Protection Topic 6 – Other insurance-based protection policies Flashcards
Accident, sickness and unemployment (ASU)
- Alternative to IPI
- Cheaper than IPI as it is not underwritten on a personal basis
- ASU works on probabilities, not certainties (the events that lead to ASU pay-out might not ever happen)
- Renewable at the discretion of the insurer, policies can be revoked or premiums can be increased on the annual review
- Benefit structure combines lump-sum and income benefits
Income benefits, from ASU, are paid after a deferred period (usually xxx days) and paid for a maximum period (usually xxx years).
30, 1-2
Lump-sum benefits for ASU are paid by some insurers in the event of specified conditions such as:
- Death as a result of an accident
- Loss of a limb
- Loss of an eye
- Total and permanent disability
Lump sums are scaled due to the severity of the accident, for example a bigger payment for loss of hand than loss of finger.
Typical restrictions and exclusions applied to ASU:
- Proposer must have been actively employed for a specified period
- For redundancy, if it is proved that the redundancy was imminent when the policy was created, it will be excluded
- No benefit payable if redundancy happens within certain period of policy creation
- Policies do not provide unemployment cover if they are self-employed
- No benefit payable if sickness is due to underlying condition
Personal accident insurance
Similar to ASU but pays lump-sum only to conditions arising after an accident.
Payment protection insurance (PPI)
PPI is designed to protect payments for loans or debt.
This can be setup alongside your mortgage for protection. It is essentially a branded ASU and cover is usually provided at a fixed cost per £100 of benefit. You can get basic cover or additional cover which can cover household bills and even endowment premiums.
Payments commence after a deferred period (typically 30-60 days) and cover can be arranged for 12-24 months.
Exclusions and restrictions for PPI:
- Proposer must have been actively employed for a specified period
- For redundancy, if it is proved that the redundancy was imminent when the policy was created, it will be excluded
- No benefit payable if redundancy happens within certain period of policy creation
- Any period of unemployment or disability arising from self-inflicted injury or abuse of alcohol/drugs will be excluded
- No benefit payable if sickness is due to underlying condition
Benefits of PMI
- No waiting lists
- Choice over location
- Choice over timings
- High-quality accommodation
- Choice over consultant
Factors affecting premium rates for PMI:
- Where a person lives
- The type of hospital the individual is allowed into
- The type of scheme (budget scheme for example, it has limits)
- Age of person applying
- No-claim bonuses
Comprehensive PMI plan – an expensive plan that may include all of the following benefits:
- No limits on overall claims
- Accommodation costs covered for parents when child is hospitalised
- Psychiatric treatment
- Lump-sum payments if CI diagnosed
- Overseas medical cover
- Insurance of pre-existing conditions
- Cover for glasses or contact lenses
- Dental care (subject to limits)
Exclusions for PMI:
- Typically, any pre-existing conditions are excluded
- Optical care
- Routine dental treatment
- Routine maternity care
- Chiropody
- Treatments of injuries that are self-inflicted
- Cosmetic surgery
- Alternative medicine
Hospital cash schemes
Aims to cover additional costs whilst hospitalised rather than refund costs of medical care (as PMI does).
Benefits of hospital cash schemes
- Cash benefit on a per-night basis for every night spent there
- Cash lump-sum for a long stay over a single course
- Enhanced cash benefits if husband and wife are hospitalised at the same time
- Refund of 50% of the cost of dental care
- Refund of 50% of optical care
- Payment of lump sum on reaching advanced stage of pregnancy
