Income Protection Products Flashcards

1
Q

Income protection product

A

A long-term insurance contract that provides the insured with regular payments during periods of incapacity in return for regular premiums.

This product offers cash benefits, NOT indemnity cover

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2
Q

Main customers for IP products

A

1) Individuals (particularly the self-employed)
2) Employers
3) Small professional practices

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3
Q

Locum protection insurance

A

A form of IP cover that provides for the salary of a temporary replacement professional

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4
Q

Waiting period

A

From the date the policyholder purchases the cover to when it kicks in

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5
Q

Moratorium period

A

Like a waiting period, but condition-specific

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6
Q

Deferred period

A

From the date the claim event occurs to when the benefit starts to be paid. A deferred period occurs at the start of each period of incapacity, save where the linked-claims period has been breached.

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7
Q

Initial period

A

From the date of policy inception to the beginning of the extended period

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8
Q

Extended period

A

From the end date of the initial period to the expiry of the policy term

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9
Q

Linked-claims period

A

Between the end of one claim period and some set end date, within which the policyholder can “restart” initial period of cover

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10
Q

Policy term

A

From the date of policy inception to the date of policy expiry

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11
Q

Premiums may be…

A

Single
Regular
Guaranteed
Reviewable
Increasing in line with benefits
Waived during periods of benefit payment

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12
Q

Ways to limit benefit payouts to prevent over-insurance

A

1) Maximum replacement ratios
2) Maximum benefit amounts
3) Deductions for other income received
4) Limits on high salaries
5) Quality training of sales people
6) Regular benefit reviews
7) Clear conditions on over-insurance at the claims stage

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13
Q

Replacement ratio

A

The ratio of post-claim income to pre-claim income (both net of taxes) taking state welfare benefits and other sources of income into consideration

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14
Q

Financial underwriting

A

The process of checking the proposer’s income and other circumstances to prevent over-insurance

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15
Q

Types of IP benefit increases

A

1) Fixed benefits with no increases
2) Increases at a fixed rate
- Same rate both in and out of claim
- Escalate in but not out
- Escalate out but not in
3) Index-linked

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16
Q

Incapacity

A

Being unable to earn an income as a result of illness or disability

17
Q

Occupational incapacity criteria

A

Own/alt/any

And the variations (particularly in the alt category)

18
Q

Non-occupational (i.e. Functional) criteria of incapacity

A

ADL - Activities of Daily Living
ADW - Activities of Daily Working
FAT - Functional Assessment Tests
PCA - Personal Capability Assessment

19
Q

Advantages of non-occupational definitions of incapacity

A

1) Measures generic level of incapacity
2) Identify generic skills
3) Precisely described
4) Are more easily applicable to those who work but are not paid or those who are temporarily without work
5) Can be applied beyond retirement
6) Can be applied to a wider range of lives
7) Simpler to use only one definition throughout policy term
8) Less subjective

20
Q

Ways to manage moral hazard

A

1) Careful policy wording
2) Robust policy conditions

21
Q

Residual risks

A

Risks existing after taking into account all other benefits to which a customer is entitled

22
Q

For any group scheme it is necessary to establish…

A

1) WHO is eligible for benefits under the scheme
2) the BENEFITS
- by size
- definition of a valid claim
- period of benefit

23
Q

Partial benefit

A

A proportionate benefit paid to someone who has returned to work but not at full capacity. Makes total earnings up to insured level

24
Q

Rehabilitation benefit

A

A benefit aimed at facilitating rehabilitation for a person who may or may not yet be back at work

E.g. A helpline or payment for reasonable workplace accommodations e.g. a wheelchair ramp

25
Q

Amounts of Income Protection Benefits

A

LP BROWSER

Lump sums
Partial benefits

Basics
Replacement ratios
Over-insurance
Waivers of premium
Surrenders
Escalations
Rehabilitation benefits

26
Q

Options available on IP products

A

1) GIO
2) Continuation
3) No-claims discount
4) Premium waiver