U5: T17 - TYPES OF FINANCIAL PROTECTION I Flashcards
(98 cards)
1
Q
Define means tested benefit.
A
Eligibility depends not only on the claimant suffering from a certain condition or experiencing a certain life event, but also on the claimant’s financial circumstances – in particular, how much income and/or savings they have.
2
Q
Is Universal Credit means tested? Yes or No
A
Yes
3
Q
Is Job Seekers allowance means tested? Yes or No
A
Yes
4
Q
Is Income Based ESA means tested? Yes or No
A
Yes
5
Q
Is Income Support means tested? Yes or No?
A
Yes
6
Q
Claims for Universal Credit are made on a per-individual, rather than per-household, basis. True or false?
A
False. They are made on a per-household basis
7
Q
Name 3 criteria to be eligible for Universal Credit.
1) Must be over the age of 16 years old
2) Must be over the age of 18 years old
3) Must have less than £15,000 in household savings
4) Must have less than £16,000 in household savings
5) Both them and their partner are under the state pension age
6) Either them or their partner are under the state pension age
A
2) Must be over the age of 18 years old
4) Must have less than £16,000 in household savings
6) Either them or their partner are under the state pension age
8
Q
How many consecutive days must someone be off sick to be entitled to Statutory Sick Pay?
A
4 days
9
Q
Who pays employees for SSP?
1) Employers
2) Department for Work and Pensions
A
1) Employers pay the benefit on behalf of the Department for Work and Pensions and reclaim the amounts paid
10
Q
What is the maximum period that SSP can be paid?
A) 14 days
B) 20 days
C) 28 days
A
c) 28 days
11
Q
2 spells of sickness less than 8 weeks apart are counted as:
1) 2 spells of sickness
2) 1 spell of sickness
A
2) 1 spell of sickness
12
Q
SSP is means tested. True or false
A
False
SSP is not means tested.
13
Q
What must someone claim if they are still sick after 28 weeks?
A
Incapacity Benefit (being replaced by ESA)
14
Q
New claims for Incapacity Benefit are not allowed. True or false?
A
True. It is being replaced by ESA and no new claims are allowed.
15
Q
Attendance allowance is taxable. True or false
A
False. Attendance allowance is tax free.
16
Q
Attendance allowance is means tested. True or false
A
False. It is neither means tested nor dependent on national insurance contributions (NICs)
17
Q
What are the 2 criteria for Personal Independence payment?
They have difficult with mobility for at least X months;
They expect their difficulties to continue for at least another Y months.
A
X= 3 months
Y= 9 months
18
Q
How many components does PIP have?
A
2.
Daily living component
Mobility component
19
Q
Carer’s allowance is dependent on NIC contributions. True or false
A
False
20
Q
How many hours per week must a carer spend as a carer to qualify for carer’s allowance?
A
35 hours
21
Q
How many hours per week must a carer spend as a carer to qualify for carer’s allowance?
A
35 hours
22
Q
Is a 15 year old carer eligible for carers allowance?
A
No, they must be aged over 16
23
Q
Carers in receipt of the state pension cannot receive the full amount of both the state pension and Carer’s Allowance. True or false
A
True
24
Q
SMI (Support for Mortgage Interest) is a state benefit. True or false?
A
False, it is a state loan
25
Universal credit payment reduces if someone earns more. True or false
True
26
You pay both tax and NICs on SSP. True or false?
True
27
If you are 16 or 17 you can receive Job Seekers Allowance. True or false?
True. Generally speaking you must be above the age of 18, though there are some exceptions
28
You must work less than 16 hours per week to receive JSA. True or false?
True. Or unemployed and actively seeking work
29
New style JSA can be paid for a maximum of how many days?
A) 160 days
B) 180 days
C) 182 days
C) 182 days
30
What style of JSA is dependent on sufficient class 1 NICs being paid?
New Style JSA
31
What style of JSA can only apply if the applicant is eligible for severe disability premium?
Contribution-based JSA
32
Which type of JSA Is being replaced with Universal Credit?
