CIIN Certificate CF4 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Pure risk

A risk where the only possible outcomes are loss or no loss, with no possibility of gain; this is the category of risk that insurance is designed to cover.

Insurable interest

A legal and financial interest in the subject matter of insurance such that the insured benefits from its survival or suffers loss from its destruction; required at inception and loss for property.

Utmost good faith

The duty on both parties to an insurance contract to disclose all material facts and not misrepresent them; breach can allow the insurer to void the policy.

Proximate cause

The dominant and effective cause of a loss, without which the loss would not have occurred; it determines whether the loss falls within the policy cover.

Indemnity

The principle that insurance restores the insured to the financial position held immediately before the loss, no better and no worse, and prevents profit from loss.

Term assurance

Life cover that pays a sum assured only if death occurs within a specified term; it has no maturity value, making it the cheapest form of death protection.

Decreasing term assurance

Life cover whose sum assured reduces over the policy term, commonly arranged alongside a repayment mortgage so that cover tracks the outstanding loan balance.

Family income benefit

A term policy that pays a regular income for the remaining policy term after death, rather than a single lump sum, providing ongoing financial support to dependants.

Critical illness cover

Pays a tax-free lump sum if the insured is diagnosed with one of the specified serious conditions, usually subject to a survival period after diagnosis.

Income protection insurance

Replaces part of lost earnings, typically 50-70%, after a deferred period when the insured cannot work through illness or injury, paying until recovery or retirement.

Whole of life assurance

A policy with no fixed term that guarantees to pay a sum assured whenever death occurs, provided premiums are maintained, and often includes an investment element.

Motor third party liability

The legal minimum motor cover in the UK, paying for injury or damage the policyholder causes to other people and their property; fire and theft may be added.

Average clause

A condition that reduces claim payment in proportion to underinsurance, so if a property is insured for less than its value, the insured bears a share of the loss.

Policy excess

The first amount of each claim that the insured must bear; increasing the excess typically lowers the premium because the insurer's exposure is reduced.

Employers liability insurance

Cover for claims from employees injured or made ill at work; it is a legal requirement for most UK employers and pays damages and legal costs.

Business interruption cover

Insurance that replaces lost profit and covers extra costs of working after an insured physical event interrupts the business, for a defined indemnity period.

Defined benefit scheme

A pension arrangement promising retirement income based on salary and years of service rather than investment performance, so the employer bears the investment risk.

Defined contribution scheme

A pension arrangement where contributions are invested to build a pot, and the eventual retirement income depends on fund value and annuity or drawdown rates.

Auto-enrolment

A legal duty for UK employers to enrol eligible workers into a pension, with minimum total contributions of 8% of qualifying earnings, including at least 3% from the employer.

Annual allowance

The maximum tax-relieved pension contribution in a tax year, £60,000 in 2024/25, with unused allowance from the previous three years potentially available by carry forward.

Money purchase annual allowance

A reduced tax-relieved contribution limit of £10,000 that applies once a person has accessed flexible pension benefits such as drawdown.

Pension commencement lump sum

The tax-free cash normally available at retirement, usually 25% of the fund and capped at £268,275, with the balance taxed as income when drawn.

Individual Savings Account

A tax-free savings or investment wrapper with an annual allowance of £20,000, where interest, dividends and capital gains are exempt from UK tax.

Lifetime ISA

An ISA for those aged 18 to 39 allowing £4,000 a year with a 25% government bonus, usable for a first home up to £450,000 or from age 60.

Investment bond

A single-premium life policy where growth is taxed on chargeable events, and up to 5% of the original premium can be withdrawn each year with tax deferred.

OEIC

An open-ended investment company pooling investor money in a single-priced fund, where shares are bought and sold at one price based on net asset value.

Capacity for loss

The financial ability of an investor to absorb falls in value without affecting their standard of living, distinct from their willingness to take risk.

FCA principles for business

High-level rules including integrity, skill and care, fair treatment of customers and clear communication, which firms must meet alongside detailed rules.

Consumer Duty

An FCA standard requiring firms to act to deliver good outcomes for retail customers across products, price and value, understanding and support.

Vulnerable customer

A customer whose circumstances, such as health, life events, low resilience or low capability, make them especially susceptible to harm and in need of support.

Financial Ombudsman Service

The independent UK body that resolves unresolved complaints between consumers and financial firms, able to award compensation up to a published limit.

Financial Services Compensation Scheme

The UK statutory scheme that pays compensation to eligible customers of failed financial firms, for example covering deposits up to £85,000 per person per firm.