Topic 6 Flashcards
Whole of life assurance?
No term
Remains in force as long as premiums paid
Usually Provides element of investment
Vast majority with profits or unit linked
Can make plan ‘paid up’
Non-profit plans- sum assured, premium fixed
Insurable interest means…
They would suffer financial as a result of the death Eg spouse Creditor Employer Bus partner
With profits wol?
Premiums invested in fund Fund covers 'liabilities', expenses, reserves Expenses not transparent GSA est on set up Premiums are fixed at start Reversionary bonus increase gsa- added if fund is healthy Can be added as simple bonus- % of gsa Or compount % of gsa + bonuses Often get terminal bonus Offer loans againt current cash value No maturity date- wol
Low cost with profits wol?
Gsa is lower
Relys on bonuses to increase to required sum assured
Incorps temp life cover to plug the gap until sum assured at required amount
Unit linked wol?
Refered to as flexible
Wide range of funds to choose from
Charges for life cover, fees, add benefits are taken by cashing unit
Charges are clearly stated
Premium not set, prem range for each sum assured but reviewed at 10 yr point then 5 yrly, lower if range likely to need incr
3 levels of cover, max, min and balanced- life cover/invest ratio
SA usually guaranteed for 10 years
Initial charge- bought at offer price then valued at bid price(lower)
Diff being bid-offer spread
Universal wol
Flex of unit linked wol extended further by range of benefits:
IPI, CIC, TPD etc
Addition cost met by cashing more units
Uses of wol assurance?
Protect dependants
Tax free legacy, cover expenses on death
To pay IHT
Renewable term assurance?
Renewed at end without med evident
Same as original term
Convertable term?
Can be converted to wol or endow policy with med evidence
Family income benefit?
Form of DTA but regurlar incme pymts
Income paid from death to endof orig term
Income free of tax as it is installment of sum assurred
Income for family over defined period
Uses for term assurance?
Where need is for a defined term eg mort
Family protection where period needed predicable
IPI?
Used to be PHI- for long term dis or illness
50-60% of income, until recovered or end of term
Perm, cannot be cancelled by insurer
Agreed derferred period
Benefits tax free for individual policies
If company owed, the employee recieves as paye and taxed
Good for self emp
3 types of IPI
Reviewable- premium may starts off low, but reviewed every few years to take into account changing circs
Renewable- as above but reviewed each time renewed
Guaranteed- prems guaranteed for whole of policy term, more expenses as term may be 25 years
ASU?
Like IPI but cover redundancy
Renewable contract so can be cancelled by incurer
Benefits cease after 1 or 2 yrs
Self emp usually excluded
Long term care insurance?
Long term nursing for sick or elderly
For inability to carry out ‘activities of daily living’ ADLs
Premiums are taxable
Benefits are taxed unless used to buy annuity- in which the income would be
For life ins on a key employee, how might you calc the sum assured?
His salary x annual profit x 5
All / total wage bill
3 main schemes for partners to buy or sell share on death..
Automatic accural method - share automatically divided amonst other partners in agreed proportions. Decease family compensated by life cover
Buy and sell- obliged to buy/sell, enabled to do this by life policy on own life but in trust in other partners names
Cross-option method- as above but not abliged, must go ahead if one person wishes to proceed(check topic answer say both must agree)- IHT relief may be available as not contractually obliged
Life policies can be taken in 4 ways….
Single life own benefit- paid into own estate
Life of another- must have ins interest on person insured
Joint life 1st death- couples eg ensure mort paid
Jnt life 2nd death- exclusively for IHT planing to cover IHT liability- not term assurance
What pays income/benefits tax free?
IPI
ASU
FIB
Ie sum assured for life plans not subject to income pay but possibly IHT
Offer price
Price bought at
Bid price
Price revalued at
What holder would receive if surrendered
Additional benefits of unit wol
Guaranteed insurability- to ncrease cover
Indexation of bene
Waiver of premium- if unable to work- excess 3-6 mths
Uni wol option may include
Ipi Cic Accidental death Total and perm disability Hosp benefits Flex of premium
Bereavement pmt?
State pay tax free £2k if surviving spouse under pension age
Bereavement allowance
Paid to surviving partner if bet 45 and pension age
Cant be bringing up children with other partner
Deceased must have made nics
Ssp
Paid if off for 4+ days
Must earn more than LEL-£107
£85.85 pw for max28 wks subjec to tax and ni
Incap benefit
To self emp and those who reach end of 28 wks for ssp
3 levels:
Short term low rate- if cant ssp up to 28wks
Short term high rate- 29-52wks now taxable
Long term rate- still sick after 1 yr taxible
Attendance allowance
Tax free benefit
65+
DLA
Tax free
Before 65, but can continue after