Income-based JSA
33
For those who do not qualify for new-style or contribution based JSA, what JSA is available?
Income-based JSA
34
After a claim has been made, what is the waiting period that must elapse before Support for Mortgage Interest (SMI) is paid?
A) 8 consecutive Universal Credit payments or 38 weeks after claiming for another qualifying benefit
B) 9 consecutive Universal Credit payments or 39 weeks after claiming for another qualifying benefit
C) 10 consecutive Universal Credit payments or 40 weeks after claiming for another qualifying benefit
B) 9 consecutive Universal Credit payments or 39 weeks after claiming for another qualifying benefit
35
Claimants receiving Pension Credit are generally only covered for interest on how much of their mortgage?
On their first £100,000
36
Claims of SMI is paid to cover interest (not capital) on the first how much of a mortgage?
£200,000 for claimants not receiving pension credit
37
Claims of SMI is paid to cover interest (not capital) on the first how much of a mortgage?
£200,000 for claimants not receiving pension credit
38
Payments of SMI are made to the borrower. True or false?
False, payments of SMI are made direct to the lender
39
Payments are calculated using a standard rate of interest, rather than the borrower’s actual pay rate. True or false
True
40
Interest charged on the loan is usually lower than market interest rates and is reviewed every six months. True or false
True
41
Is the SMI loan a secured loan?
Yes, it is secured by second charge on the borrower's property
42
In the instance an SMI claimant's property is sold but there is not enough equity to pay the SMI loan, what happens to the loan?
It is written off
43
If an SMI claimant is about to start a job after more than 26 weeks of SMI claims, are they still eligible for SMI?
No, they become ineligible.
Where the claimant has been receiving SMI for at least 26 weeks but they are about to start a job that will make them ineligible, they can claim mortgage interest run-on.
44
A mortgage-interest run-on is paid directly to the lender. True or false?
False. A run on pays the benefits straight to the claimant rather than to the lender.
45
A mortgage interest run-on is paid for how long?
This pays the benefits for a further four weeks, and straight to the claimant rather than to the lender.
46
Describe the 52-week linking rule.
Under the 52-week linking rule, a borrower who has already served the waiting period for SMI and then ceases to claim payments for up to 52 weeks will not have to serve a further waiting period at the start of the second claim. This means that those who claim SMI can accept offers of short-term or seasonal work without losing their entitlement to further SMI payments.
47
What is an 'Equitable Right'?
Governed by the practice of equity, or fairness; indicates an agreement between the two parties that the policy has been given as a form of security.
48
Term assurance has an investment element. True or false
False. Term assurance is the most basic form of life assurance: it is pure protection (see section 19.1) for a limited period with no element of investment.
49
Term assurance is the most expensive form of life assurance. True or false?
False.
Term assurance is the cheapest because there is no element of investment.
50
Define Surrender Value.
An amount paid when cashing in an investment-linked policy early. This ends the policy and typically incurs high charges.
51
Which mortgage would a level term assurance be most appropriate for?
A) Interest-only
B) Repayment
A) Level term assurance is often used when a fixed amount would be needed on death to repay a constant fixed-term debt, such as an interest-only mortgage.
52
Which mortgage would a decreasing term assurance be most appropriate for?
A) Interest-only
B) Repayment
B) Repayment
The most common use of decreasing term assurance is to cover the amount outstanding on a repayment mortgage; this is also known as mortgage protection assurance.
53
Define convertible term assurance.
Convertible term assurance includes an option to convert the policy into a whole-of-life or endowment assurance without further evidence of health or additional underwriting.
54
Define whole-of-life assurance.
Whole-of-life assurance covers the life assured for their whole lifetime and pays out the sum assured in the event of death, whenever it occurs, provided that the policy remains in force (ie that the premiums have been paid).
55
What does CIC stand for?
Critical Illness Cover
56
Which of the following could be paid out before death of the life assured?
