Topic 4 - Dealing With Long-Term Risks Flashcards
Current bank rate
0.25%
Risk transfer meaning
Person who faces a risk decides to spend money on passing the risk to someone else, who will accept the financial responsibility
Aspects to impact of risk
Amount of money involved
Effect on lifestyle
Timing of event
Frequency of event
Significance of risk formula
Significance of risk = probability x impact
Two life assurance protection policies
Whole-of-life assurance
Term assurance
How does whole-of-life assurance work?
Sum assured is payable on the death of the life assured
How does term assurance work?
Sum assured is payable only if the person assured dies before end of a specified term.
How does critical illness cover work?
A guaranteed lump sum is paid out if insured person is diagnosed with a critical illness.
How do income protection policies work?
Monthly income is paid to insured people who have suffered an accidental injury or a long-term illness and who are unable to work
How does accident, sickness and unemployment (ASU) work?
They provide cover to the insured party in the event of an accident or sickness that prevents them from working if they have become involuntarily unemployed
It pays out for a maximum of 12 or 24 months,
FSCS offers maximum protection of how much on deposits in banks, building societies and credit unions?
£75,000 per person
FSCS offers maximum protection of how much on investments?
100% of first £50,000 per person per firm
FSCS offers maximum protection of how much on home finance e.g. mortgage advice?
100% of first £50,000 per person per firm
FSCS offers maximum protection of how much on long-term insurance e.g. pensions?
90% of claim with no upper limit
FSCS offers maximum protection of how much on compulsory insurance?
Claims are protected in full
FSCS offers maximum protection of how much on non-compulsory insurance?
90% of claim with no upper limit
FSCS offers maximum protection of how much on general insurance advice?
90% of claim with no upper limit
Main items that people include in their will
Details of assets
Names and details of all beneficiaries
Arrangements for guardianship of children under age of 18
Names of executors
Requirements for a will to be made person must be:
Over 18
Of sound mind
Aware of what it contains
Making it voluntarily
Requirements for will to be valid
Made in writing
Signed by person making will in presence of two witnesses (who cannot benefit) who must also sign.
Nil rate band for inheritance tax in 2017/18
£325,000
Tax rate payable on amount over nil rate band for inheritance tax
40%
What is a trust in inheritance?
Financial relationship whereby property is held by one party (trustee) for the benefit of the beneficiary.
Child Trust Fund definition
Long-term tax-free savings account aimed to ensure every child in country has savings at age 18.
How can you be eligible for a Child Trust Fund?
Born after 1st September 2002.
How much do you initially receive a voucher for from Child Trust Fund?
£250
What replaced Child Trust Funds?
Junior ISA’s
What is the limit that adults can pay into existing Child Trust Funds each year?
£4,128
How can you be eligible for Junior ISA’s?
Under 18
Live in UK
Not entitled to a Child Trust Fund
Two types of Junior ISA
Cash Junior ISA
Stocks and shares Junior ISA
Legal guardian definition
Someone who has legal authority and duty to care for the person and property of another person (ward)
