Topic 12 Flashcards
what is critical illness cover and its key features
This is a specific cover which pays out a tax free lump sum in the events of a major illness which will help with lifestyle changes as well as the inability to work.
The key features of this cover is that it pays out a lump sum which is set at a minimum to set clear standards and consistency by the association of British insurers, This lump sum can be used to pay off mortgages/day to day expenses/ altercations to housing for accessibility or anything else which is needed as it is flexible.
The main three illnesses that all insurers cover are heart attacks, cancer and stroke. Any illnesses other than this can be covered but will depend on the insurer as not all illness’s that others may consider critical will have the same definition as the insurer.
what is income protection insurance and its key components
Income protection insurance is for those who become ill/injured or unable to work, this cover will provide a steady income for those with this issue until they are able to work as they are recovering.
The key components of this cover is that it will pay out 50-65% of the individuals income before the illness or 75% if it is a group policy but this is to ensure that they are not benefitting from higher income while not working. This type of cover is suitable for both self employed and the ones whom are employed however the self employed may need to pay higher premiums as they will not have the backing of sick pay from the employer. This will also dictate the delay at which the policy is activated as it can vary.
Some policies may also offer inflation support at a fixed rate determined at the purchase of the policy or a index linked inflation which will be variable. The policy will also provide benefits for part time or lower roles in recovery phases.
The premium can be split into three categories, one being guaranteed which a fixed rate that is not affected by any external factors. Another is the reviewable premium but this may not be favourable as premiums may rise and lastly is the waiver of premium which is the absence of premiums in the claim period.
Finally the taxation on individual policies is tax free but if employer supported then benefits will be taxed and the policy will cease if the folling occur: death/recovery/retirement and the end of term.
What is accident sickness and unemployment insurance and its key components
This cover is a short term relief policy made for specific support such as mortgage repayment for individuals who affected by accident sickness or unemployment.
This is a short term policy usually with a max term of two years highlighting its short term nature compared to income protection insurance, this will also come with lower premiums due to the lack of comprehensiveness and short term.
Sometimes additional benefits are added to cover expenses but this is not the normal. The policy usually is deferred for a month from the start of the claim and a lump sum may be offered in some case studies such as death/ loss of limp or permanent disability.
This policy will not cover those unemployed due to voluntary or misconduct dismissals as well as industry downturns.
what are the policy restrictions for accident sickness unemployment insurance
The policy does require some screening in order to stop those wanting to take advantage of the plan as the policy will not accept claim of unemployment from those who have not been in work actively for 6-12 months to stop those taking out plans with the fear of unemployment from jobs they are new to as well as the pre-knowledge of redundancy which was announced to the employee and then the policy was taken in anticipation are not valid.
These policies are renewable annually therefore the companies own the rights to offer higher premiums especially is the claims and demands are high.
What is private medical insurance and its key components
Private medical insurance is for those who prioritise shorter wait times as well as personalised care as they are reimbursed by the policy for the care and treatment they receive.
This policy includes cover for prescriptions, consultations, surgeries, stays in hospital as well as a daily allowance for treatment through the nhs.
There are two types of plans, one being individual such as families and for one person or group plans which are most common as they are received as benefits from employers to employees and benefits of economies of scale.
The premiums for this policy can vary as location can be costly if treatment is London as well as age being a factor the premium will rise as the age does and higher premiums are presented to those in need of luxury hospitals and private beds.The two plans consist of budget which is cheaper and will offer private care once the nhs is over set limits e.g 6 weeks or comprehensive which is the inclusion of shorter waits and greater hospitals.
The premiums are taxed through insurance premium tax but the benefits are tax free unless a group plan is required.
These plans will often exclude pre existing injuries and illness’s as well as self inflicted injuries and illness’s. They will also exclude cosmetic treatment and routine care e.g. dental or optical.
What is long term care insurance and its key components
This is for those who are unable to perform daily acts of living and are in need of assistance.
This type of care insurance has risen recently as family dynamics change and they live further away as well as responsibilities such as work paired with the increase in living age there are more people in need of this policy. This policy is also affected by the rising expectations from the cared for as the NHS is not seen as adequate and have rising concern for some.
The eligibility for these products are determined by tests of daily tasks such as dressing, eating, going to the toilet ect. If two or three of these are failed then they are eligible for the treatment.