A) Convertible term assurance
B) Whole-of-life assurance
C) Critical Illness Cover
C) Critical Illness Cover
57
What is the typical 'Survivial period' lives assured must survive in order for the sum assured to be paid out under CIC?
14-28 days after an insured event
58
For level CIC cover, what happens to cover and premiums over time?
Both stay fixed throughout the term
59
For decreasing CIC cover, what happens to cover and premiums over time?
Both decrease
60
For increasing CIC cover, what happens to cover and premiums over time?
Both increase
61
CIC may be added to a term assurance policy. True or false?
True
62
What is IPI?
Income Protection Insurance
63
Which of the following can be cancelled on the grounds of 'poor claims experience'?
A) IPI
B) Sickness and accidental insurance
B) Sickness and accidental insurance
IPI is permanent, so the insurer cannot cancel the cover simply on the grounds of poor claims experience.
64
What is the typical % of earnings that can be paid out through IPI?
50-80%
65
What is the 'deferred period' for IPI?
Deferred period is the period after which benefits are paid out
66
What is the typical 'deferred period' for IPI?
Typically 4 weeks
67
What is back to day one’ cover?
Offered by a limited number of providers, provides cover from the first day of the illness once the insured has been off work for three days.
68
What length deferred period is a self-employed person likely to choose?
The shortest they can afford as they are likely to be without income as soon as they get ill.
69
What are the main differences between CIC and IPI?
1) CIC is intended to cover the costs associated with one of the specified illnesses. Typically a lump sum
2) IPI intends at replacing income when an illness prevents someone from working
3) The benefits of IPI can continue until retirement if the person is out of work that long. CIC is a one-off lump sum
4) CIC ceases once the claim has been made. IPI keeps running as long as premiums are paid.
70
Which UK state benefit is replacing various others?
Universal Credit
71
Housing Benefit is means tested. True or false?
True
72
SMI is paid as a:
a) benefit
b) loan.
c) gift.
b) loan.
73
Mortgage protection assurance is the most common use of which type of term assurance?
a) Level term assurance.
b) Decreasing term assurance.
c) Convertible term assurance.
b) Decreasing term assurance.
74
When exercising the conversion option on convertible term assurance, the new sum assured:
a) cannot exceed the original sum assured.
b) must be equal to the original sum assured.
c) can exceed the original sum assured.
a) cannot exceed the original sum assured.
75
Which core conditions are generally always covered by a CIC policy? Select all that apply.
a) All forms of cancer.
b) Heart attack of any severity.
c) Stroke resulting in permanent symptoms.
d) Heart attack of specified severity.
e) Most forms of cancer.
c) Stroke resulting in permanent symptoms.
d) Heart attack of specified severity.
e) Most forms of cancer.
76
When deciding whether to change a reviewable CIC or IPI premium, the insurer cannot consider claims experience. True or false?
False
77
For which of the following traditional exclusions did the ABI revise its CIC guidance in 2018?
a) Self-inflicted injury.
b) Participation in certain high-risk pastimes.
c) HIV not resulting from a blood transfusion, an assault or a work accident.
c) HIV not resulting from a blood transfusion, an assault or a work accident.
78
A payout from a CIC plan can only be triggered if the insured takes a specified minimum amount of time off work. True or false?
False
79
IPI benefits cease on the earliest of recovery and end of policy term, death or what else?
Retirement
80
Which UK state benefit is replacing various others?
A) Universal Credit.
B) Employment and Support Allowance.
C) Personal Independence Payment.
A) Universal Credit.
81
PIP is usually payable where the person has had difficulties with daily living or mobility for ______ months, and expects their difficulties to continue for at least another ______ months.
A) Three months and nine months.
B) Three months and six months.
C) Three months and three months.
A) Three months and nine months.
82
A person who qualifies for Attendance Allowance and needs help both by day and night would receive the:
A) lower rate.
B) higher rate.
C) standard rate – there is only one rate.
B) higher rate.
There are two levels of benefit for Attendance Allowance: a lower rate for people who need help with personal care by day or at night, and a higher rate for those who need help both by day and at night.
