Protection insurance principles Flashcards
(15 cards)
Q: What is the purpose of life assurance?
A: To provide a lump sum or income on the policyholder’s death.
Term: Term Assurance
Definition: Life cover for a fixed term, paying out only if the insured dies during that time.
Q: What’s the difference between level term and decreasing term assurance?
A: Level pays a fixed amount; decreasing reduces over time (e.g., to match a mortgage).
Term: Whole of Life Assurance
Definition: Life cover that lasts for the insured’s lifetime and pays out on death.
Q: What is critical illness cover?
A: A lump sum paid on diagnosis of a specified serious illness (e.g., cancer, stroke).
Term: Income Protection
Definition: Replaces part of the policyholder’s income if they can’t work due to illness or injury.
Q: What is the typical deferred period for income protection policies?
A: Often 4, 13, 26 or 52 weeks — based on employer sick pay or personal preference.
Term: Underwriting
Definition: The process of assessing risk before issuing a protection policy.
Q: What is non-disclosure in insurance?
A: Failing to disclose material facts, which could void the policy.
Term: Guaranteed Premium
Definition: A premium that stays the same for the term of the policy.
Q: What’s the difference between own occupation and any occupation in income protection?
A: Own occupation pays out if you can’t do your specific job; any occupation is stricter.
Term: Family Income Benefit
Definition: A policy that pays out regular income on death instead of a lump sum.
Q: What is waiver of premium?
A: A policy add-on where premiums are waived if the insured is unable to work.
Term: Relevant Life Policy
Definition: A tax-efficient life cover for employees, usually paid by the employer.
Q: What’s the main benefit of writing life insurance in trust?
A: It keeps the payout outside the estate for IHT purposes and speeds up payment.
