Chapter 2 Notes

Question 1

What are the three stages of life cycles and needs of each cycle?

Answer 1

• Vulnerable years (up to 40yrs) - low income and protection needs are high
• Relaxed years (40s) - protection needs reduce and pension saving takes priority, increased protection against death and ill health
• Anxious years (50yrs +) - IHT planning, Health care and long term care are a priority

Question 2

What are the main types of term assurance?

Answer 2

• Level term assurance - offers a level sum insured in return for a level premium
• Decreasing term assurance - for those with decreasing liabilities and death, such as paying an interest and capital mortgage. The premium will stay level but be cheaper than. level term policy.

Question 3

What is family income benefit and how is it paid?

Answer 3

• A special form of decreasing term insurance whereby, on the death of the life insured, the insurance company pay a series of annual or monthly payments.

Question 4

What is personal accident and sickness insurance and how is it paid?

Answer 4

• When the insured is unable to work through accident or illness
• Short deferral period (1-14 days)
• Paid for up to 2 years
• Paid in regular benefits

Question 5

What is income protection and how is it paid ?

Answer 5

• Replaces lost income for someone who is ill or in an accident
• Deferral period for 4 weeks plus
• No set time, paid until insured returns to work (50-60% of wages)
• paid in regular benefits