CIIN Certificate CF4 cheat sheet

Risk is uncertainty of outcome; pure risk offers only loss or no loss, speculative risk offers gain or loss.

Insurable risk criteria: large number of similar exposures, accidental and measurable loss, no catastrophic concentration, premium affordable.

Utmost good faith (uberrimae fidei) requires disclosure of material facts; non-disclosure or misrepresentation can void the contract.

Indemnity restores the insured to pre-loss financial position; valued policies, life assurance and personal accident are exceptions.

Insurable interest must exist at inception for life policies and at inception and loss for property/casualty covers.

Proximate cause is the dominant, effective cause of loss; it determines whether a peril is covered.

Subrogation lets the insurer step into the insured's legal rights after paying a claim, preventing double recovery.

Contribution applies when two or more policies cover the same loss; each insurer pays rateably to its share of the total sum insured.

Risk management sequence: identify, analyse/measure, control (avoid, reduce, transfer, retain), monitor and review.

Term assurance pays a sum only on death within the term; no maturity value, so it is the cheapest form of death cover.

Whole of life assurance is guaranteed to pay on death whenever it occurs; it is typically more expensive than term cover.

Endowment policies combine life cover with a savings element and pay a maturity sum if the insured survives the term.

Level term cover has a fixed sum assured; decreasing term is often used with repayment mortgages and falls in line with the outstanding balance.

Family income benefit pays an income for the remaining term rather than a lump sum on death.

Critical illness cover pays a lump sum on diagnosis of a specified condition, usually subject to a survival period of around 14-30 days.

Income protection pays a replacement income (commonly up to 50-70% of earnings) after a deferred period while the claimant is unable to work.

Underwriting for life cover considers age, health, family history, occupation, residence and hazardous pursuits; ratings can be standard, loaded or declined.

Suicide exclusion clauses in UK life policies are normally limited to the first 12 months of the policy.

Motor insurance is compulsory in the UK; third party, fire and theft is the legal minimum, while comprehensive adds own-damage cover.

Home buildings cover insures the structure; contents cover insures movable possessions, with 'new for old' replacement common on contents.

Average (underinsurance) clause reduces claims proportionally when the sum insured is less than the reinstatement value at risk.

Excess is the first amount of each claim paid by the insured; a higher excess usually lowers the premium.

Public liability covers injury or damage to third parties; employers' liability is compulsory for most UK employers.

Business interruption covers loss of profit and increased working costs following an insured physical damage event.

Travel insurance typically excludes pre-existing medical conditions unless declared and accepted by the insurer.

A deductible/excess and policy limits (single item, total sum insured) define the maximum the insurer will pay.

State Pension is based on National Insurance qualifying years; a full new State Pension requires 35 qualifying years and 10 minimum to receive anything.

Defined benefit schemes promise a pension based on salary and service; defined contribution schemes build a pot invested for retirement.

Auto-enrolment minimum contributions are 8% of qualifying earnings in total, of which the employer pays at least 3%.

UK pension annual allowance is £60,000 (2024/25); unused allowance can be carried forward for up to three years.

Money purchase annual allowance (MPAA) is £10,000 once flexible pension benefits have been accessed.

Pension commencement lump sum is normally 25% of the fund, capped at £268,275, with the remainder taxed as income when drawn.

Lifetime allowance was abolished from 6 April 2024; the lump sum allowance and lump sum and death benefit allowance replaced it.

Annuities convert a pension pot into guaranteed income for life; drawdown keeps the fund invested but carries investment and longevity risk.

Pension freedoms (age 55, rising to 57 from 2028) allow UFPLS, drawdown or annuity; UFPLS is 25% tax-free and 75% taxed as income.

Individual Savings Accounts (ISAs) have an annual allowance of £20,000 (2024/25); interest, dividends and capital gains are tax-free.

Cash ISAs hold deposits; stocks and shares ISAs hold equities, bonds and funds and carry investment risk.

Lifetime ISA allows £4,000 a year with a 25% government bonus, for first homes up to £450,000 or retirement from age 60.

Junior ISA annual limit is £9,000; the child gains control at 18.

Investment bonds are single-premium life policies; gains are taxed on chargeable events with 5% annual withdrawals of the original premium tax-deferred.

Collectives (unit trusts and OEICs) pool investor money; unit trusts are dual-priced, OEICs are single-priced.

Investment risk types include market, credit, liquidity, inflation and concentration risk; diversification reduces unsystematic risk.

Gilts are UK government bonds; corporate bonds carry higher credit risk and generally higher yields.

Risk tolerance is the investor's willingness to accept risk; capacity for loss is the ability to bear it financially.

The FCA is the conduct regulator; the PRA regulates prudential soundness of banks and insurers.

FCA principles for business include integrity, skill and care, fair treatment of customers and clear communication.

TCF outcomes cover culture, product design, clear information, suitable advice, meeting expectations and no post-sale barriers.

Consumer Duty requires firms to act to deliver good outcomes across products, price and value, consumer understanding and consumer support.

Vulnerable customers must be identified and given appropriate support; the four drivers are health, life events, resilience and capability.

Financial Ombudsman Service handles complaints after eight weeks; the Financial Services Compensation Scheme protects eligible deposits up to £85,000 per person per firm.

Know Your Customer and anti-money-laundering checks require identity verification and source-of-funds evidence.

Conflicts of interest must be identified, managed and disclosed; inducements must not impair the duty to act in the client's best interests.

Record keeping and disclosure of charges support the fair treatment of customers and enable regulatory supervision.

The FCA is the conduct regulator; the PRA regulates prudential soundness of banks and insurers.

FCA principles for business include integrity, skill and care, fair treatment of customers and clear communication.

TCF outcomes cover culture, product design, clear information, suitable advice, meeting expectations and no post-sale barriers.

Consumer Duty requires firms to act to deliver good outcomes across products, price and value, consumer understanding and consumer support.

Vulnerable customers must be identified and given appropriate support; the four drivers are health, life events, resilience and capability.

Financial Ombudsman Service handles complaints after eight weeks; the Financial Services Compensation Scheme protects eligible deposits up to £85,000 per person per firm.

Know Your Customer and anti-money-laundering checks require identity verification and source-of-funds evidence.

Conflicts of interest must be identified, managed and disclosed; inducements must not impair the duty to act in the client's best interests.

Record keeping and disclosure of charges support the fair treatment of customers and enable regulatory supervision.