09. Other insurance based policies Flashcards
What is the difference between short-term (general) and long-term insurance policies?
- ST: insurer can decide each year (even month), whether to renew, what terms, what premium
- LT: insurer is bound to continue cover on original terms as long as premiums are paid
What is insurance premium tax (IPT) on general insurance financial protection premiums?
12%
What is the typical time period for PAS insurance?
Annual, though can be shorter like business trips
Name 4 common areas covered under PAS insurance.
- death
- permanent disablement
- loss of an eye
- loss of a leg, foot or toe
- loss of arm, hand, finger or thumb
PAS policies usually have what 2 other benefits?
- medical expenses refunded up to %
- weeks sickness benefit paid (usually after short period e.g. 4 weeks) for set period at set rate if unable to work due to sickness or accident
Name 5 exclusions under a PAS policy.
- under influence of drugs / alcohol
- suicide & attempted suicide
- pre-existing conditions
- wilful exposure to needless danger
- hazardous sports / pastimes
- pregnancy
- war, invasion, hostilities etc
Where might PAS cover be restricted to specific activities?
Group PAS insurance.
What is the tax status on PAS premiums for individuals and groups?
- individual: no tax relief on premiums or taxation on benefits
- group: benefit in kind if premiums paid by employer and allowable business expense for EER
Who are PAS policies marketed for? [2]
- those needing to cover one-off events not covered by other insurances
- the self-employed
It is not uncommon for people to have PAS policies instead of which other?
IP
PMI is generally an indemnity policy. What does this mean?
The insured person can only claim back from the insurance company up to the amount of cats that have actually been incurred.
PMI is generally aimed at acute not chronic conditions.
What is the difference and what might be more suitable for chronic conditions?
- Acute come on rapidly and are normally curable.
- Chronic are long-lasting and normally incurable.
- LTCI
How might it be possible to reduce the cost of PMI?
By choosing to have no or lower cancer cover.
Name 3 reasons why people might want PMI.
- long NHS waiting times
- some common treatments may be restricted or rationed on NHS
- may be able to choose hospital & surgeon
- private rooms & personal attention of a consultant
What is an ‘open referral system’?
Where the patient’s GP refers the patient to a specialist but doesn’t not specify which specialist or hospital.
Are foreign countries normally covered by PMI?
No, usually restricted to UK.
What are the 3 types of PMI plan?
- basic
- standard
- comprehensive
What are basic plans?
Cover is restricted to certain things only. Other things such as outpatient treatments may not be covered at all or limited.
May be limits on the cost of treatment covered in any one year.
Name 3 things how standard plans might differ to basic plans?
- generally have longer classic periods - and higher limits
- often a wider choice of hospitals
- outpatient treatment more likely to be covered
- consultant fees, diagnostic tests, physiotherapy and psychiatric cover may be included
Name 2 things how comprehensive plans might differ to standard plans?
- services such as home nursing & private ambulances are covered
- costs of parent needing to stay overnight in hospital with sick child likely to be covered
- may include alternative medicines, dental treatment, travel abroad
Under PMI, what is a co-payment?
Where the customer pays part of the cost of the treatment, often up to a preset limit.
Name 4 exclusions to PMI.
- cosmetic surgery for appearance
- alcohol/drug misuse treatments
- pregnancy
- chronic illnesses
- routine checkups
- war, hostilities
- dangerous activities & pastimes
What is the tax status for group PMI premiums paid for by the EER?
- benefit in kind for EEE
- EER pays NICs on them but is tax deductible expense
What are the 2 underwriting options for PMI?
- can be fully underwritten
- or accepted without medical information subject to a moratorium
What is a moratorium re underwriting?
Typically means that medical conditions an individual had in the previous 5 years before the start of the policy are excluded for a period (e.g. 2 years) and them must remain treatment free for a further 2 years (5/2/2)
Name one pro and one con of moratorium underwriting.
- simpler & cheaper to obtain
- reduces real value of policy if pre-existing conditions are excluded
How do PMI claims normally start?
With a referral from a GP (unless emergency admission to NHS hospital)
What is the process for PMI claims?
