6 - Income Protection

Question 1

How does IP pay? What does it pay for?

Answer 1

Weekly or monthly income unable to work because of longer term illness or incapacity

Question 2

Can the insurer cancel on IP?

Answer 2

Nope as long as they keep paying premiums. The insured can keep claiming

Question 3

What is IP classified as (insurance)

Answer 3

long-term

Question 4

How long is the usual benefit period on limited term cover

Answer 4

1-5 years

Question 5

What type of ip is designed mostly for self employed

Answer 5

Day one or back to day one

Question 6

What are holloway policies

Answer 6

(a form of IP usually issued by friendly societies and often bought by the self-employed) build up a cash value at retiremen

Question 7

What is the usual ip deferred period

Answer 7

13 or 26 weeks

Question 8

What are the 3 most common incapacity definitions

Answer 8

Unable to perform own occupation
Unable to follow any occupation one is suited to
Unable to follow any occupation

Question 9

What is rehabilitation benefit

Answer 9

A smaller benefit if return to work but earn less eg working part time

Question 10

What is proportionate benefit

Answer 10

Similar to rehab benefit but if they take a different role than they had previously

Question 11

What is the usual benefit limit for ip

Answer 11

50-60% average gross earnings

Question 12

Increasable IP - how can this work

Answer 12

linking cover to an increase in the level of inflation as measured by the retail prices index (RPI), the consumer prices index (CPI) or a measure of earnings inflation; or
increasing cover by a pre-determined percentage each year.

Question 13

Generally, do insurers need to be notified in a change of occupation.

Answer 13

No

Question 14

Is personal ip benefit taxed

Answer 14

No

Question 15

Waiver of Premium

Answer 15

If the policyholder suffers an illness or accident that prevents them from working, the insurance company waives premiums at the level they were at when the period of incapacity started, possibly with indexation. Some waiver contracts also cover unemployment:

Question 16

What is the age IP normally ceases

Answer 16

SPA

Question 17

What are the features looked at when underwriting for IP

Answer 17

Age
Deffered Period
Term
Smoking
Escalation options

Question 18

What are the two types of hazards in IP

Answer 18

Physical Hazard - higher risk job - higher risk hobbies more risk physically
Moral Hazard - knowing you are insured so gonna be more risky

Question 19

How do reviewable premiums work

Answer 19

Reviewed in light of insurers claims experience

Question 20

Benefits of reviewable premiums

Answer 20

The use of reviewable premiums allows the insurer to offer lower premiums

Question 21

Renewable premiums period

and also benefits - what does it entail for the insurer

Answer 21

As an alternative to conventional ‘permanent’ IP policies, renewable policies are available which are structured over a short term (e.g. five years) with guaranteed renewal at expiry.

The insured may renew the contract and the insurer cannot decline to continue to cover, but premiums will be revised at renewal in line with the insurer’s then current rates.

Question 22

When is claim normally paid out IP

Answer 22

Return to work
End of policy
Death

Question 23

Free limits - what are they

Answer 23

if insured travels to uk/republic of ireland - western countries (1st world) - generally pays IP up to 3-6 months but not more than a year

Question 24

When should insurer be notified of illness

Answer 24

Straight away

Question 25

Group policies IP - deferred period

Answer 25

26 weeks

Question 26

When is IP benefit paid tax free

Answer 26

When it is paid directly to the claimant under an individual policy.

Question 27

What are the 5 key considerations when recommending an ip policy

Answer 27

Deferred period
Incapacity definition
Benefit level
Indexation or increases
Guaranteed or reviewable premiums

Question 28

How is the deferred period treated in linked periods of illness

Answer 28

Waived