Cover Types Flashcards
What is the purpose of Income Protection?
To protect the insured against loss of earnings resulting from sickness or accident
How is Income Protection taxed?
It’s paid free of income tax and National Insurance
Is Income Protection a permanent or temporary insurance?
Permanent
When is an Income Protection term often written to?
Usually age 60 or 65, in accordance with retirement
Up until when does the benefit from an Income Protection policy continue to be paid?
Until the insured returns to work, dies, or the policy term expires
Name 6 features of an individual Income Protection policy?
- Incapacity
- Deferred period
- Rehabilitation benefit
- Proportionate benefit
- Limitation of benefit
- Exclusions
What are the 4 typical definitions if incapacity relating to Income Protection?
- Own occupation
- Suited occupation
- Any occupation
- Activities of daily living
What is the definition of own occupation?
The insured is totally unable to perform their own occupation
Under which incapacity definition would someone come under if they were totally unable to perform their own occupation?
Own occupation
What is the definition of suited occupation?
Totally unable to perform any occupation to which they are suited to by education, training or experience?
Under which incapacity definition would someone come under if they were totally unable to perform any occupation to which they are suited to by education, training or experience?
Suited occupation
What is the definition of any occupation?
Unable to perform any occupation
Under which incapacity definition would someone come under if they were unable to perform any occupation?
Any occupation
What is the definition of activities of daily living?
Unable to perform activities such as dressing, washing, bathing, and climbing stairs (this is often used for those with no occupation)
Under which incapacity definition would someone come under if they were unable to perform activities such as dressing, washing, bathing, and climbing stairs?
Activities of daily living?
What are the 4 main types of activities of daily living?
- Dressing
- Washing
- Bathing
- Climbing stairs
What are the standard deferred periods for Income Protection?
~ 4 weeks
~ 8 weeks
~ 13 weeks
~ 26 weeks
~ 52 weeks
Some life offices offer stepped deferred periods to match up with an employer’s sick pay arrangements
What is Rehabilitation benefit?
A proportionately reduced benefit may be paid if the insured returns to their previous occupation but on reduced hours/pay
What is Proportionate benefit?
A proportionately reduced benefit may be paid if the insured returns to a lower paid occupation because they are unable to do their previous job
What type of benefit may be paid if the insured returns to their previous occupation but on reduced hours/pay?
Rehabilitation benefit
What type of benefit may be paid if the insured returns to a lower paid occupation because they are unable to do their previous job?
Proportionate benefit
What is limitation of benefit?
To ensure the insured isn’t financially better off than previously while working, a limit will be placed on the benefit
If the insured becomes incapacitated, receives benefit, recovers, and is then incapacitated again with the same illness, will the insurer restart the deferred period?
No, the benefits will restart immediately because it’s the same illness
Name some typical exclusions for IP?
~ war, invasion, riot
~ taking part in a criminal act
~ engaging in hazardous sports or pastimes
~ self-inflicted intentional injury
~ alcohol or drug abuse
~ pregnancy, childbirth
~ flying
~ AID, HIV
~ Living outside free limits
~ Failure to follow medical advice
What 4 types of IP policies are there, apart from a standard plan?
- Reviewable policies
- Increasing policies
- Unit-linked policies
- Group IP policies
What is the main difference between pure protection policies and unit-linked policies?
Unit linked policies are likely to attract a surrender value over time
What is free cover under a group IP scheme?
The level of benefit available to all members of the scheme without needing medical evidence
With an IP policy, will the underwriter look at morbidity risk or mortality risk?
Morbidity risk
Will hazardous sports and pastimes be more relevant to IP or life assurance?
Income protection
What is the most important factor for IP?
Occupation
Which class do managerial, executive, clerical, administrative and professional workers fall into?
Class 1 - the least risk
Which class do shop workers, skilled light manual workers in non-hazardous jobs, hotel and catering workers fall into?
Class 2
Which class do skilled workers in non-hazardous manual jobs fall into?
Class 3
Which class do skilled workers in hazardous jobs and heavy manual worker fall into?
Class 4 - the most risk
Can provider cease a policy if the insured changes their occupation during the policy term?
Yes
When will a claim form be sent out by the insurer in the event of an IP claim?
After the deferred period
Will an insurer pay for the medical evidence required to support an IP claim?
No, the claimant must pay this
When does the benefit under an IP policy cease?
Until the claimant recovers, dies, or the policy expires (the earliest)
Some budget policies have a maximum claim payment period of 2, 3 or 5 years