The tax for immediate care needed is none and for the differed care needed is treated as an investment therefore the tax will be different and an ordinary annuity will only be taxed on compounded interest.
there are two types of long term care which is split into immediate care or differed cared.
What is general insurance and the 5 categories they are split into
General insurance is for those needing financial cover for a wide range of things.
1.Property loss- this can be the loss of jewellery, homes, vehicles or business property
2.liability loss- this is for the financial damages caused to other e.g neighbours fence was destroyed by them.
3.personnel loss (commercial)- this is for employers who will lose employees through death or illness.
- pecuniary loss (commercial)- this is for those needing cover for the absence of monetary institutions through defaults.
- interruption loss (commercial)- this is for those who have had to stop business and production though disaster such as a fire in the factory.
What is indemnity in general insurance
This is the idea that the policy is there to help an individual reach the position they were in before the loss and not to profit off the insurance. For example a homeowners roof was destroyed in a storm the insurance will repair but not add to the roof. There is no indemnity for injury and illness as it is hard to quantify
They are different ways that indemnity can be applied. the insurance company can either replace the items, repair the damage, reinstall what was destroyed or pay out a cash settlement.
what is the average principle in the underinsurance of an asset
This is when the sum insured is less than the true value of the item which is covered by the insurance therefore the payout will be the same percentage of what the claim is.
For example if the sum insured was 200,000 and the items true value was 300,000 then the percentage of the insured in this case 66.67% then the claimed amount would be the same percentage e.g. £1000 claimed and recived was £666.70.
What is building insurance
This protects building and structures from risks such as fires, floods or any damages to the buildings but cannot provide over a certain sum even if the damages are more as well as an excess which will not cover small payouts set at the purchasing time and can be adjusted for cheaper premiums.
They will also provide accommodation if the property is inhabitable but only for a set limited time.
what is contents insurance
This is the insurance of the personal possession that would be taken if a house was sold for example a freezer. This is covered from risks such as fires, storms, damage outside the house if all risk insurance is taken or power loss leading to freezer damage.
There can be insurance for the grouped lesser value items or individually listed high value items.
What is motor insurance and its common extensions
Motor insurance is mandatory under the road traffic act of 1988 with third party risks being covered as the minimum along with this cover there is third party with fire and theft care and comprehensive care which covers all.
With the uk insurance market for cars increasing in demand and competition some covers will offer additional extensions in order to attract more customers with these benefits some of which are:
roadside breakdown cover which will help with any breakdowns along with mechanics any tire punctures with help to recovery into garages and off the roadside.
a courtesy car can also be added as a benefit for those who are in need as the cars maybe in the garage and written off which results in the client needing a car.
They can also provide legal cover from any disputes with claims and compensation covering all the legal costs of coming to a solution to these claims against others.
finally they could offer out of pocket expenses such as medical appointments and accomodation.
what is travel insurance and what does it cover
This type of cover is for anyone who is travelling domestically or overseas and are in need of financial cover in the case of something going wrong.
The two types of policies are single trip insurance for a one off trip looking for cover which is ideal for infrequent fliers. The second type is annual multi trip insurance which is for individual or families who are frequent fliers which is much more cost efficient but will have a minimum and maximum day and trip cover.
The coverage of the policy can vary but for the most part they can cover delays and cancellations or missed trips. As well as these any medical bills up and personal liabilities or loss of possessions on top of any legal enpenses.
However these policies will all have minimum and maximum expenses and payout along with higher premiums for the types of trips depending on the danger e.g skiing trips.
what is insurance tax premiums
there are two types of tax premiums one being the standard tax that is applied to all insurances as a percentage and the higher tax for broader covering insurances such as travel insurance.
The only insurances that exempt from this tax is long term insurances such as life assurance and income protection.
what is PPI (payment protection insurance) and its issues
this is a type of financial insurance which will cover repayments in the short term for those who are not able make the payments if they are ever unable to such as unemployment. This will only be covered for a period of 12 months.
However, PPI had a scandal as this type of insurance was miss sold to many consumers as it was told that a loan could not be taken out without one as well as binding them into package deals. They were also sold to those who were ineligible to claim on the insurance.
When the scandal was found out through the FCA the institutions were fined and forced to pay out compensations through the fscs to whomever was mis sold this type of insurance.
