2. Legal & Tax Issues

Question 1

A … needs to show insurable interest at inception only.

Answer 1

life insurance policy

Question 2

A … is when the cedent pledges the proceeds and value of the policy as security for a debt without giving up the ownership of the contract.

Answer 2

security cession

Question 3

A … needs to show insurable interest at inception and claim stage.

Answer 3

short-term insurance policy

Question 4

Contractual capacity refers to the …

Answer 4

ability to enter a contract

Question 5

In an … the cedent, the person making the session, transfers all his rights in the policy to another person(s) called the cessionary.

Answer 5

absolute cession

Question 6

Name five examples of insurable interest:

Answer 6

1. on the insured’s life
2. on the life of a spouse
3. on the life of a relative
4. business partner
5. employer on employees

Question 7

Name one example of people who has limited contractual capacity:

Answer 7

minor children between age 7 - 18

Question 8

Name the two ways in which contracts can be set up:

Answer 8

1. Caveat Emptor

2. Uberrima Dudes

Question 9

Name three examples of people who has no capacity to contract:

Answer 9

1. Insanity
2. Intoxicated people
3. Minor children under age 7

Question 10

Name four taxation issues that apply to life insurers:

Answer 10

1. Company tax
2. Value-added tax (VAT)
3. Estate duty tax
4. Donations tax

Question 11

Since the discontinuance of the … the only policies that are affected by the income tax act are those that are owned by an employer on the Life of an employee.

Answer 11

Sixth Schedule to the Income Tax Act

Question 12

Name five mischellaneous restrictions and prohibitions that apply to life insurance policies:

Answer 12

1. Restricted insurance to children under age 14
2. Limited relief for the misstatement of age
3. Only rate table given to Registrar may be used
4. No discrimination
5. No inducements

Question 13

The … test is all about determining whether the action of a reasonable person would have been the same as the person in question.

Answer 13

reasonable man

Question 14

When it comes to the death of the insured the … are sometimes irrelevant.

Answer 14

cause and circumstances

Question 15

Where there is no nomination of a beneficiary the proceeds will not be paid to a surviving spouse and/or child. The proceeds are paid to the …

Answer 15

estate

Question 16

You get two types of cessions namely?

Answer 16

1. Absolute cession

2. Security cession

Question 17

… is the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.

Answer 17

Caveat Emptor

Question 18

… contract is a legal agreement, common to the insurance industry, requiring the highest standard of good faith during disclosure of all material facts that could influence the decision of the other party.

Answer 18

Ubemma fides