Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

LP2 > Life Assurance Products > Flashcards

Life Assurance Products Flashcards

(95 cards)

Start Studying
1
Q

What is a useful saying that expresses how we should approach financial risk?

A

“Some risks are best managed, whilst others are best insured.”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What types of insurance does protection insurance refer to?

A

Contracts that provide financial sums in the event of long-term illness, disability or death.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the FIVE main areas for protection needs?

A
  1. Health
  2. Income, mortgage and other debt
  3. The event of death
  4. Asset protection
  5. Business protection
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a state benefit for unemployment/low earners?

A

Universal credit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Who is universal credit paid to?

A

Individuals who are actively seeking work or are on low incomes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are THREE state benefits for sickness/illness/loss of capacity?

A
  1. Statutory sick pay
  2. Personal Independence Payment (PIP)
  3. Attendence allowance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Who is ‘statutory sick pay’ paid to?

A

Employees who pay Class 1 National Insurance Contributions (NICs)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Who is ‘Personal Independence Payment (PIP)’ paid to?

A

Individuals under state pension age who need help with key activities necessary to everyday living.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Who is ‘Attendance allowance’ payable to?

A

Individuals over state pension age who need help with their personal care (often replaces PIP).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the state benefit in place to assist with the cost of raising a family?

A

Child benefit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the state benefit in place to assist with the cost of caring for others?

A

Carer’s allowance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Who is ‘Carer’s allowance’ payable to?

A

Individuals who spend at least 35 hours a week caring for an individual in receipt of PIP or attendance allowance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How is ‘carer’s allowance’ paid?

A

As a taxable weekly benefit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the state benefit in payment to assist with costs left after death of a spouse/civil partner?

A

Bereavement Support Payment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How is ‘Bereavement Support Payment’ paid out?

A

A lump sum and temporary monthly income payments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What THREE things is the amount payable for ‘Bereavement Support Payment’ based on?

A
  1. Age
  2. NICs
  3. Nature of death
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Why would an individual require financial insurance when there are state benefits in place to assist with income replacement?

A

Because nearly all state benefits are insufficient to live off alone.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a benefit-in-kind?

A

A benefit that an individual receives through their employment that has a monetary value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Why are employers able to negotiate better terms and cheaper premiums on the benefits they provide to their employees?

A

Because they have higher bargaining power due to bulk buy and the policies are not individually risk-based.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How and when is ‘Life assurance’ paid out?

A

As a lump sum on the death of the life assured.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

How and when is ‘Income protection (IP)’ paid out?

A

As regular income when the insured is unable to work due to accident or illness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

When is IP payable until?

A

Retirement.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How and when is ‘Critical illness cover (CIC)’ paid out?

A

As a lump sum if the insured is diagnosed with a critical illness specified in the policy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

How and when is ‘personal accident insurance’ paid out?

