Topic 12 Flashcards
Health & General Insurance
The longer the deferred period on an income protection policy, the cheaper the premium will be.
True or False?
True
When Gary was diagnosed with bowel cancer at the age of 50, he was able to use the lump sum he received under his insurance policy to pay off his outstanding mortgage. Which
of the following types of insurance did Gary have?
a) Private medical insurance.
b) Income protection insurance.
c) Critical illness insurance.
d) Long‑term care insurance.
c) Critical illness insurance.
Marco, a self‑employed painter and decorator, is considering
taking out income protection insurance. He should opt for as
short a deferred period as possible.
True or false?
True
Marco’s partner Lydia, an HR manager, already has income protection insurance. If she claims under her policy, she will
have to pay tax and NICs on the income she receives. If Marco goes ahead and buys income protection, he will not pay tax or NICs if he has to claim benefits under the policy. This is likely
to be because:
a) Marco’s earnings are below the personal allowance for
income tax.
b) Marco’s policy will be arranged on an individual basis whereas Lydia’s policy has been arranged as part of a
group scheme.
c) Marco is self‑employed whereas Lydia is an employee.
d) The insurance provider from whom Marco is thinking of buying his policy has different rules to Lydia’s insurance
provider.
b) Marco’s policy will be arranged on an individual basis whereas Lydia’s policy has been arranged as part of a
group scheme.
Adaeze, an office administrator, hurts one of her hands, causing permanent damage, and has to be re‑employed on a
lower salary. What effect would her return to work have on her IPI benefits?
a) Full benefits would be paid until Adaeze has fully recovered.
b) Proportionate benefits would be paid, but no other claims under the policy would be accepted by the insurance
company.
c) Benefits would cease immediately.
d) Proportionate benefits would be paid until retirement,
death or the end of the policy.
d) Proportionate benefits would be paid until retirement,
death or the end of the policy.
Annette, who retired last year, has developed arthritis and needs a hip replacement. Under which of the following types
of insurance policy might she be eligible to claim benefits?
a) Critical illness cover.
b) Accident, sickness and unemployment insurance.
c) Private medical insurance.
d) Income protection insurance.
c) Private medical insurance.
Vanessa is unhappy in her current job and has decided to resign. She will be able to claim benefits under her ASU policy to tide her over until she finds a new post.
True or false?
False.
Roger, who is 78, is finding it difficult to look after himself at home and is planning to move into residential care next month. He has purchased an immediate needs annuity so his
fees will be paid direct to his care provider, once tax has been deducted.
True or false?
False.
With an immediate needs annuity, the benefits are paid directly to the care provider but they are tax-free.
General insurance policies operate on the principle that policyholders should be restored to the position they were in before the event occurred that led to their claim.
True or false?
True.
This is the principle of indemnity.
It is illegal to drive a vehicle on public roads in the UK unless you have insurance that covers damage to your car or injury to yourself.
True or false?
False.
Which of the following is the same for both accident, sickness and unemployment insurance and income protection insurance?
a) Deduction of state benefits from payments.
b) Taxation of benefits.
c) Length of the policy term.
d) Deferred period.
b) Taxation of benefits.
Which of the following statements is true in relation to income protection insurance (IPI)?
a) A tax-free income benefit will be payable after a specified period of incapacity.
b) IPI provides a surrender value for early surrender.
c) Benefits are paid for a maximum of 12 or 24 months.
d) It is the same as an ASU policy, but without redundancy cover.
a) A tax-free income benefit will be payable after a specified period of incapacity.
Billie insured her house contents for £30,000 and accepted a £100 excess. Later that year she made a claim for £5,000 as a result of local flooding. The insurer has written to her, stating that the true value of her contents should have been £40,000 and that they are disputing her claim. How much is Billie likely to receive in settlement of her claim?
a) The insurer will reject her claim as she was underinsured.
b) Billie is likely to receive £3,650.
c) Billie is likely to receive £3,750.
d) The insurer is likely to pay the claim in full, as the underinsurance was unintentional.
b) Billie is likely to receive £3,650.
Andrea has private medical insurance, paid for by her employer as part of her employment package. Which of the following would not apply?
a) Insurance premium tax on the premiums.
b) An income tax liability for Andrea on payments made in the event of a claim.
c) An income tax liability for Andrea on the value of the premiums.
d) Premiums qualify as business expenses for her employer.
b) An income tax liability for Andrea on payments made in the event of a claim.
Which of the following would be least likely to be covered on a critical illness assurance policy?
a) Kidney failure.
b) Angina.
c) Breast cancer.
d) Heart attack.
b) Angina.
