22) MORTG RELATED INSURANCE PRODUCTS Flashcards
What is term insurance?
Cheapest, most basic…joint borrowers can take out single or joint, payable on first death protecting second borrower. Protection only….no investt.
What are the three types of insurance?
Level term, decreasing term and convertible term
Main points of each type of mortg related insu
A) Decreasing term insu: Sum assured decr with time. Diff types of decr term insu are family income benefit, gift-inter-vivos (for IHT planning) and mortg protec policies.
Mortg protec policy is used with capi repayment mortg - sum assured decr annually in line w reducing mortg balance., policy is paid in full if not in arrears, premiums remain unchanged.
B) Level term insu: premiums are calcu in 2 ways - 1st - guaranteed premiums-set at beg of contract and will stay same - 2nd - reviewable premiums - premiums gen lower at start but reviewed annually/every 5 years.
C) Convertible term insu - not common, level term policy with option to convert to whole-of-life or endowment insu at a later date without medical evidence or underwriting ‘guaranteed insurability’ term of policy extended but not sum assured.
What is critical illness cover?
pays tax-free lump sum on diagnosis of specified ilness or death…if recovered from illness does not ahve to be repaid, - paid out only once.
All critical illnesses cover cancer (excl less advanced ones), heart attack (specified severity), stroke resulting in permanent symptoms. Insurers can choose other med condns setting out definitions for min of each.
Normally AIDS, HIV is excluded, except for some professions such as police, med workers etc. Known condns are excluded.
Mortg Payment Income Protection products
1) Mortg Payment Protection Insurance
2) Income protection insu
Mortgage Payment Protection Insurance features
Mortg payments covered for upto 2 years due to accident or sickness - usually called accidetn, sickness and unemployment ASU policy
__18-65 years
__no medical
__paid after a deferred prd (28-30 days) upto 2 yrs
__may cover mortg + insu, and also some living expenses
__renewed annually by insurer (may decline too)
Exclusions -
*Pre-existing med condns
*self-inflicted injury, alcohol,
drugs, pregnancy, HIV
*perma and total disability must meet insurer’s criteria
* self-employed/business owners/directors can only claim if they are not involved in busi during claim, busi shd be involuntarily stopped due to lack of work
Unemployment cover - must have been continuously employed before, redundancy not anticipated, no redundancy cover within certain prd of policy start, voluntary/disciplinary redundancy not covered
Income Protection Insurance features
(MAX LEVEL BENE IS 60-65% OF PRE-ILLNESS INCOME)
COVER/LEVEL OF PREMIUM AFFECTED BY
OCCUPATION, HOBBIES/PASTIMES,
MED HISTORY
monthly tax-free income due to sickness or accident. UNEMPLOYMENT OR REDUNDANCY NOT COVERED
No limit to no of claims so it is also called’PERMANENT HEALTH INSU’ Insurer cannot cancel policy or incr premiums. Continued payment till recovery or return to employment, or death.
Arranged with an end date - usu retirement date, (67 - 70 yrs)
Deferred prd from 4 wks - 52 wks
Cancellation prd
Pure protection insurances (term insu, IPI, critical illness insu, ASU, MPPI)
—–30 days of receiving cancellatio notice
Bldgs and content insu —-
14 days
Buildings and contents insurance
Exclusions - escape of water/oil when unoccupied, damage to gates/fences/hedges,
theft/attempted theft whn unoccupied,
heating sys damage due to corrosion/wear & tear
Std cover for bldgs include:
Fire and smoke damage, lightning/explosion/e.quake, storm/flood, subsidence,landslip, impact (by animals, trees, vehicles etc), theft/attempted theft, vandalism, escape of oil, escape of water due to frozen/burst pipes.
most covers cover alternative accommodation, architects’/surveyors’ fees etc
