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R06 CII June > Protection Products > Flashcards

Protection Products Flashcards

(67 cards)

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1
Q

Areas to comment on protection cover for clients

A

-Is there a will in place. Impact of not having a will. Laws of intestacy. Funeral arrangements etc
-Mortgage-is it protected in the event of death on first death, in event of sickness, critical illness
-is there family income benefit in place that would pay income on death to replace
-Sick pay-is there sick pay. If not DWP. And its means tested. Would they qualify?
-PMI-does family have PMI? If not, should they need urgent surgery they may need to wait and risk losing more income
-Impact of long term sickness on their financial aims-who is the breadwinner

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2
Q

What is level term assurance and what does it generally cover? (1))

A

To cover a debt or liability. Death during term triggers. Eg mortgage

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3
Q

What is decreasing term assurance?

A

For debts that are reducing (eg repayment mortgage)
Last for term of debt

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4
Q

What are the features whole of life assurance? (7)

A

Life cover and investment mix
Normally on JLFD/JLSD own life joint life
Used often for iht/ mortgages
Lump sum
Can have CI bolt on
Inflation proofed through range of equities
Unit linked

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5
Q

What is critical illness? (4)

A

-Pays out a lump sum on survival to assist with CI
-14-30 days survival
-standalone or as bolt on to life cover
-can be term, WOL, endowment

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6
Q

What is income protection (6)

A

-for long term illness/sickness/accident
-tax free
-to chosen retirment age
-own profession
-once taken out cannot be cancelled
-based on current health

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7
Q

What is LTC (2)

A

-Long term care fees for those who cannot complete daily task
-Can be immediate or pre funded

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8
Q

What is PPI

A

Illness accident
To cover debts
Set term
Max 2 years

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9
Q

What is ASU

A

Income for set term
Max 2 years

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10
Q

What is personal accident and sickenss? (4)

A

Short term income/smaller lump sums
For illness, accident, disability
Set terms
Max two year pay out

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11
Q

What is PMI?(6)

A

Covers medical bills/hosp bills
For treatment
Annual fee
Allows to go private/helps get back to work esp self employed
Pre existing normally excluded
Underwriting at application

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12
Q

How do the premiums work for WOL assurance? (5)

A

-paid monthly/annually
-buy units
-Premiums cancelled for life cover
-set based on assumed investment return
-If underperforming policyholder can increase premiums or reduce cover

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13
Q

What levels of cover are there for WOL assurance and when is it set? (3)

A

-can be on a maximum cover, standard or guaranteed cover basis
-set initially so you dont need to increase

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14
Q

What is maximum cover for WOL?(4)

A

-Fixed for set term the jumps up
-Client can increase premiums or reduce cover for sum assured
-small surrender value may build up
-good if want reduced initial payments eg. Wife on maternity

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15
Q

What is guaranteed cover for WOL?(3)

A

-No investment element
-guaranteed premiums
-More costly from outset but doesnt increase

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16
Q

What is standard cover for WOL?(2)

A

-set so it doesnt increase
-remains as long as fund meets return

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17
Q

Why is own life WOL used? (3)

A

When benefitting own life
Goes into estate (not to beneficiary)
Endowments

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18
Q

What is the downside of JLFD?(3)

A

Survivor will need to continue premiums
Doesn’t cover if both die
Creates estate problem for survivor

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19
Q

What is JLSD typically used for? (5)

A

-Normally put under trust
-Less tax
-Quicker payout as does not go to probate
-Legally owned by trustees
-Used to pay IHT charge

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20
Q

What are the cover plans for WOL assurance (3)

A

-Maximum cover
-Standard cover
-Guaranteed cover

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21
Q

What is an assurance bond? (5)

A

Alrernative to life insurance
Single premium(unlike life)
Non qualifying WOL
Benefit is sum assured from inv vehicle on death
No term-pays out on death to beneficiaries

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22
Q

What are the features of term assurance? (5)

A

-Cash lump sum on death within the term
-Can be index linked (increasing term assurance)
-Can be taking out to cover age 100 (Term 100)
-can be decreasing term (good for Iht)
-Can have renewable-option to extend when come to end (good if ill health and cant get another provider to insure)
-can have a convertible option (converts at end of term without need for new health assessment)

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23
Q

What is family income benefit? (5)

A

-pays out tax free regular income to family on death during the term
-no lump sum
-generally the most affordable life insurance
-can include CI
-cost based on mortality

