Income Protection & Critical Illness Cover Flashcards
What is income protection?
An insurance polic which pays out a regular income when a person is unable to work due to illness / incapacitation
What is income protection sometimes known as?
Permanent health insurance
What are the key features of income protection
permanent health insurance
1) Policy runs for a set term
2) Clearly defined when a benefit is paid
3) Regular Income
4) Payments stop when individual returns to work / retires
What is income protection useful for?
If household has a sole earner and standard of living would fall if they became ill
How do premiums compare on income protection vs other policies
As the life office may have to be for a prolonged period - premiums tend to be high
What 3 forms do income protection premiums come in?
1) Reviewable
2) Renewable
3) Guaranteed
What are reviewable premiums
income protection
Premiums not fixed - reguarly reviewed and will change as circumstances change
can change every year
What are renewable premiums
income protection
Premiums are not fixed but only change when the policy is up for renewal
What are guaranteed premiums?
Income protection
Premiums which are fixed for life - tend to be more expensive
What are the conditions for IP policies?
1) Must be between 18-59 to take cover (stops when reaching 65)
2) Insurance policy will define incapacity (excludes pre-existing conditions)
3) Benefits start when deffered period finishes
4) The longer the deferred period the lower the premiums ( can go up to 104 weeks)
5) Claim is invalid under certian circumstances (e.g. alcohol, self-inflicted, not following medical advice)
What are the 4 main types of income protection policies?
1) Standard Policies
2) Limited Term Cover
3) Day one & back to day one
4) Investment linked policies
What are standard income protection policies
payment starts at end of deferred period
Tend to pay 50-60% of pre claim income
What are limited term income protection policies
only cover a short term e.g. 1-5 years
What is day one cover income protection policies
Day one are for self employed with no sick pay arrangements
What are investment linked policies
some legacy products are unit linked
Deferred periods:
1) What periods are available
2) What periods are most common
3) What do longer periods do?
1) 4 weeks to 2 years
2) 13 and 26 weeks
3) Reduce premiums
How does underwriting differ for income protection?
More stringent than life protection
What factors influence premiums for income protection?
1) Age
2) Deferred Period
3) Term
4) Smoker
5) Escalation options
What exclusions and conditions can nullify a claim?
1) Alcohol / Drugs
2) Criminal Acts
3) Dangerous Sports
4) Flying (other than a passenger)
5) Not followin gmedical advice
How is income protection taxed?
No tax on individual policies
Group policy benefits paid through PAYE
What is ASU?
Accident, Sickness and Unemployment protection
covers more than just incapacitated (e.g. loss of job)
What are the key differences between ASU and income protection
ASU - much shorter term (usually only 2 years)
ASU is less stringently underwritten
ASU is cheaper (lower premiums)
ASU pays out on things like unemployment (non-voluntary & >6 months since policy)
65-75% income payout on ASU vs 100% in group income protection or 75% standalone policy
What is critical illness cover?
Insurance designed to pay a lump sum if a person is diagnosed with a critical illness
What are the conditions for critical illness cover?
1) Policy will name what illnesses are covered
2) Some illnesses are not covered
3) Illnesses arising from certain activities are not covered (e.g. alcohol / drugs, war, flying, criminal act)
In relation to critical illness cover, what is Survivor’s insurance
must live for 14-30 days following diagnosis to receive payment
How is critical illness cover taxed?
No tax on a single policy
group policies are taxed as a benefit in kind
What term is criticla illness cover
can be fixed or whole life
How do premiums work on critical illness cover
Underwriting must be done
Premiums not fixed - Reviewable every 5yrs for example