83
SMI payments are calculated using:
A) the borrower’s actual mortgage interest rate.
B) the Sonia index.
C) a standard rate of interest.
C) a standard rate of interest.
SMI payments are calculated using a standard rate of interest, rather than the borrower’s actual pay rate.
84
Assignment of life policies remains normal practice among lenders. True or false?
False.
Assignment used to be normal practice among lenders, but it has become increasingly less common.
85
Level term assurance is most appropriate to cover repayment of which of the following products?
A) Repayment mortgage.
B) Interest-only mortgage.
C) Credit card.
B) Interest-only mortgage.
Level term assurance is often used when a fixed amount would be needed on death to repay a constant fixed‑term debt, such as an interest‑only mortgage.
86
With mortgage protection assurance, the sum assured:
A) increases by lesser monthly amounts near the start and by larger amounts towards the end of the term.
B) decreases by larger monthly amounts near the start and by lesser amounts towards the end of the term.
C) decreases by lesser monthly amounts near the start and by larger amounts towards the end of the term.
C) decreases by lesser monthly amounts near the start and by larger amounts towards the end of the term.
With mortgage protection assurance, the sum assured, like the mortgage, decreases by lesser monthly amounts near the start and by larger amounts towards the end of the term.
87
Pension term insurance cannot extend beyond the individual’s:
A) 55th birthday.
B) 65th birthday.
C) 75th birthday.
C) 75th birthday.
Pension term insurance cannot extend beyond the individual’s 75th birthday, and the policy cannot be held in joint names or assigned to a lender.
88
Which of the following whole-of-life contracts may be suitable where both lifetime cover and an increasing benefit are required?
A) With-profit.
B) Unit-linked.
C) Non-profit.
B) Unit-linked.
Unit‑linked is suitable where both lifetime cover and an increasing benefit are required. Some of the money is used to buy the life assurance while the rest is invested. However, whole‑of‑life is primarily a protection policy, so more speculative funds should generally be avoided
89
CIC commonly, but not always, covers aorta graft surgery. True or false?
True.
CIC commonly covers aorta graft surgery.
90
With which type of CIC does the cover amount change each month in line with a repayment loan?
A) Level cover.
B) Decreasing cover.
C) Increasing cover.
B) Decreasing cover.
With decreasing cover, the cover amount decreases each month, generally in line with a repayment loan such as a mortgage, while applying a fixed interest rate chosen at the start.
91
Universal Credit consists of a basic allowance with different rates payable for single people/couples and younger people. True or false?
True
92
What is the maximum number of hours someone can work on average per week and still receive JSA?
16 hours per week
93
What is the waiting period that must elapse for SMI payment for those receiving pension credit?
No waiting period
94
Which whole-of-life assurance policy is suitable where an absolute fixed amount, no more and no less, is needed on death. In practice, such situations are rare.
A) Non-profit
B) Unit-linked
C) With-profit
D) Universal
A) Non-profit
95
Which whole-of-life assurance policy is suitable if the client has needs similar to those fulfilled by a basic unit-linked policy, but they want the flexibility of a variable mix of protection types.
A) Non-profit
B) Unit-linked
C) With-profit
D) Universal
D) Universal
96
Which whole-of-life assurance policy is suitable where both lifetime cover and an increasing benefit are required. Some of the money is used to buy the life assurance while the rest is invested. However, whole-of-life is primarily a protection policy, so more speculative funds should generally be avoided.
A) Non-profit
B) Unit-linked
C) With-profit
D) Universal
B) Unit-linked
97
Which whole-of-life assurance policy is suitable where a cautious approach to the provision of lifetime cover is required, but where an increasing benefit is also needed (eg to allow for inflation).
A) Non-profit
B) Unit-linked
C) With-profit
D) Universal
C) With-profit
98
The maximum time to receive support for mortgage interest (SMI) is:
A) 106 weeks
B) 106 months
C) indefinitely
C) indefinitely