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24
Q

What would you need to consider when choosing a suitable policy for a client? (4)

A

-the purpose
-affordability
-investment element wanted?
Desirability to have guaranteed or flexible premiums

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25
Features of IP
standard cover-deferred 50-60 of salary, pay until return or die limited-short term, day one-for self employed-from day one WOP-waiver or premium feature ensure policy continues-based on morbidity
26
What are the benefits of IP?
-Linked periods of illness-no need for double deferred periods -Unlimited amount of claims -works with sick pay -tax free
27
Describe group ips FPB
Features paid to employer to distribute to staff if get sick Paid to all staff (non selective) Simplified underwriting (no medical underwriting needed for limited payout) Not a benefit in kind Premiums Paid by employer Can be reduced if cover reduced to term Deducted as business expense Benefits Often higher than normal ip-c75% Taxed as income Normaly deferred for 20weeks (SSP IS 28 weeks) Taxable for employee (as they havent paid tax on this yet)
28
FPB of CI (f=8,p=3, b=3)
Features Based on morbidity Standalone or combined with life cover Can be held in trust-split benefit w/Li (retain some benefit for self eg.Ci and some others in trust) 14-30 day survival required Index link available (premium increase and need higher amount possible) Life cover buy back option (feature that allows you to continue the life cover once claimed. (CI policy is over once claimed) -Exclusions exists eg. Types of activity etc -reinstatement cover (reinstates after divorse) Premiums -Guaranteed or reviewable -WOP available -based on age, medical history, med, history of family, lifestyle factors Benefits Cash LS on survival Reduced sum assured may be paid for some CI’s Non taxable
29
FPB OF LTCI (5,4,2)
Required when can no longer do ADL (eg. Keep safe, clean) Your contribution to long term care is means tested by the gov Features Pays an income until death Deffered care-own care for x years Immediate needs-ls paid based on perceived life span Pre-funded policies-paid for before care needed equity release-Lifetime mortgages (paid back when die) or home reversion plan (sell part/all of home) Premiums As lump sum-for immediate of future By regular premiums (pre funded build up) Whole life-policies pay out on need Equity release-money from House Benefits Paid for all/part of period policyholder cannot live without assistance Annuity pays for life
30
How is long term care means tested?
On savings
31
Describe PMI (8)
-Covers acute conditions(urgent/short term care) -Basic, standard or comprehensive plans -Excess fee available-higher the excess the lower the cover -non taxable -annually reviewable -increases with claims -if group-taxed as BIK, allowable business expense -monthly/annual premiums
32
Describe Personal Accident and Sickness insurance (5)
-covers medical expenses -on accident/sickness -Annual contract -weekly sickness payment after deferred period -Max 2 years payout
33
When do you review WOL cover?
Typically after 5-10 years
34
What is normally the four outcomes of a WOL policy review? (4)
-premiums increased to maintain cover. (If on maximum cover -reduced Premiums at start) -cover decreased if premium not affordable -no action-remain same -do nothing-policy may cease
35
What is family protection? (2)
Level term Often on interest only mortgages
36
What is family income benefit?
Pays regular income if dies Sum assured reduced Lowest cost-simply
37
Three type of life covef
WOL TERM ENDOWMent
38
What are the features of an endowment policy? (7)
Life cover and investment Can have bolt on CI Unit linked-cancelled units pay for cover Pays out on death or provide investment return at end of term -can be taken out of sinlge or joint life -wop -Guaranteed/renewable
39
What is WOL maximum Cover? (5)
Premium fixed for 5-10 years Likely to go up Or sum assured reduced Highest protection for given premium Suits low initial with less care for premiums increasing in future eg. If finances better
40
What is WOL standard cover? (3)
Where dont want hikes-consistent Can build up a investment value Investment/protection mix more even than maximum cover
41
Features of term assurance (4)
Cheap Used for fib/IHT lifetime gifts Single/joint life first death JLSD irrelevant coz its term
42
What is level term assurance?(4)
Payment on death during term Fixed premium and sum assured Policy lapses if not paid Interest only mortgage use
43
What is renewable term assurance? (3)
No health evidence required on exercising option Often used for key person insurance Normally expire age 65
44
What is convertible term assurance? (4)
No further health evidence required Convertible at end or during or to WOL or endowment Premiums Recalculated at conversion Often used for key person ins
45
What is decreasing term assurance (2)
-Premium and sum assured decreases each year -Often used as gift intervivos (for pets) or mortgage policy with repayment
46
