Assessment: Fundamentals of Long-term Insurance 22-23

Which ONE of the following life risk policies are categorised as assistance policies as defined in the Long-term insurance Act?

Which ONE of the following options describes the main difference between an endowment policy and a sinking fund policy?

The person whose life event will determine the provision of benefits by the insurer is known as the-

Which of the following statements regarding the principles relating to long-term insurance policies are correct?

i. Long-term insurance is an example of indemnity insurance as the holder cannot choose the level of cover.
ii. An insurable interest on a long-term insurance policy is only required at inception of the policy.
iii. A person who is married in community of property may take out a policy only with the consent of the spouse.
iv. The maximum cover that can be taken on the life of an unborn child is currently set at R10 000.

In order for the benefits of a life, disability or health policy to be protected from the claims of a creditor, which of the following conditions must be met?

i. The policy must be on the life of the policy holder only.
ii. The policy must be on the life of the policy holder or his/her spouse.
iii. The policy must have been in force for at least one year.
iv. The policy must have been in force for at least three years.

Which ONE of the following statements regarding fees and charges on long term investment policies is correct?

Thandi and Adam, an elderly married couple, have two major children who are also married. They are both nearing retirement, have made just enough provision for retirement but have no life cover at all. Thandi has had cancer before, and they cannot afford to pay high premiums. They only have some amount due on their credit cards.
Which of the following solutions will be most suitable for the couple?

James recently bought a house, and the bank requires that he takes out cover for the outstanding bond amount, if he were to die. He took out a loan of R1 500 000 payable over 20 years. James does not want his cover or premium to increase over the term. Which of the following cover patterns and period meets the needs of James best?

i. Level cover pattern
ii. Escalating cover pattern
iii. Term cover
iv. Whole life cover

Mpho (25) is married with no children. He is the sole breadwinner in his family. He is a self-employed electrician. During his employment, he often works long hours and has to drive home late at night. He has recently bought a property, and his outstanding amount on the mortgage bond is R600 000. He has no other debts.

Mpho has adequate life cover but has no disability insurance cover in place. He is concerned about the possibility of having an accident that leaves him physically disabled. He feels that in this case he would not be able to continue working as an electrician, since conditions are physically demanding.

Mpho asks you about the available long-term insurance products that will best meet his financial needs.
Which type of disability cover and product is most suitable for Mpho?

Which of the following statements describes the difference between medical scheme benefits and dread disease cover?

Which of the following statements regarding aspects relating to specific long-term insurance policies are correct?

i. Benefits of funeral cover is available to cover the clients for the rest of their life or for a particular term.
ii. Dread disease cover in most instances is a suitable choice to replace medical scheme benefits.
iii. The beneficiaries nominated in terms of a life insurance policy do not pay tax on the proceeds.
iv. Lump sum disability products generally have waiting periods of up to 6 months.

Janie purchased an endowment policy 3 years ago. However, she assessed her needs and wants to increase her premium with 35%.
What important information must you disclose to Janie regarding this course of action as per the stipulations under the Long-term insurance Act.

Calculate the maximum amount that a holder of an endowment policy of R1 million entered into 2 years ago may withdraw if the current value of the endowment policy is R1,2 million.

Which ONE of the following statements represents the tax implication on an endowment policy for an individual investor?

Lindiwe aged 71 pays R1 million to the insurer to buy a voluntary life annuity for life. She receives an annuity of R100 000 per year.
Calculate the taxable portion of the annuity if her life expectancy is 11 years.