CII IF6 flashcards
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31 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Decreasing term assurance
- Life cover where the sum assured reduces over the term, typically matching a repayment mortgage so the payout tracks the outstanding loan. Premiums are usually level and cheaper than level term.
- Whole-of-life policy
- Life assurance with no fixed expiry that pays a sum on death whenever it occurs. Premiums may be guaranteed or reviewable, and the policy is often used for inheritance tax planning.
- Family income benefit
- Term assurance paying a regular income from the date of death to the end of the policy term instead of a lump sum. Total payout falls the later the death occurs.
- Critical illness cover
- Pays a tax-free lump sum if the insured is diagnosed with a specified condition meeting the policy definition, such as cancer or stroke. Payment does not depend on inability to work.
- Income protection insurance
- Pays a replacement income, usually up to 50-70% of earnings, after a deferred period while the insured is unable to work through illness or injury. Claims are reviewed periodically.
- Investment bond
- Single-premium life policy with a surrender value linked to underlying funds. Onshore bonds are taxed under chargeable event rules with a 20% tax credit; 5% annual withdrawals are tax-deferred.
- Drawdown pension
- Retirement option keeping the pension fund invested while paying an income within permitted limits. The fund remains at investment risk and can be exhausted, unlike a lifetime annuity.
- Lifetime annuity
- Contract converting pension capital into a guaranteed income for life. Level annuities do not rise with inflation; escalating and investment-linked versions offer different income patterns and risks.
- Consumer Duty outcomes
- FCA rule requiring firms to deliver good outcomes for retail customers across four areas: products and services, price and value, consumer understanding, and consumer support.
- Money purchase annual allowance
- Reduced annual allowance that applies once someone has flexibly accessed defined-contribution pension income, limiting further tax-relieved contributions. It does not apply to capped drawdown or annuity purchase.
- Annual allowance
- Limit on tax-relieved pension contributions in a tax year, applying across all schemes. Unused allowance from the previous three years may be carried forward in some circumstances.
- Chargeable event gain
- Taxable gain arising on a life policy surrender, maturity, assignment or death. Onshore bond gains carry a 20% tax credit; offshore bond gains have no credit.
- Pension commencement lump sum
- Tax-free lump sum normally payable when pension benefits are taken, subject to the permitted limit. The lifetime allowance has been replaced by lump sum and death benefit allowances.
- Suitability report
- Written record explaining why a recommended product is suitable for the client, including advantages, disadvantages, costs and how it meets stated objectives. Required for advised retail investment sales.
- Financial Ombudsman Service
- Independent dispute resolution body for complaints about regulated financial firms. Firms must issue a final response within eight weeks before the client can refer the complaint.
- Insurance Act 2015
- Sets the disclosure and fair presentation duties for commercial insurance, with proportionate remedies for breach. Consumer contracts are governed instead by the Consumer Insurance Act 2012.
- Attitude to risk
- The client's willingness to accept investment volatility in pursuit of returns. It is distinct from capacity for loss and must be reconciled with objectives before a recommendation.
- Capacity for loss
- The client's financial ability to bear a fall in value without undermining their objectives. A recommendation is unsuitable if risk exceeds capacity even when willingness is high.
- Vulnerable customer
- A client whose circumstances (health, life events, resilience, capability) make them more susceptible to harm. Firms must adapt processes to secure outcomes no worse than for others.
- Replacement business
- Switching a client from an existing policy to a new one. Requires comparison of guarantees, penalties and underwriting, with documented justification for the switch.
- Fact-find
- Structured gathering of the client's objectives, finances, existing arrangements, dependants, risk appetite and time horizon. It underpins every suitability assessment and recommendation.
- Risk profiling tool
- Questionnaire or model producing a risk score to aid adviser judgment. Output must be reconciled with the client's objectives and capacity for loss, not applied mechanically.
- Policy in trust
- Arrangement placing a protection policy under trustees so the payout sits outside the estate, can pass quickly to beneficiaries and may reduce inheritance tax exposure.
- Free-look period
- Cancellation right after a policy starts, commonly 30 days for life and pension contracts, during which the client can cancel and recover premiums paid.
- Non-disclosure remedy
- Where a consumer answers carelessly or recklessly, the insurer may apply proportionate remedies such as reducing the claim or, for deliberate breach, avoiding the policy.
- Deferred period
- Waiting time after incapacity begins before income protection benefits become payable. Longer deferred periods reduce premiums and are matched to sick-pay arrangements.
- Survival period
- Period, commonly 14 to 28 days, that the insured must survive after diagnosis before a critical illness claim is paid. It prevents claims where death follows quickly.
- Grace period
- Short window after a missed premium during which cover continues. If the premium is not paid, the policy may lapse or cover be reduced, and reinstatement may need underwriting.
- Waiver of premium
- Benefit that pays premiums on the policyholder's behalf while they are incapacitated and unable to work. It keeps cover in force without further contributions from the client.
- Final response letter
- Firm's written outcome to a complaint, issued within eight weeks. It must explain the decision and the client's right to refer the matter to the Financial Ombudsman Service.
- Record retention
- Requirement to keep suitability and transaction records for a set period, commonly at least five years and longer for pensions, to evidence advice and support later complaints.