Why is increasing term assurance used? (4)
-keeps line with inflation -cover increases by set % or index linked -no health evidence required for this -premiums increase with age (eg 65)
47
What is a FIB and when used? (12)
-Suits families with young children Often used to cover the financial dependancy of children Indexed to keep pace with inflation Cheap so good for tight budget Term decided at outset Pays out until the end of the term If claim made later in term payout will be less Can be level, decreasing or increasing payments monthly, quarterly, annual LS instalments after death of assured within terms Tax free income Simple underwriting Can be placed in trust Known cost/affordability
48
Why does ATR come into consideration for those with no protection in place?
No cover means a much higher ATR May not be in line with client May not be consistent Does it match their aims
49
What is mortgage payment protection insurance? (5)
-pays mortage and assoc bills -Only pays out for 12-24 months -max payout 125% of mortgage -cheap-for when affordability an issue -special criteria for self employed to claim
50
What is the purpose of WOL cover? (2)
-to pay out a sum of money to ‘someone’ on death. -can be used to protect family, for IHT,
51
Why does guaranteed WOL cover has no investment element?(2)
-So premiums can be guaranteed. -If investment underperforms on WOL premiums need to be adjusted or sum assured reduced
52
What is special events in relation to life Cover? (4)
Feature often automatically included No underwriting needed Allows policyholder to increase sum assured, eg on marriage Within age 20-55
53
What would client need to do if no cover is in place and unexpected happens stopping them from Working? (5)
Reduce outgoings-less imcome Deplete savings Approach family and friends Claim DWP benefits-low amount-admin Put future plans on hold
54
What is waiver of premium in relation to protection policies and pension (5)
On protection products and pension as bolt on Kicks in after deferred period and lasta until retirement Premiums must be paid in deferred period Inexpensive Paid on pension as increase in contribution that gets no tax relief
55
What are the four underwriter outcomes when asessing a policy application?
Exclusion-exclude condition Deferral-eg for two years Decline-no cover Apply rating-spend more on cover or reduce cover in line with their affordability
56
What policies have no cancellation rights? (4)
Traded life policies Policies that are less than <6 months Non UK res and some pension linked benefits Travel ins<1 month
57
What cancellation period for OEICS, ISAs, EIS/CTF/GI have?
14 days
58
When cancellation period for life, pension, annuities, OEICS and EIS that are part of life policy wrapper
30 days
59
From what point can you request a right to cancel?
Once you’ve received the right to cancel documentation You must request right to cancel
60
What is the purpose of a reflection Period?
30 days before product commensement as often non reversible
61
What is a shortfall clause
A clause whereby a firm may have already bought investments so will be the value of the original investment or underlying value of investment (lowest)
62
Features of critical illness cover (14)
Pays lump sum on diagnosis of ci 14-30 days survival Severity based cover-on likelihood that will die in term Useful to pay off mortgage. Adapt house, adapt vehicles, school fees etc Guaranteed/reviewable policies -x2 higher cost of review in 5-10 Underwriting required-stricter than basic life cover Term-limited or wol Premiums-lump sum or regular Bolt on to life cover In trust-with life cover as split benefit trust-ci goes to settlor, life cover to beneficiaries Child cover as extra-ci for child Index linked/guarantees-sum assured increases in line with inflation so counter changes to life even Buy back feature-once claimed on can be hard to get cover. Buy back allows a restricted level of cover WOP-waives after deferred period of sickness
63
What is a qualifying v non qualifying endowment policy
Qualifying is totally free of income tax on withdrawal-5% can be withdrawn each year 10 years hold or 3/4 of term Non qualifying is taxed at individuals marginal rate
64
What does a life policy need to be in order to be ‘qualifying’ (5)
10+ years Premiums yearly or more frequent Premiums no more than twice the year previous (smooth premiums) Life cover min 75% of premiums paid Doesnt give rise to a chargeable gain on encashment
65
What happens when a life policy is ‘qualifying’
Doesnt give rise to a chargeable gain on encashment
66
Why is an onshore and offshore bond non qualifying?
As often single premium
67
5 Benefits and 5 db of group PMI (5/5)
Treated as a business expense Faster treatment/return to work Choice of hospital/doctor Likely cheaper than personal cover Could cancel other plans Could lose cover if leave employer May not cover wider family May not have choice of cover Taxable as BIK Higher rate tax paid on premiums when salary increases

R06 CII June (22 decks)

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