Topic 18: Types of Financial Protection 2

Question 1

What are Rider benefits?

Answer 1

Offered for a customer to increase their level of cover on life assurance, CIC or IPI plans. Sometimes they are automatic features but are usually additional charged options. This means it may be more appropriate to amend a client’s existing policy when circumstances change than to start a new one.

Question 2

What is Waiver of premium (WoP)?

Answer 2

A rider benefit available on most protection policies for an additional premium. Provides cover to continue premiums if the policyholder cannot pay them through ill health. Subject to a deferred period.

Question 3

What is Life changes benefit?

Answer 3

If the customer experiences a significant life event for which they have evidence, they can increase a life policy’s sum assured without providing further underwriting information.

Question 4

What is Replacement benefit?

Answer 4

For a joint life policy, the policy ends in the event of one of the policyholders dying. With a replacement benefit, the remaining policyholder can start a new single policy without further underwriting.

Question 5

What is buildings insurance?

Answer 5

Covers the cost of repairs, replacement or rebuilding in the event of damage to the fabric of the building or fixtures caused by specified events, known as standard perils. Lenders will insist on buildings insurance if a property is mortgaged.

Question 6

What are standard perils?

Answer 6

The risks covered as standard by a buildings insurance policy. Includes such risks as fire, subsidence, theft and escape of water, but not accidental damage.

Question 7

What is Accidental damage?

Answer 7

Offered by most home insurers as an option for an additional premium, covering accidental damage to the building and fixtures.

Question 8

What is Public liability insurance?

Answer 8

Covers a building owner’s legal liability to others, although the extent varies by insurer.

Question 9

What is Self-build?

Answer 9

Where an individual buys a plot of land and, after obtaining planning permission, builds their house themselves or using contractors. They may or may not require mortgage finance.

Question 10

What is Self-build insurance?

Answer 10

Specialist buildings insurance for those undertaking a self‑build project, because standard policies would not cover many of the specific risks.

Question 11

What is Contents insurance?

Answer 11

Insures a home’s contents against theft and damage, subject to certain exclusions. More cover is usually available for an additional premium.

Question 12

What is Landlords insurance?

Answer 12

Covers a landlord’s third-party liabilities while a property is being let out.

Question 13

What is Accident, sickness and unemployment (ASU) insurance?

Answer 13

General insurance that may be considered as an alternative to, or to work in conjunction with, IPI. It is relatively inexpensive compared to IPI, because it is not underwritten on a personal basis and will pay income benefits for a shorter period.

Question 14

What is a Group scheme?

Answer 14

Employers can arrange IPI, CIC or accident and sickness schemes for employees on a group basis. The employer may cover the costs of NI and pension contributions. Medical underwriting may not be required, and the policies are flexible to allow businesses to choose the right type of cover for them.

Question 15

What is Payment Protection Insurance (PPI)?

Answer 15

Protects repayments to service a loan or debt. It is commonly arranged in conjunction with a mortgage, a personal loan or an overdraft

Question 16

What is Mortgage payment protection insurance (MPPI)?

Answer 16

Provides a tax-free monthly payment to cover mortgage costs if the insured cannot work due to accident or illness. Redundancy cover may also be available to provide the benefit on involuntary redundancy. Policies are renewable, so the insurer can refuse to renew the plan after a claim.

Question 17

What is Terminal illness cover?

Answer 17

Terminal illness cover can allow an accelerated payment of death benefit on
a life or IPI policy where the life assured has a short life expectancy, typically
under 12 months.

Question 18

What is Accidental death benefit?

Answer 18

Accidental death benefit typically pays a multiple of the sum assured if death
occurs as a result of an accident.

Question 19

What is Total and Permanent disability cover?

Answer 19

In a similar way to terminal illness cover, total and permanent disability cover
enables an accelerated payment of the death benefit should the insured become
permanently incapacitated and unable to work (as defined by the provider).

Question 20

What is Guaranteed insurability options?

Answer 20

Guaranteed insurability options enable the sum assured to be increased
without the need for medical underwriting. Such an option may arise:
- at a set point in the plan’s term; or
- when specified events occur, such as marriage, taking out or increasing a
mortgage, or the birth of a child.

Question 21

What is Separation benefit?

Answer 21

A separation benefit effectively splits a joint life or CIC policy into two single
policies if a couple separates. The separation must be evidenced and the new
policies will be subject to the terms and conditions applicable at the time they
are taken out.