40
Q

What does “Written Under Trust” mean in relation to a Joint-Life Second-Death Policy

A

It means that the trustee’s of an estate must ensure policy proceeds pay IHT liabilities

41
Q
  • Non-profit
  • With Profits
  • Unit Linked
  • Unitised with profits
  • Low Cost
  • Flexible
  • Universal
A

Types of Whole-of-Life Assurance

42
Q

What whole-of-Life Policy is this?

Fixed Level of Life Assurance for payment of fixed premiums

A

Non-profit

43
Q

What whole-of-Life Policy is this?

Fixed minimum level of cover which bonuses are added to reflect investment portfolio

A

With-Profits

44
Q

What whole-of-Life Policy is this?

Provide a certain level of cover provided by With-Profits & decreasing term assurance

A

Low Cost

45
Q

What whole-of-Life Policy is this?

Unit issued to plan holder. Cover increases when value of units increase above that amount

A

Unit-Linked

46
Q

What whole-of-Life Policy is this?

Issued units with guarantee that unit prices will never fall below a state amount or will increase by at least a stated minimum amount

A

Unitised with profits

cemap unit 1 (12 decks)

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