Basic Product Types

Question 1

What would a joint life first death policy be used for and when would a joint life second death policy be suitable?

Answer 1

1st death - To pay off mortgage
2nd death - IHT Planning

Question 2

Which term insurance product would best suit a client that wants to ensure that their life cover maintains its value in real terms against inflation?

Answer 2

Increasing Term Insurance

Question 3

What is the typical benefit limit on IP?

Answer 3

50% - 60% of the insureds average earnings in the months in the year prior to the incapacity.

Question 4

When does a whole of life pay out?

Answer 4

When the insured dies

Question 5

When does an endowment policy pay out?

Answer 5

On maturity or upon death of the insured

Question 6

What sort of trust is used for a key person policy?

Answer 6

A trust is not used. It is a life of another contract with the company as the owner and the key person as the life insured.

Question 7

What is required by law for a life of another policy?

Answer 7

To have insurable interest.

Question 8

What is a convertible term insurance?

Answer 8

A Term Insurance with the option to convert to a WOL or Endowment without evidence of health.

Question 9

What is a family income benefit?

Answer 9

Pays out upon death of the life insured, a regular monthly or yearly sum for the balance of the term of the policy.

Question 10

What is a low-start endowment?

Answer 10

A type of low cost endowment where the premiums start at a low level and rise gradually to the full premium (over a number of years)

Question 11

What is a single premium unit linked whole of life policy often called?

Answer 11

An investment bond

Question 12

What is critical illness cover?

Answer 12

Pays out upon one of the critical illnesses specified in the policy.

Question 13

What advantage does a cross option agreement have over a buy and sell agreement in partnership protection?

Answer 13

It preserves IHT benefit relief.

Question 14

What is income protection?

Answer 14

Pays out a regular income where the policy holder is unable to work due to sickness or accident.

Question 15

What type of insurance is personal accident and sickness (PAS) under the regulatory rules?

Answer 15

General or short term insurance

Question 16

Give an example of a key person

Answer 16

An employee who is vital to the profitability of the business. Eg: Marketing executive with valuable contacts or an inventor of products.

Question 17

What is a level term insurance?

Answer 17

It has a sum insured which is fixed throughout the term.

Question 18

What is a renewable term insurance?

Answer 18

It has the option at the end of the term to take out a new policy without further evidence of health.

Question 19

What is convertible term insurance? (CTA)

Answer 19

It has an option to convert at any point from a term insurance to a whole of life or endowment policy. Without further evidence of health.

Question 20

What is a decreasing term insurance?(DTA)

Answer 20

It has a sum insured which decreasing each year by a stated amount, decreasing to nil at the end of the term. Normally used to cover a reducing debt ( repayment mortgage)

Question 21

What is an increasing term insurance?

Answer 21

It has a sum insured that increases over the term of the policy without any further evidence of health - either on a fixed basis (for Eg - 5% compound each year) or linked to inflation. Whichever method is used the premium will be increased to cover the cost of the increased risk the life office is accepting.

Question 22

If a life office allows policy loans, on what value would the loan be based?

Answer 22

Current sum assured

Question 23

Why might a property fund include a condition that can delay surrenders or switches?

Answer 23

Property is an illiquid asset

Question 24

Terminal illness benefit does not apply for some policies in the last

Answer 24

18 months of the contract