TEST 2 Flashcards Preview

RO5 2017-2018 TESTS > TEST 2 > Flashcards

Flashcards in TEST 2 Deck (50):

People’s confidence in long-term financial arrangements is undermined by which of
the following factors?



Morag is considering a policy that would enable her to maintain her mortgage
payments if she was made redundant. She should be aware that such policies:

will only provide benefits for a maximum of two years


James makes a lifetime gift into a trust which isn’t an absolute/bare or disabled trust. How much tax is due immediately?

20% on the amount gifted into trust that exceeds the available nil rate band


Where a business is considering protection for one of its employees, the need will
depend on:

the individual employee’s role in the business


Which of the following statements relating to the personal independence payment is

Eligibility is based on an assessment of individual need


In relation to the State pension credit, an individual reaching State pension age on or
after 6 April 2016 may normally be entitled to:

The guarantee credit only


Mark and Joanne are making a claim in November 2017 for child tax credit having had their first child in June 2017. Their claim can be backdated:

for no more than one month


Which of the following is a term assurance policy which may be used as an alternative
to a whole life policy?

Term 100


Which of the following statements CORRECTLY defines the pure or net premium calculated for life assurance policies by actuaries from mortality tables?
A. The premium required just to meet the claims of those who die during the year
B. The actual premium that will be paid by the policyholder
C. The premium for all policyholders in good health
D. The premium required to meet claims each year including an assumed interest
rate of 5%

A. The premium required just to meet the claims of those who die during the year


Carla is placing a life assurance policy into trust. Which of the following statements is
correct in relation to her selection of trustees?

The trustees should have an understanding of her wishes


Craig has had a life assurance policy assigned to him. By when should he notify the life office of the assignment?

As soon as possible


Jack, who is married to Vera, has an endowment policy approaching maturity. The life office’s form of discharge can be signed by:

Jack only


In which of the following circumstances would the claimant on a life assurance policy normally be asked to sign a Statutory Declaration?
A. When receiving the proceeds of a death claim
B. When receiving the proceeds of a maturity claim
C. When a policy document has been lost
D. When a policy has been assigned

C. When a policy document has been lost


Shona has been advised to take out an increasing term assurance as protection for her dependants. The reason for this would be:

to ensure that the sum assured keeps pace with inflation


Julie has decided to pay the premiums on her life assurance policy by monthly
instalments. This means that the premium she pays will have a:

frequency loading


Where a claim is made under a mortgaged life policy, who will the life office make the
payment to?

The mortgagee


Who is responsible for declaring a chargeable gain on a life policy to HMRC?

The policyholder only


Helen has made a chargeable gain of £4,500 on the surrender of her non-qualifying life assurance policy. If her taxable income in 2017/2018 is £40,000 she will be liable for which of the following taxes on the gain?

Income tax at 20%


John is paying regular monthly premiums on a life assurance policy to protect a
potential inheritance tax liability. Which of the following exemptions from
inheritance tax could he claim against the annual premiums totalling £3,200?

The annual exemption and the normal expenditure out of income


Frances has made a claim on the maturity of a second-hand life assurance policy and
made a chargeable gain. Which of the following taxes will she be liable for?

Capital gains tax


Andrew died in May 2017, leaving £81,250 to his niece and the remaining £285,000 to
his wife Mary. Mary’s estate is to be left to their niece. If Mary’s estate is now worth
£590,000 and she wants to take out a policy to cover the inheritance tax liability on this, she should take out a policy for which of the following amounts?



The life fund of a UK insurer is liable for capital gains tax at which of the following



Kevin is employed and receives sick pay from his employer. This is paid at full pay for six months and then half pay for a further six months. In arranging an income
protection policy, he will be able to take out cover based on:

half pay for months 7 - 12 and full pay from month 13


The usual limitation on the amount of benefit that can be paid from an individual
income protection policy is that the total of all policies does not exceed:

50% - 60% of average monthly gross earnings in the year prior to incapacity


Jennifer, who works in the hotel and catering industry, is applying for an income
protection policy. In which occupational class will she be placed for the calculation
of her premium rate?