A

As a lump sum OR income benefits if the insured suffers an accident or falls ill.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
When is Accident, Sickness and Unemployment (ASU) paid out?
When the insured suffers an accident or is unable to work due to sickness, redundancy or unemployment.
26
What does Payment Protection Insurance (PPI) provide an income to cover, and when?
Provides an income to cover mortgage or loan payment if the insured suffers an accident or is unable to work due to sickness, redundancy or unemployment.
27
What is the main purpose of life assurance?
To provide a lump sum if the insured dies during the term of the policy.
28
What TWO categories does Life assurance fall into?
1. Whole of life assurance. | 2. Term assurance.
29
Who is the policyholder?
The individual who purchases the policy.
30
If a Life assurance policy was held in a trust, who would the benefits be paid to upon death?
A nominated beneficiary.
31
If a Life assurance policy was not held in a trust, who would the proceeds be paid to upon death?
The estate.
32
What is a 'whole life policy' designed to do?
Pay out a cash lump sum upon death.
33
What is the surrender value?
An amount payable if the policyholder decides to exit a flexible whole of life policy.
34
What are funeral plans?
A whole of life contract designed for those over age 50.
35
What determines the level of annual bonus applied to a with-profit policy?
The financial performance of the life company providing the policy.
36
What is the 'final/terminal' bonus on a with-profit policy, a percentage of?
A percentage of the original sum assured and any accrued 'reversionary/annual' bonuses.
37
Why should individuals be wary about taking a surrender value with a with-profit policy?
Companies can apply a Market Value Reduction (MVR).
38
Which type of policy presents a higher risk, with-profit or non-profit?
With-profit policy.
39
What are flexible whole of life policies also known as?
Unit-linked whole of life policies.
40
What do flexible whole of life policies offer?
A mix of life cover and investment.
41
How is the premium set for Maximum cover plans?
Fixed for a set period and then revised at the end of this period and increased in account of client's new age.
42
What is the structure of maximum cover plans?
Has an investment element built in, but the majority of the premium pays for life cover.
43
How are the premiums set for Standard cover?
Fixed, provided the investment element provides growth at a predetermined level.
44
What is the structure of a standard cover whole of life plan?
Has an investment element built in.
45
What is the structure of a guaranteed cover whole of life plan?
There is no investment element affecting premiums.
46
Which is likely to be the most expensive whole of life plan out of Maximum cover plans, Standard cover and Guaranteed cover??
Guaranteed cover.
47
As Friendly societies are mutual organisations, who are all profits (after expenses) payable to?
The policyholders.
48
What is the maximum annual amount allowed to be saved in a Friendly society policy?
£270
49
When does term assurance pay out a lump sum?
Upon death if the death happens within the policy term.
50
In which type of term assurance is the sum assured fixed throughout the term?
Level term assurance
51
What does increasing term assurance increase in line with?
An index.
52
In which type of term assurance does the sum assured fall each year in a predetermined way?
Decreasing term assurance.
53
What are the examples of decreasing term assurance?
1. Mortgage protection. 2. Gift inter vivos term assurance. 3. Family income benefit (FIB)
54
Which type of decreasing term assurance decreases over seven years in line with Inheritance Tax (IHT)?
Gift inter vivos term assurance.
55
Who is Family income benefit (FIB) there to protect?
A family with young children that requires regular payments.
56
What SIX things should be considered when determining the amount and type of cover an individual needs?
1. Who needs to be insured. 2. Whether a joint or single life basis is better. 3. The amount of life cover needed. 4. Flexibility required. 5. Reason for cover. 6. Affordability of premiums
57
Who is the sum assured payed to upon death on an 'own life' policy?
Their estate.
58
What do life assurance companies use mortality tables to estimate?
The amount of claims they can expect each year from lives of a given age.
59
How is the mortality rate calculated?
By dividing the number of people dying by the number of people living.
60
Whose job is it to calculate the level of premiums to charge from mortality tables?
Actuaries.
61
What is the name of the process that insurance companies use to measure the risk posed by potential clients?
Underwriting.
62
What is the aim of underwriters when assessing the risks posed by potential clients?
Minimize the losses for their company and remain profitable.
63
What are the FIVE different risk classes an insurance company will designate a client into, following the underwriting process.
1. Preferred 2. Standard 3. Rated 4. Postponed 5. Declined`
64
What is the name of the risk class that represents clients who have an above average risk and subsequently attract higher premiums?
Rated.
65
What are the THREE stages of the underwriting process?
1. Collect information 2. Analyse information 3. Identify options
66
During what stage of the underwriting process is the client placed into one of the five risk classes?
Stage 3 - Identify options
67
What SIX aspects of an individual are gauged from medical underwriting?
1. Personal details including age 2. Current state of health 3. Medical history 4. Occupation 5. Hazardous pursuits 6. Lifestyle
68
What is the name of the mandatary code introduced by the Association of British Insurers (ABI) the required insurers to pay out in the event of innocent misrepresentation during underwriting?
Consumer Insurance (Disclosure and Representations) Act 2012
69
Misrepresentation be deemed to be what THREE classes?
1. Innocent 2. Negligent 3. Deliberate
70
What does being a qualifying or non-qualifying policy determine?
The tax treatment of then policy.
71
What is the difference in the tax treatments of qualifying and non-qualifying policies?
Gains on qualifying policies are not taxable whereas a non-qualifying policy could be subject to income tax.
72
What must the minimum policy term be for a qualifying policy?
At least 10 years.
73
What is the maximum premium payable per annum on a qualifying policy?
£3,600
74
The sum assured for a qualifying policy must be no less than what percentage of the premiums payable over the contract?
75%
75
Chargeable gains made on life policies are subject to income tax with which type of policy?
Non-qualifying.
76
How is the amount of tax payable on a chargeable gain for a non-qualifying policy determined?
Based on the individual's income tax rates.
77
What is the name of the relief that may be considered if a gain pushes a taxpayer into a higher rate of income tax than usual?
Top-slicing relief.
78
What TWO things must a claimant do before receiving payment, once the life office has confirmed it is satisfied that the claim is valid?
1. Prove their title (legal ownership of the monies). | 2. Sign a form of discharge.
79
Where will the proceeds be paid if the policyholder of an own life policy dies?
To their estate.
80
What can be done with a life assurance policy to control the ownership of assets and mitigate tax liabilities?
Write the policy into a trust.
81
Who creates a trust deed?
The settlor.
82
Who does the trust deed outline the rights and duties of?
The trustees.
83
Who should the trustees act in the best interest of?
The beneficiaries.
84
What are the THREE main parties of a trust?
1. Settlor 2. Beneficiaries 3. Trustees
85
Who is the person that creates a trust and transfers legal ownership of money and assets to the Trustees?
The settlor.
86
If a trust is going through financial difficulties and the assets in the trust are unable to meet the trust's liabilities, who could have personal liability to meet any shortfalls?
The trustees.
87
What are the THREE main types of trust?
1. Absolute or bare trusts. 2. Interest in possession trusts. 3. Discretionary trusts
88
With an absolute or bare trust, who is completely entitled to the assets of the trust?
The beneficiaries.
89
What is another name for the beneficiary who will receive income from an 'interest in possession trust' throughout their lifetime?
A life tenant.
90
Who is the remainderman in relation to an Interest in possession trust?
A separate beneficiary who will be entitled to the capital of the trust on the life tenant's death.
91
What is the name of the type of trust where the settlor gives the trustee discretion over whom the trust funds pass to and when?
A discretionary trust.
92
What is the primary advantage of an absolute trust?
They are the least complex trusts to set up and administrator.
93
What is the primary disadvantage of an absolute trust?
They provide little flexibility and protection.
94
What is the name of the trust that provides the most flexibility for making changes to the beneficiaries of the trust, and the highest level of asset protection?
A discretionary trust.
95
What are THREE advantages of using trusts with life policies?
1. Speeding up distribution of money to beneficiaries upon death. 2. The fund is free of IHT. 3. Flexibility over who receives the money from the trust.

LP2 (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions