QFA Loans cheat sheet

Term assurance pays a benefit only if death occurs within the policy term; no maturity value accrues.

Whole-of-life cover has no fixed expiry and pays on death whenever it occurs, subject to premium payment.

Endowment assurance combines death cover with a maturity payout if the insured survives the term.

Level term premiums are fixed at outset; decreasing term cover is typically used to match a reducing mortgage balance.

Under the doctrine of insurable interest, a proposer must stand to suffer financial loss from the life insured.

Non-disclosure or misrepresentation material to underwriting can render a policy voidable by the insurer.

A surrender value arises only on policies with an investment element; pure protection term policies have none.

The free-look period allows cancellation within a set number of days of policy issue for a refund of premiums.

Defined benefit schemes promise a pension linked to salary and service; defined contribution schemes pay out according to the accumulated fund.

The lifetime allowance regime has been replaced by lump sum allowances capping tax-free cash; excess lump sums are taxed at the recipient's marginal rate.

A pension commencement lump sum is typically capped at 25% of the fund, subject to a monetary ceiling.

Annuities convert accumulated capital into guaranteed income for life; drawdown keeps the fund invested with income taken as needed.

State pension entitlement depends on qualifying years of National Insurance contributions or credits.

Auto-enrolment requires eligible jobholders to be enrolled with minimum contributions split between employer and employee.

Transfers from defined benefit to defined contribution schemes require regulated advice above a value threshold.

Tax relief on personal pension contributions is limited by relevant earnings and annual allowance caps.

Compound interest grows capital as interest is added and itself earns interest in later periods.

Real return approximates nominal return minus inflation; it measures change in purchasing power.

Diversification reduces unsystematic risk but cannot eliminate systematic market risk.

Equities historically offer higher expected returns with greater volatility than cash or gilts.

Collective investment schemes pool investor money and issue units priced by reference to net asset value.

An individual savings account shelters returns from tax within annual subscription limits.

Bonds carry credit risk and interest rate risk: prices fall when yields rise.

Risk tolerance and time horizon are the primary determinants of an appropriate asset allocation.

Indemnity restores the insured to the pre-loss financial position, no better and no worse.

Average (condition of average) reduces claims proportionately where the sum insured is below the full reinstatement value.

New-for-old cover is typical on household contents; wear and tear deductions apply to older items.

Buildings policies usually cover the structure and permanent fixtures; contents cover movable possessions.

Excess is the first amount of each claim borne by the insured, reducing small claims and premiums.

Public liability covers injury or damage to third parties; employers' liability covers employees.

Subrogation lets the insurer pursue recovery from a third party after paying the claim.

Escape of water and accidental damage are commonly optional extensions to standard household cover.

Business interruption cover replaces lost gross profit and increased working costs following an insured peril.

The indemnity period is the maximum time over which business interruption losses are paid.

Employers' liability insurance is compulsory for most employers and covers work-related injury to staff.

Product liability covers damage or injury caused by goods supplied by the business.

Professional indemnity covers claims arising from negligent advice or professional services.

Material damage and business interruption should share consistent sums insured and a common peril list.

A coinsurance or average clause reduces commercial property claims where declared values are understated.

Fidelity guarantee covers loss of money or property through employee fraud or dishonesty.

PMI typically covers acute conditions amenable to treatment; chronic and pre-existing conditions are commonly excluded.

Underwriting may be moratorium (conditions in a look-back period excluded for a set time) or full medical underwriting.

No-claims discounts reduce premiums where few or no claims are made in a policy year.

Excess and co-insurance options lower premiums by shifting part of each claim to the insured.

Cash plans reimburse fixed amounts toward routine treatment rather than full consultant and hospital costs.

Critical illness cover pays a lump sum on diagnosis of a specified condition meeting the policy definition.

Income protection pays a proportion of income during incapacity, usually after a deferred period.

Waiting periods and deferred periods determine when cover or benefit payments begin.

Loan-to-value ratio equals loan amount divided by property value; higher LTV generally means higher interest rate.

Repayment mortgages amortise capital and interest so the balance reaches zero at term end.

Interest-only mortgages require a separate repayment vehicle to clear the capital at maturity.

Fixed-rate periods lock the rate for a set term, after which the rate reverts to the lender's variable rate.

Early repayment charges may apply when a fixed or discounted loan is redeemed before the period ends.

Affordability assessment tests income, outgoings and stress interest rates before lending is approved.

Mortgage indemnity guarantee premiums protect the lender, not the borrower, on high-LTV loans.

A charge registered against the property secures the lender's interest until the loan is repaid.

In a home reversion plan the provider buys all or part of the property at below market value in exchange for a tax-free lump sum or income.

The homeowner remains in the property rent-free under a lease, usually for life or until moving into care.

Because the property share is sold outright, the provider takes the full share of future house price growth.

Equity release plans regulated as home finance require advice from a qualified adviser.

A no-negative-equity guarantee ensures the estate never owes more than the property's sale value.

Early repayment charges can be substantial if a reversion plan is unwound.

Means-tested benefit entitlement may be affected by the capital released.

Independent legal advice is a standard requirement before completing a reversion agreement.

The annual percentage rate (APR) expresses the total cost of credit including fees, on a standardised basis.

Regulated credit agreements give the borrower cancellation rights within a statutory cooling-off period.

Payment protection insurance covers loan repayments during unemployment, sickness or accident under defined terms.

A guarantor loan adds a third party liable if the principal borrower defaults.

Hire purchase keeps ownership with the lender until the final payment; the customer has the right to terminate after paying a statutory proportion.

Early settlement rebates reduce outstanding interest when a regulated credit agreement is repaid early.

Creditworthiness assessment is required before entering a regulated credit agreement.

Missed payments can be recorded on a credit file and affect future borrowing capacity.