Class 2


Daniel’s company provides income protection for him and they pay the premiums. For how long will the benefits usually be paid if he becomes ill?

To the earliest of his recovery or normal retirement date


Arlene has started a second occupation on a part-time basis, three years after taking
out her income protection policy. How will this change be treated by most providers?

It will mean that her benefits will only be paid in relation to her occupation at the time the policy started


Sean has an income protection policy with a deferred period of 13 weeks. When
should he notify the insurance company in the event that he becomes incapacitated
and needs to make a claim?

As soon as possible


Amanda has a term assurance policy that includes Waiver of Premium (WOP). For
how long will the waiver of premiums continue when a valid claim is made?

Until she returns to work, the expiry of the policy or a specified age


Neil’s critical illness policy has been set up on a reviewable basis. Which of the
following is the new rate based on when the reviews are undertaken?

Claims experience of the insurer


Emily, a higher rate taxpayer, has received the benefits from her critical illness policy
after making a valid claim. Which of the following taxes will she be liable for?

There is no tax liability


Where a combined life assurance and critical illness policy allows for a buy back of the sum assured on death after the payment of benefits on a critical illness claim, this is typically allowed for what period of time?

Up to six months from the end of any treatment for the diagnosed critical illness


Although no set survival period is specified in the ABI best practice, which of the
following reflects the typical range of survival periods for critical illness cover on the market?

14 – 30 days


Under total and permanent disability, which of the following definitions is the strictest in terms of when a critical illness cover would pay out?

Unable to look after oneself ever again


Which of the following conditions is usually excluded from critical illness cover?
A. Heart valve replacement
B. HIV infection caused by a blood transfusion administered in the UK
C. Temporary loss of speech
D. Terminal illness

C. Temporary loss of speech


Which of the following factors should be carefully examined by the potential
policyholder before taking out a long-term care policy?

The number of activities of daily living (ADLs) used to assess the need for care


Belinda, a single parent, has 2 children aged 8 and 10, has taken out a personal
accident and sickness policy for herself. If she wanted to extend the cover of the
policy to cover her children, what restriction might there be?

The cover may be restricted to accidents only


Avril wants a low-cost policy that will help to pay for any medical care she requires. A
disadvantage of a basic private medical insurance plan rather than a comprehensive policy is:

there may be limits on the cost of treatment covered in one year


A mortgage payment protection insurance policy is designed to cover:

All mortgage related costs


Which of the following additional benefits may also be paid from an accident,
sickness and unemployment insurance policy?

A lump sum benefit for loss of a limb or sight


Systemis Ltd pays the premiums for a group personal accident and sickness insurance for their employees. How is this treated in relation to the company’s taxation?

It is treated as an allowable business expense


Which of the following is not an argument in favour of taking out private medical

It is more suitable for a patient with a chronic medical condition


Vivienne wants to apply for a mortgage payment protection insurance policy. Which
of the following is a typical eligibility condition?

She must have been employed/self-employed continuously for the last 6 months


In quantifying the protection needs of a client on death, which of the following
should be considered first?

Capital to settle liabilities


James has completed a sales process with a client and sold a protection product. To meet the FCA rules he should keep copies of:

The fact-find, written recommendations and suitability letters


Tax relief can generally be given on premiums for a key person policy where the life assured is classed as:

an employee


Where policies are written on a life of another basis in relation to share protection
insurance, the main advantage is that:

there is no need for trusts


Caledon Ltd has an agreed overdraft facility with their bank of £50,000. They have only ever used £20,000 of it occasionally to cover short term cash flow problems. In considering the insurance cover, they should have on this, the cover should be for:



Tim is in a partnership with Nigel and they have agreed to set up a buy and sell
agreement. The associated life assurance policies should be written as:

own life policies in trust for the other partner


DDB Ltd has made a claim on a company held life policy. How is this treated in
relation to taxation?

The profit is treated as income of the company and subject to corporation tax