Unit 5 – Topic 16 Flashcards
Financial Protection and Planning
Which one of the following is usually the priority financial need for young families ? (16.2)
A. Savings
B. Investment
C. Income and life assurance protection
D. Pension planning
C. Income and life assurance protection
The situation of a young couple with children is similar to that of those without, but their needs are magnified. If both parents work, with children in paid childcare or being looked after by other family members, the couple is likely to rely on both incomes. So, protection in the event of death and illness is crucial.
Which of the following financial needs is considered as having the highest priority ? (16.2.1)
A. Protection of dependants from the effects of loss of income in the event of premature death.
B. Protection of income for a time later in life when the client does not want to work.
C. Protecting self and dependants from the effects of losing the ability to earn an income in the long term.
D. Increase and/or protection of the value of money saved or invested, either now or in the future
A. Protection of dependants from the effects of loss of income in the event of premature death.
In terms of the priority of financial needs, the first need is generally seen to be the protection of dependants from the financial effects of a loss of income or of meeting outgoings in the event of premature death.
There is no universal rule for calculating the amount of cover required but it is usually based on quantifying the shortfall in income that dependants would suffer. How can this shortfall be expressed if the risk event happened ? The difference between : (16.1)
A. the amount that dependants would like and the amount of cover the client has.
B. the amount of protection usually needed and the amount of protection that is affordable.
C. the amount of protection needed and the amount the client currently has inplace.
D. the amount of protection the client needs and the amount of cover the client would like
C. the amount of protection needed and the amount the client currently has inplace.
The shortfall in income can be expressed as the amount of protection needed and the amount the client currently has in place.
In the UK, many clients are underinsured for life and illness and accident protection. Which of the following is not seen as a reason for this? (16.1.1)
A. Concerns that health issues will exclude them from being able to purchase the cover they need
B. The client doesn’t recognize the nature and size of the need
C. The client believes the State will provide
D. Low levels of trust in the insurance sector
A. Concerns that health issues will exclude them from being able to purchase the cover they need
There are six reasons identified which can lead to underinsurance, three of these are shown at
options B,C and D, but there are three others, namely :
* misapprehension of the client’s needs
* the client may not wish to discuss the subject
* the client may feel the product is not affordable
After John died, his widow, Freda was responsible for the whole mortgage loan, despite only owning half of the value of the property; this was because the property was registered: (16.1.2)
A. in John’s sole name
B. as tenants in common
C. as joint tenancy
D. in Freda’s sole name
B. as tenants in common
If the property was registered as tenants in common, the deceased’s share will pass according to their will. The survivor will be jointly and severally liable for the mortgage, so could end up with the whole mortgage but effectively only own half the value of the property
