Cover Types

Question 1

What is the purpose of Income Protection?

Answer 1

To protect the insured against loss of earnings resulting from sickness or accident

Question 2

How is Income Protection taxed?

Answer 2

It’s paid free of income tax and National Insurance

Question 3

Is Income Protection a permanent or temporary insurance?

Answer 3

Permanent

Question 4

When is an Income Protection term often written to?

Answer 4

Usually age 60 or 65, in accordance with retirement

Question 5

Up until when does the benefit from an Income Protection policy continue to be paid?

Answer 5

Until the insured returns to work, dies, or the policy term expires

Question 6

Name 6 features of an individual Income Protection policy?

Answer 6

1. Incapacity
2. Deferred period
3. Rehabilitation benefit
4. Proportionate benefit
5. Limitation of benefit
6. Exclusions

Question 7

What are the 4 typical definitions if incapacity relating to Income Protection?

Answer 7

1. Own occupation
2. Suited occupation
3. Any occupation
4. Activities of daily living

Question 8

What is the definition of own occupation?

Answer 8

The insured is totally unable to perform their own occupation

Question 9

Under which incapacity definition would someone come under if they were totally unable to perform their own occupation?

Answer 9

Own occupation

Question 10

What is the definition of suited occupation?

Answer 10

Totally unable to perform any occupation to which they are suited to by education, training or experience?

Question 11

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?

Answer 11

Suited occupation

Question 12

What is the definition of any occupation?

Answer 12

Unable to perform any occupation

Question 13

Under which incapacity definition would someone come under if they were unable to perform any occupation?

Answer 13

Any occupation

Question 14

What is the definition of activities of daily living?

Answer 14

Unable to perform activities such as dressing, washing, bathing, and climbing stairs (this is often used for those with no occupation)

Question 15

Under which incapacity definition would someone come under if they were unable to perform activities such as dressing, washing, bathing, and climbing stairs?

Answer 15

Activities of daily living?

Question 16

What are the 4 main types of activities of daily living?

Answer 16

1. Dressing
2. Washing
3. Bathing
4. Climbing stairs

Question 17

What are the standard deferred periods for Income Protection?

Answer 17

~ 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

Question 18

What is Rehabilitation benefit?

Answer 18

A proportionately reduced benefit may be paid if the insured returns to their previous occupation but on reduced hours/pay

Question 19

What is Proportionate benefit?

Answer 19

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

Question 20

What type of benefit may be paid if the insured returns to their previous occupation but on reduced hours/pay?

Answer 20

Rehabilitation benefit

Question 21

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?

Answer 21

Proportionate benefit

Question 22

What is limitation of benefit?

Answer 22

To ensure the insured isn’t financially better off than previously while working, a limit will be placed on the benefit

Question 23

If the insured becomes incapacitated, receives benefit, recovers, and is then incapacitated again with the same illness, will the insurer restart the deferred period?

Answer 23

No, the benefits will restart immediately because it’s the same illness

Question 24

Name some typical exclusions for IP?

Answer 24

~ 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

Question 25

What 4 types of IP policies are there, apart from a standard plan?

Answer 25

1. Reviewable policies
2. Increasing policies
3. Unit-linked policies
4. Group IP policies

Question 26

What is the main difference between pure protection policies and unit-linked policies?

Answer 26

Unit linked policies are likely to attract a surrender value over time

Question 27

What is free cover under a group IP scheme?

Answer 27

The level of benefit available to all members of the scheme without needing medical evidence

Question 28

With an IP policy, will the underwriter look at morbidity risk or mortality risk?

Answer 28

Morbidity risk

Question 29

Will hazardous sports and pastimes be more relevant to IP or life assurance?

Answer 29

Income protection

Question 30

What is the most important factor for IP?

Answer 30

Occupation

Question 31

Which class do managerial, executive, clerical, administrative and professional workers fall into?

Answer 31

Class 1 - the least risk

Question 32

Which class do shop workers, skilled light manual workers in non-hazardous jobs, hotel and catering workers fall into?

Answer 32

Class 2

Question 33

Which class do skilled workers in non-hazardous manual jobs fall into?

Answer 33

Class 3

Question 34

Which class do skilled workers in hazardous jobs and heavy manual worker fall into?

Answer 34

Class 4 - the most risk

Question 35

Can provider cease a policy if the insured changes their occupation during the policy term?

Answer 35

Yes

Question 36

When will a claim form be sent out by the insurer in the event of an IP claim?

Answer 36

After the deferred period

Question 37

Will an insurer pay for the medical evidence required to support an IP claim?

Answer 37

No, the claimant must pay this

Question 38

When does the benefit under an IP policy cease?

Answer 38

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