7 Critical illness insurance Flashcards
What is critical illness insurance (CIC) ?
Insurance which pays out a lump sum if diagnosed with a specific condition
How have recent standards released by the ABI helped the sale of CIC?
MAkes it easier for clients to:
- Understand key features of the policy
- Understand definitions of core conditions
When CIC is paid out what is it usually used for?
To cover a mortgage/ refit a house/ car
What type of trust would a CIC & Life combined policy usually be written in to?
A split trust
What is the usual survival period for CIC policies?
14-30 days
What is children’s cover in CIC policies?
if the policyholder’s child is diagnosed with a critical illness, then an added value can be added to the policy
What is life cover buy back on CIC policies?
allows for restricted life cover to be taken out when the insured suffers a critical illness and the policy pays out
What are reinstatement policies in CIC policies?
– Allowing a joint life policy to be split in the event of separation/ divorce without the need for more underwriting
What is terminal illness cover and what type of trust would this be written in to?
If someone has 12 months to live the policy pays out, but won’t pay out if the policy has 12-18 months remaining – would use a split trust to pay out the terminal illness cover
According to the ABI, which 3 conditions should every CIC policy cover?
Cancer, heart attacks & strokes
Who is the onus on to prove the CIC claim is payable?
The policyholder
What are some usual exclusions for CIC policies?
Alcohol & drug abuse, criminal acts
What two ways can CIC premiums be bought?
guaranteed or reviewable basis
What is CIC underwriting based on?
Based on morbidity
What are two benefits of CIC group policies for employees?
- Reduced underwriting need
- can increase loyalty
What is the tax treatment of a CIC benefit which is paid out?
Free of income tax & CGT
Why could an IHT liability arise when the CIC payment is paid, but the policyholder has died & it’s written in to a split trust?
Payment to the policyholder sits outside of the trust and falls in to estate
What are two advantages of CIC?
- Provides lump sum figure on diagnosis
- Can use the money on whatever they please
What are two disadvantages of CIC?
- CIC is an expensive product
- Not all conditions are covered
- If have a pre-existing health condition then hard to get cover
