What is life assurance?
Providing (usually) a lump sum on death of the life assured.
Life assurance is a financial product that pays out a sum of money upon the death of the insured individual.
What does income protection insurance (IP) provide?
Providing a regular income when the insured is unable to work due to accident or illness.
This insurance helps individuals maintain their income during periods of incapacity.
What is critical illness cover (CIC)?
Providing a lump sum if the insured is diagnosed as suffering from one of the listed critical illnesses.
This cover is designed to provide financial support during serious health issues.
What does long-term care insurance (LTCI) cover?
Providing cover towards the costs of long-term care due to old age or infirmity.
LTCI is essential for individuals who may require assistance with daily living activities.
What is the purpose of payment protection insurance (PPI)?
Providing a regular income, like mortgage payment protection insurance (MPPI), to cover loan or credit card repayments if the insured is unable to work due to illness, accident, redundancy or unemployment.
PPI helps ensure that borrowers can meet their financial obligations during difficult times.
What does personal accident and sickness insurance (PAS) provide?
Providing a lump sum or income benefits if the insured suffers an accident or falls ill.
This insurance is crucial for financial security in case of unexpected health issues.
What is accident, sickness and unemployment insurance (ASU)?
Providing a lump sum or income benefits if the insured suffers an accident or is unable to work due to sickness, redundancy or unemployment.
ASU insurance offers a safety net for various unforeseen circumstances.
What does private medical insurance (PMI) cover?
Providing cover towards the costs of private medical treatment.
PMI allows individuals to access quicker medical treatment and services.
What are health cash plans?
Providing small lump sum benefits for a number of medical treatments or on a per day basis for a hospital stay.
These plans help cover everyday health expenses.
What is a menu plan in insurance?
Different types of cover to be provided by one single contract.
Menu plans allow flexibility in choosing various insurance options.
The main areas of need for protection are:
- health, incapacity or accident
- income, mortgage and other debt
- death
- asset protection
- business protection
These areas highlight the critical aspects of financial protection.
What are potentially exempt transfers (PETs)?
Lifetime gift to another individual or to an absolute/bare or disabled person’s trust, this may be a PET. If the donor dies within seven years, the PET is deemed to have ‘failed’ and the gift falls back into the estate of the donor.
PETs can have significant implications for inheritance tax.
What are chargeable lifetime transfers (CLTs)?
If an individual makes lifetime gifts to a trust (other than an absolute/bare or disabled trust) and such transfers over a seven-year period exceed the available amount of the nil-rate band, there is an immediate tax charge of 20% of the excess. If the donor dies within seven – or in some cases 14 – years, further tax may be due.
CLTs are important for estate planning and tax considerations.
What is key person insurance?
Life assurance, critical illness or income protection for individuals who are key to a business’s success.
This insurance protects businesses from the financial impact of losing essential personnel.
Does a divorce itself alter a person’s interest in a policy?
No, if an ex-spouse is a policyholder, life assured, trustee or beneficiary, this will continue unless the court orders otherwise.
Legal considerations may affect policy interests post-divorce.
Why must liquidity of assets be considered when assessing cover needs?
Some assets may be significant but not easily accessible in the event of a need for immediate cover (e.g. Housing).
Liquidity is crucial for ensuring that funds are available when needed.
How does an advisor determine whether insurance is required?
Meeting the regulator’s ‘know your customer’ requirement, A standard fact-find or ‘know your customer’ form will cover the assets and liabilities of the customer and whether they have any financial dependants.
This process ensures that the insurance needs are accurately assessed.
Some protection requirements can be provided by an employer as an employee benefit, such as:
- sick pay/income replacement
- life cover (death-in-service)
- critical illness cover
- pension arrangements
- private medical insurance
Employer-provided benefits can significantly enhance an employee’s financial security.
Why must employee benefits be taken into account in any review of protection needs?
No point in duplicating cover that is already in existence. The adviser should look instead at filling the gaps in the cover provided by the employer.
This approach ensures comprehensive coverage without redundancy.
Death-in-service life assurance is often set at __________.
four times salary
This standard helps provide a safety net for beneficiaries in the event of an employee’s death.
