Critical Illness Products Flashcards
Critical illness insurance
A pure protection product with the sum assured cash benefit payable if the policyholder is diagnosed with a specified illness, if they undergo a surgical procedure or if they reach a specified level of impairment
List the three main forms of CI protection
1) A stand-alone policy
2) Rider to a life policy
3) Accelerator to a life policy
CI rider to life policy (TA or WLA)
Sum assured relating to a critical illness event paid out on that event and the separate sum assured relating to death paid out on that event
CI accelerator to life insurance (TA or WLA)
Sum assured is paid out on earliest of CI event and death
Needs met by CI policy
1) Income replacement
2) Repayment of mortgage or other loan
3) Medical expenses
4) Recuperative holiday
5) Childcare
6) Home adaption to aid living post CI event
7) Key man cover
8) Fund a change of lifestyle to improve claimant’s health
Key man cover
When business partners take out CI policies on each other’s lives such that the benefit will fund the buyout of the ill person’s stake in the business
Why are CI products appealing?
They are readily understood
They cover a risk that customers recognize readily
Why are CI products confusing?
1) Due to exclusions
2) Due to point-of-claim underwriting and claims assessment
3) Due to differences in everyday understanding of illnesses and the claim definitions in the policy
4) Complex medical terminology necessary to avoid ambiguity
List the three criteria for the inclusion of an illness or condition
1) It is a condition perceived by the public to be serious and occur frequently
2) It can be defined clearly so there is no ambiguity at the point of claim
3) Sufficient data are available to price the benefit
TPD
Total Permanent Disability
Advantages of tiered CI contracts
1) More comprehensive
2) More fair
3) Better fit for policyholder’s financial needs
4) Reduces anti-selection and incentive to exaggerate symptoms at claims stage
5) May differentiate the product from competitors
6) Allows more than one claim until full sum insured has been reached
Disadvantages of tiered CI contracts
1) More complex than a standard CI product
2) Difficult to compare with competitors’ products
3) Leads to potential for higher degree of claims dispute
Loss of independent existence cover
Total permanent disability (TPD) cover written on an Activities of Daily Living (ADL) basis for whole of life
Options available on CI cover
1) GIO
2) Continuation
3) Children’s benefit rider
Survival period
The period from diagnosis through which the insured must survive in order to become eligible for claim payments under a CI policy
