IIQE Paper 3 flashcards
IIQE Paper 3 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Term life insurance
- Cover that pays the death benefit only if the insured dies within the policy term. It builds no cash value and carries the lowest premium for pure protection.
- Whole life policy
- Permanent, level-premium cover with guaranteed cash value and non-forfeiture values. Participating versions may pay dividends, but dividends are not guaranteed.
- Universal life account value
- The savings pool inside a universal life policy. Monthly cost of insurance and expenses are deducted from it, and underfunding can cause the policy to lapse.
- Critical illness benefit
- A lump sum paid on diagnosis of a covered condition, usually after a survival period. It may be accelerated from the death benefit, reducing the eventual payout.
- Accelerated death benefit
- A rider that advances part of the death benefit on terminal illness. The advance and accrued interest reduce the amount paid to beneficiaries later.
- Group life scheme
- One master policy covering a defined class of members. Individual evidence of insurability is usually waived, and cover typically ends when membership ends.
- Annuity payout options
- Ways to convert capital into income: life annuity, fixed-term annuity, or joint-and-last-survivor. Escalating options raise later income but cut the starting amount.
- Insurable interest
- A statutory requirement that the policyholder would suffer financial loss from the insured event. It must exist at inception and, for some contracts, at claim.
- Utmost good faith
- The duty to disclose all material facts relevant to the risk. Breach, such as non-disclosure or misrepresentation, can make the contract voidable by the insurer.
- Incontestability clause
- A provision preventing the insurer from avoiding a policy for misrepresentation after a stated period, commonly two years from issue, absent fraud.
- Suicide clause
- A provision limiting payout to a refund of premiums if the insured dies by suicide within a stated period, commonly the first one or two years.
- Grace period
- A period after the premium due date, commonly 30 or 31 days, during which cover continues despite non-payment. Unpaid premium may be deducted from a claim.
- Reinstatement provision
- Allows a lapsed policy to be revived, usually on evidence of insurability and payment of overdue premiums with interest, within a set window.
- Free-look period
- A right to cancel a new policy within a stated period after delivery and receive a refund, subject to any market value adjustment on investment-linked products.
- Irrevocable beneficiary
- A beneficiary designation that cannot be changed without that beneficiary's consent. The policyholder's control over the death benefit is restricted.
- Policy loan
- A loan secured against a policy's cash value. Unpaid loan interest accrues and reduces the surrender value or the death benefit paid.
- Underwriting outcomes
- Risk classification results: standard, substandard with loading, postponed, or declined. Factors include age, health, occupation, residence, hobbies and sum assured.
- Gross premium components
- Expected claims based on mortality or morbidity tables, plus expenses and profit margin, minus expected investment return. Loadings cover substandard risk.
- Premium payment modes
- Frequency of payment: annual, semi-annual, quarterly or monthly. Annual is cheapest because less interest is lost and administration is lower.
- Non-medical limit
- The maximum sum assured that can be issued without medical evidence, set by age and declared health. Above it, underwriting evidence is required.
- Automatic premium loan
- A provision that pays overdue premiums from cash value to prevent lapse. The amount plus interest is recovered from later benefits.
- Investment-linked policy
- A policy whose value is linked to underlying funds. The policyholder bears investment risk, and the value is not guaranteed.
- ILP charges
- Deductions from an investment-linked policy: premium allocation, bid-offer spread, fund management fee, policy administration, mortality and morbidity charges, and surrender charges.
- Illustration scenarios
- Projected returns for investment-linked products must show a realistic and a pessimistic scenario, with a warning that higher figures are not forecasts.
- Fund switching right
- The policyholder's ability to move money between sub-funds, often free up to a stated number of switches per year, with charges thereafter.
- Qualifying deferred annuity
- A retirement product eligible for tax deduction on premiums, subject to statutory conditions on premium limits, holding period and payout form.
- Licensing requirement
- An intermediary must hold a licence for the class of business sold. Regulated activities include advising on, arranging and negotiating long term contracts.
- Fit and proper test
- The regulator's standard for licensees: qualifications, experience, training, financial soundness, and integrity, assessed at licensing and on renewal.
- CPD obligation
- Mandatory continuing professional development hours per year for licensees, including a required portion on ethics or regulation.
- Client agreement
- A document setting out the intermediary's identity, capacity, remuneration and scope of services, to be completed and given to the client at or before sale.
- Suitability assessment
- Matching a recommendation to the client's disclosed needs, financial capacity and risk tolerance, with the rationale documented.
- Churning
- Replacing existing policies mainly to generate new commission, harming the client through new surrender charges and lost accrued benefits. It is a prohibited practice.