Unit 1 Topic 12 - Health and general insurance Flashcards
What is critical illness cover?
Critical illness cover provides a tax-free lump sum to met the additional costs that someone may face if they find themselves in this situation. The illness need not be terminal.
What is income protection insurance?
Income protection insurance (IPI) pays an income when accident or illness prevents someone from earning a living by carrying out their normal occupation.
Many insurers also offer IPI to people whose main responsibilities are in the family home, for example looking after children, rather than earning money outside it.
What factors will influence the premium rate of income protection insurance?
- The age of the life assured.
- The amount of benefit
- Current state of health
- Past medical history
- The length of the deferred period
What are Reviewable premiums on IPIs?
A reviewable premium means that premiums may start off relatively low, but will be reviewed in the future and may go up every few years or so. In some cases, the premium may be reviewable every year, or every five years. to take into account changing circumstances.
What are Guaranteed premiums on IPIs?
The nature of guaranteed premiums means that these tend to be more expensive than other two options, but the premiums are guaranteed for the life of the policy, which may be 25 years of even longer.
Define Deferred period in relation to insurance.
The period that must elapse between the onset of the illness/injury that gives rise to the claim and the first payment of benefits.
How are IPI benefits taxed?
When income protection insurance is taken out on an individual basis the benefits are tax free.
IPI can be arranged by an employer on a group basis and in this case the income is taxable as earned income.
What is ASU insurance?
Accident, sickness and unemployment insurance (ASU) plans are a type of general insurance that may be considered as an alternative to IPI.
ASU insurance is typically used to cover mortgage repayments if illness, accident or loss of employment prevents the policyholder from earning a living. A level of income to monthly mortgage repayments is paid for a limited period, usually a maximum of two years.
How does ASU differ from IPI?
In contrast to IPI, ASU plans should be viewed as short term to protect mortgage payments rather than as providing total protection of earned income.
What are the restrictions on ASU insurance?
- The proposer must have been actively and continuously employed for a specified minimum period prior to starting the plan.
- Any redundancy that the proposer had reason to believe was pending when they took out the policy will be excluded.
- No benefit will be payable if redundancy occurs within a specified period of the cover starting.
- A person may have to have been employed for a minimum period either before they can take out this type of plan or before the unemployment cover becomes value.
Define Proposer in terms of insurance.
The individual who is applying for cover under the insurance policy and will pay the premiums, also referred to as the policyholder. The proposer is often the same as the person(s) covered under the policy, the life assured, but can be different.
How are ASU benefits taxed?
All benefits are tax-free, but there is no tax relief on contributions to an ASU plan when it is arranged on a personal basis.
If the scheme is set up on a group basis, any employer contribution will be allowed as an expense against corporation tax.
What is Private medical insurance?
Private medical insurance (PMI) is a pure protection plan designed to provide cover for the cost of private medical treatment, thus eliminating the need to be totally dependent on the NHS.
What does Private medical insurance usually cover?
- In-patient charges: including nursing fees, accommodation, operating fes, drugs, and the cost of a private ambulance
- Surgical and medical fees: including surgeon’s fees, anaesthetist’s fees, pathology, and radiology
- Out-patient charges including consultations, pathology, radiology, and home nursing fees.
What is long-term care insurance?
The purpose of long-term care insurance (LTC) is to provide the funds to meet the costs of care that may arise in later life, when a person is no longer able to perform competently some of the basic activities involved in looking after themselves each day.
