Unit 1, Topic 11

Question 1

Which of the following statements relating to term assurance is correct?
A) A decreasing term assurance will pay benefits only if the insured dies withing the policy term
B) Gift inter vivos cover is maintained at the same level for seven years
C) A convertible term assurance policy can be converted to an endowment or whole-of-life assurance only within two years of the date of the original policy
D) If a convertible term assurance policy is converted to an endowment, the maturity date of the new policy must not be more than five years later than that of the original policy

Answer 1

A) A decreasing term assurance will pay benefits only if the insured dies withing the policy term

Question 2

Which of the following is true of a whole-of-life policy?
A) It is designed to provide protection rather than investment
B) Premiums are always payable throughout the full term of the policy
C) It can only be used on a with-profits basis
D) It will pay out only on the death of the insured and cannot be surrendered

Answer 2

A) It is designed to provide protection rather than investment

Question 3

Duncan and Alice, who are married, are taking out a whole-of-life plan to provide for payment of inheritance tax liabilities on their deaths. The policy would normally be set up in which of the following ways?
A) Two single lives
B) Single life
C) Joint-life first-death
D) Joint-life second-death

Answer 3

D) Joint-life second-death

Question 4

The main advantage of writing a life assurance policy in trust is to:
A) Increase personal allowance
B) Ensure the policy obtains qualifying status
C) Create a tax-exempt fund
D) ‘Ring fence’ the proceeds outside the individual’s estate

Answer 4

D) ‘Ring fence’ the proceeds outside the individual’s estate

Question 5

Which type of whole-of-life policy offers a fixed level of life cover at outset that may be increased by the addition of bonuses?
A) With-profits
B) Non-profit
C) Unit-linked
D) Low-cost

Answer 5

A) With-profits

Question 6

What other type of life assurance is combined with a with-profits plan in a low-cost whole-of-life plan?
A) Non-profits
B) Decreasing term assurance
C) Level term assurance
D) Increasing term assurance

Answer 6

B) Decreasing term assurance

Question 7

If a policy benefits from ‘waiver of premiums’, what does it mean?
A) No premiums are paid for the first 12 months of a life assurance plan
B) Reduced premiums are paid for the first 12 months of a life assurance plan
C) No premiums are payable if the life assured is unable to work as a result of accident or sickness
D) Any increase in premium as a result of medical underwriting is added as a debt to the policy

Answer 7

C) No premiums are payable if the life assured is unable to work as a result of accident or sickness

Question 8

Which of the following is incorrect in respect of low-cost endowment policies?
A) The basic sum assured increases with the addition of bonuses
B) The basic sum assured is lower than the amount borrowed
C) The policy is made up if a with-profits endowment and a decreasing term assurance
D) The policy is guaranteed to repay the mortgage in full at the end of the term

Answer 8

D) The policy is guaranteed to repay the mortgage in full at the end of the term

Question 9

Where a claim is made on a term assurance policy the benefits payable are always free of income tax. True or False

Answer 9

True