- call insurer to check claim is covered
- provide medical evidence
- payment usually made direct to hospital or doctor
How might the rising cost of PMI be negated? [2]
- take on very large excesses
- join group PMI (normally cheaper)
MPPI pays a monthly benefit to protect a client if they are unable to keep up with mortgage payments due to what 3 things?
- accident (or disability)
- sickness
- unemployment (involuntary)
MPPI benefits are usually paid for how long?
12, 18 or 24 months only
Name 3 things MPPI max benefits are normally limited to.
- a % of salary
- a fixed amount
- or in relation to overall mortgage costs
Compared to the benefit, the cost of MPPI tends to be relatively what?
High
Name 3 reasons why people might take out MPPI.
- their mortgage is their most important regular bill
- state benefits only help with mortgages in limited circumstances
- they don’t expect financial problems to last more than a few months
- MPPI covers unemployment as well as accident & sickness, unlike IP & CIC
- MPPI is easy to buy as normally limited underwriting
Name 4 typical conditions on MPPI policies.
- age range
- conditions
- work £ & history
- work status
- payment period
- is available for ages 18 - 64
- pre-existing medical conditions exc.
- must be employed for at least 16 hrs a wk & working for last 6 months
- must not be aware of any forthcoming redundancies
- will be a deferred period, normally 30-180 days
MPPI policies can normally be cancelled or withdrawn by the insurer at a minimum of how many days notice?
Or amended with how many days notice?
- 90 days
- 30 days
Regarding the sale of MPPI products, what is now banned?
Selling them at the same time as the loan.
Regarding the sale of MPPI products, now have to wait until the later of what 2 things?
- 7 days after credit sale
- or point of providing a personalised illustration before selling MPPI
Name 5 typical exclusions for MPPI.
- conditions existing at start, either known or not known
- conditions where treatment was received in 12 months before start date
- self-inflicted injuries
- injuries from criminal activity
- alcohol/drug misuse
- normal pregnancy
- voluntary unemployment
- unemployment that could have reasonably been known about
What is the tax status on MPPI premiums & benefits?
- no tax relief on premiums
- no tax on benefits
ASU insurance is similar to MPPI but how does it differ?
It is not linked to or restricted by a mortgage.
What are MPPI & ASU insurance sometimes known as?
STIP (ST income protection policies)
ASU is a monthly or weekly benefit payable for a maximum of how long?
Max period of 2 years
What do some ASU policies sometimes include?
Possibly some lump sum benefits for events such as loss of sight or limb
What do group ASU schemes benefit from and why?
- Preferential premiums & underwriting
- Bargaining power of a bulk buyer
What is the taxation status on ASU policies for individuals and when an employer pays the premiums?
- Individuals: no tax relief on premiums and benefits not taxed
- Group: premium payments are benefits in kind subject to income tax under PAYE, but allowable as business expenses for EER
How do health care plans and dental plans work in terms of benefits, waiting period and conditions covered?
- pay up to a preset limit
- waiting period often up to 6m before claim can be made
- pre-existing conditions usually exc.
What cash benefit does a health cash plan provide?
A fixed cash sum for each day spent in hospital.
Cover under health care plans is normally much ~ compared to PMI cover.
lower
How does PPI differ to MPPI?
It can be taken out alongside non-mortgage credit agreements such as unsecured car loans or with store & credit cards.
When an adviser makes protection recommendations, what should the 1st option generally be?
LT policies e.g. IP & CIC, as opposed to ST policies e.g. ASU, MPPI, PPI & PAS).
Name 2 disadvantages of LT policies vs ST policies?
- subject to extensive underwriting
- costs likely to be higher
Name 3 advantages of ST policies vs LT policies.
- simpler underwriting
- cheaper
- can cover unemployment
What is a disadvantage of ST policies vs LT policies?
ST ones can be be terminated or premiums increased at renewal date.
Name 4 adviser considerations when considering PMI.
- level of cover - budget, standard or comprehensive
- level of excess - higher = cheaper
- basis of underwriting - full may take longer, but moratorium may result in permanent exclusions
- travel plans - International PMI?
