Week 1 Flashcards
High risk, low probability
Serious illness
High risk, high probability
Redundancy in high turnover job
Low risk, low probability
Don’t really happen
Low risk, high probability
Scraped knee
What is insurance best to cover in terms of probably
Low probability, high risk
What is morbidity
Likeliness of illness
What is Mortality
Likeliness of death
What types of lifestyle have a significant impact on life expectancy
Smoking, drinking, Change eating patterns, exercise
Why has the need for protection changed?
Historically people stayed in the same job, more protection from employer. Now higher turnover of job roles and less protection
Why is there a protection gap?
Lack of understanding, costs, inertia (a tendency to do nothing), advice - not enough
What should we look at when giving protection
Needs, wants, gots (for this look at YES - yourself, employer, state)
Type of life insurance - term
Runs for a specific length of time, it ends and if no claim is made no claim can be made after
Life insurance - Whole of life
Lasts for whole of life
Life insurance - endowment
Form of savings plan with life cover attached. Often used in the past as way of repaying mortgage
Heath insurance - income protection
Pays out an income when unable to work due to illness, this stops when go back to work, retire or die. Usually be up to 60% of gross income.
A provider cannot cancel an income protection policy unless the policy holder stops paying the premiums. This means the holder can claim multiple times.
Health insurance - PMI - private medical insurance
Pay for private treatment - acute medical conditions i.e short term.
Health insurance - CIC - critical illness cover
Lump sum on diagnosis of serious illness. 30 day survival period
Type of term life insurance - level term
Sum assured (amount covered) is set for a particular term and doesn’t change. Can be linked to inflation so the real value sum assured is maintained great for protection against interest only mortgage
Type of term life insurance - decreasing term
The sum assured decreases over the term in line with the term outstanding balance of the mortgage. In theory the mortgage is always guaranteed to be repaid. Usually much cheaper than level term as the insurer is committed to a lower pay over time
Type of term life insurance - whole of life
Whole of life payout guaranteed as long as premiums maintained. Potentially really useful for funeral expenses and IHT (inheritance tax)
State benefit - 3 groups of benefits
Means tested
Contribution tested
Needs tested
Means tested
Those where payment is based on the level of an individuals broader recourses recourses - with payment targeted at those who have the least. Often known as income based
Contribution tested
Those where payment is based of NIC - national insurance contribution. Whether sufficient NIC has been paid.
Needs tested
Where payment is based neither on contribution nor means tested but rather the individuals level of need