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Flashcards in Chapter 2 - Protection needs Deck (21)
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1

What are the main types of protection cover?

Life Assurance
Income Protection (PHI)
Critical Illness (CIC)
Long Term Care Insurance
Mortgage Payment Protection Insurance (MPPI)
Payment Protection Insurance (PPI)
Personal Accident and Sickness (PAS)
Accident sickness and unemployment (ASU)
Private Medical Insurance (PMI)
Health cash plans

2

What policies could you use to cover illness, incapacity or accident?

Income Protection
Critical Illness
Personal Accident and Sickness
Accident sickness and unemployment
Private Medical Insurance

3

What policies could you use to cover income, mortgage or death?

Life Assurance
Income Protection
Critical Illness
Mortgage Payment Protection Insurance
Personal Accident and Sickness
Accident sickness and unemployment

4

What policies could you use to cover death?

Life Assurance

5

What policies could you use to cover asset protection?

Life Assurance

6

What policies could you use to cover business protection?

Life Assurance
Income Protection
Critical Illness

7

What are the benefits of splitting protection policies on divorce?

No need to be underwritten again
As the client is older the premiums will be cheaper
There could have been changes to the clients health

8

Why must existing assets and policies be considered before putting any new protection policies in force?

Saves insuring a need that might not need insuring due to existing policies or substantial assets

9

Its important to remember with regard to the effect of divorce on protection policies that;

it will have no impact unless ordered by a court

10

What is the rate of IHT?

40%

11

What is the current Nil Rate Band (NRB)?

£325,000

12

What IHT is due on the current estate if the individual is single, has made no previous gifts and dies leaving an estate of £815,000?

£196,000

£815,000 - £325,000 x 40% = £196,000

13

A Potentially Exempt Transfer (PET) is?

A lifetime gift from one person to another or a gift into a Bare/Absolute Trust

14

A Chargeable Lifetime Transfer (CLT) is?

A gift into trust (excluding Bare/Absolute Trust)

15

The main difference between a PET and CLT is?

There is an immediate IHT charge of 20% on any CLTs made in excess of the available NRB

16

The main type of business insurance is?

Key Person Insurance

17

A disadvantage of employer provided protection cover is?

Its very likely this will cease if the employee leaves

18

What rate of tax is applied on Chargeable Lifetime Transfers made in excess of the NRB?

20%

19

How long does a donor need to survive after making a gift for it to have no IHT implications?

7 years

20

What would be the impact of a failed PET?

It would fall back into the estate and use up that element of the NRB.

If the PET is in excess of the NRB the amount above the NRB will attract IHT at 40%

21

Who is responsible for paying any IHT due?

The executors of the estate