Topic 12 (Health and General insurance) Flashcards
What is Critical Illness cover?
Cover that provides a tax-free lump sum upon diagnosis of a critical illness/medical condition
What are some typical uses of critical illness cover?
- Long term car
- Alterations to living accommodation
- Medical equipment
- Mortgage repayment
- Enhancing quality of life
What is income protection insurance? (IPI)
Pays out a regular income when accidentally/illness prevents someone from earning a living
What major factor affects premium rate?
The occupation of the life assured (normally split into classes that determine the level of premium)
How are premiums on IPI structured?
Renewable Premiums
- start low and increase in future, the premium may be renewable
Guaranteed Premiums
- more expensive as premiums don’t increase
When and how are benefits taxed?
- payments begin after the deferment period
- the longer the deferred period the cheaper the premium
- max. benefit is usually 50-75% of pre-disability earnings
How are IPI benefits taxed?
- Policy on a individual basis is tax-free
- Group basis, any income paid is subject to tax and national insurance
What is ASU insurance?
Accident, Sickness and Unemployment
-used to cover mortgage payments (for a maximum of 2 years)
What makes ASU different to IPI?
Asu policies should be viewed as short term products rather than providing protection for earned income
How are ASU benefits taxed?
benefits are tax-free, but no tax relief is available
What is PMI?
Private Medical Insurance
- a pure protection plan
- can provide a daily rate of income
- can cover those not working
What does cover normally include the reimbursement off with PMI?
- In patient charges
- Surgical/medical fees
- Outpatient charges
What factors affect the cost of cover?
- Location
- Type of hospital
- Accommodation
- Type of scheme taken out
- Age of the person
In terms of PMI, how are benefits and premiums taxed?
Premiums are subject to insurance-premium tax and benefits are tax-free
What is long-term care insurance? (LTC)
Provides funds to meet the cost of care that arises at a later point in life
How are levels of benefits determined?
depends on the individuals requirements and the ability to carry out activities of daily living (ADL’s)
’ the greater number of ADL’s that can’t be performed the greater amount…….’
of care required, therefore a higher level of benefit paid
How are benefits taxed?
There must be an immediate annuity in order for benefits to be tax-free
What is Annuity?
A financial product purchased with a lump sum which then pays out regular income
What is immediate needs annuity?
An annuity from which the benefits are used to pay for care needs that the insured already has (tax-free)
What is a deferred needs plan?
An investment designed to build up funds that can then be drawn on to pay for care needs as and when required
What is General Insurance?
Covers all types of insurance that are not life insurance
What are the 5 categories of General insurance?
Personal ad commercial: 1. property loss 2. liability loss Commercial only: 3. personal loss 4. pecuniary loss 5. interruption loss
What is Indemnity?
General insurance policies
-In the event of a claim, the insured person should be restored to the same financial position after a loss that they were in before loss occurred)
