Topic 4: Dealing with long -term risks

Question 1

What can be at risk?

Answer 1

Physical body
Possessions may get lost
Legal liability
Finances

Question 2

How are risk and probability linked?

Answer 2

If the probability of something bad happening increases, it becomes more risky

Question 3

From low to high, what are the ranks of risk for financial products

Answer 3

Premium bonds
Banks savings account
Unit trusts
Shares in an established company
Shares in newly quoted company

Question 4

What increases if risk is higher

Answer 4

Interest rates and return

Question 5

What does risk averse mean

Answer 5

Avoids it

Question 6

What’s risk transfer

Answer 6

Spending money to transfer the risk to someone else, insurance

Question 7

What does the impact of risk depend upon

Answer 7

Amount of money involved
The effect on someone’s lifestyle
The timing
The frequency

Question 8

How can a bank measure the rate of risk

Answer 8

Probability x impact = degree of risk

Question 9

Why buy life assurance?

Answer 9

Provides for family when you’re gone
debt protection
cover for old people

Question 10

What type of insurance is available to someone with an illness

Answer 10

Critical illness insurance

Question 11

What insurance is available to someone who cant work

Answer 11

Income protection insurance

Question 12

What insurance does ASU cover

Answer 12

Accident, sickness and unemployment

Question 13

What is the FSCS

Answer 13

Financial services compensation scheme

Protects financial products from services if they default

Question 14

What’s in a will

Answer 14

Guardianship, possessions, assets, money, provision for a partner if not married legally and executors (the people who checks wants are met)

Question 15

What does intestate mean

Answer 15

dying without a will

Question 16

What can a will reduce the amount of

Answer 16

Inheritance tax
Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

Having the estate in your will given to spouse or charity can mean the tax paid is severely reduced

Question 17

What’s a trust

Answer 17

A financial relationship whereby financial property is held for someone else until they are of age to claim it