4: Life Assurance Pt. 4 Flashcards
(24 cards)
Why does TIB usually not apply in the last 12–18 months of a term policy?
Insurers avoid paying claims when there’s a reasonable chance the life assured will survive beyond the policy’s expiry date, meaning no claim would be payable.
What happens to the money paid out if the life assured lives beyond the expiry date after receiving a terminal illness payment?
The payment is not refundable to the insurer.
What is the tax treatment of terminal illness payments?
No income tax or inheritance tax (IHT) liability arises from the payment itself. However, any remaining balance in the estate will form part of the estate for IHT purposes.
What is the issue with TIB and trust policies?
If a policy with TIB is written under trust, the life assured cannot personally receive the payment, as the money belongs to the beneficiaries. A split trust could be used instead.
Ownership shares do not automatically pass to the survivor. Instead, the deceased’s share goes to their estate and can be distributed via will. What type of tenancy agreement is this?
Tenancy in common
What happens to the owners’ shares if they die with a joint tenancy?
Their share automatically goes to he surviving owner.
What does the Policies of Assurance Act 1867 regulate?
It regulates the assignment of life policies, ensuring assignees have legal rights to claim policy benefits.
Sarah and James are both assigned the same life insurance policy by a policyholder under the Policies of Assurance Act 1867. Sarah’s assignment occurred three months before James’s, but James notified the insurance company first. Who has the legal right to the policy payout, and why?
Priority is determined by notice, not the assignment date. Therefore, James.
Does the Policies of Assurance Act 1867 apply to all types of life policy assignments?
The Act covers all types of assignments, except those occurring by operation of law, such as assignments due to bankruptcy proceedings.
What is the core PRINCIPLE behind Section 3 of the Policies of Assurance Act 1867?
“Priority of notice regulates priority of claim.” This means that whoever notifies the insurer first secures the right to claim policy benefits, regardless of when the assignment was originally made.
The Policies of Assurance Act 1867 says that notice can be both expressed or implied. True or false?
True
Under the Policies of Assurance Act 1867, when an assurer might have
reason to suspect that an assignment has taken place even though no express or implied notice has been received, what is this known as?
Constructive notice
What is the core OBJECTIVE behind the Policies of Assurance Act 1867?
Simplify actions against a
life office and make it easier for the office to settle claims.
Karen has assigned her endowment policy to her sister in return for cash. Her sister has written to the insurer and the insurer has acknowledged the notice of assignment. Do you think it is true to say that the ownership of the policy has now been transferred?
The notice does not actually transfer title. Only the deed of assignment can formally do this.
What is the the right of equity of redemption in mortgage law?
It means that the mortgagor (borrower) is able to reclaim their property once they have fully repaid the debt secured by the mortgage.
Suicide is no longer discriminated against when filing a death claim under an insurance policy (for most insurers), but what clause might be added an inception instead?
Voids a claim if suicide occurs within a specified period (e.g. one year from inception).
For what purpose are joint life second death policies used?
Mainly IHT planning
What is a convertible term assurance?
A term assurance with an option to convert to an endowment or whole life policy without evidence of health at any time before expiry.
Why are premiums derived from a mortality table loaded?
To cover the expenses of the life office in marketing, selling and administering
the policy.
How can the owner of an existing life policy put it in trust?
By assigning it to trustees using a deed of assignment.
How will an insurer treat a claim when there has been a careless non-disclosure of a material fact?
The insurer will make a payment that is proportionate to the effect of the nondisclosure.
If terminal illness cover is part of a term assurance, when will it not normally apply?
During the last 12 or 18 months of the contract.
What proof of title will be required for a death claim on an unassigned own life policy and to whom will the money be payable?
The appropriate grant of administration and the money would be payable to the legal personal representatives/executors of the will.
What might be required if a policyholder cannot produce the policy document on a claim?
An indemnity form and/or a statutory declaration.
