07. Critical illness insurance Flashcards
(36 cards)
What is CIC?
It pays a cash lump sum following diagnosis of one of a number of specified critical illnesses.
What are the main 3 critical illnesses that CIC pays out on?
- cancer
- heart attack
- stroke
Someone under 65 is how many more times likely to suffer a CI than to die?
5 times
What can be paid out if the CIs are less severe?
Reduced sums assured, potentially on a sliding scale of %s
In 1999 the Association of British Insurers (ABI) issued guidance regarding critical illnesses. Why? [2]
- to improve consistency
- and help consumers compare products more easily
Name 4 potential uses of a CIC payout.
- pay off mortgage
- adapt house depending on needs
- new car if required
- any other commitments e.g. school fees
Most newer CIC policies have what kind of term?
A limited term e.g. 20, 25 or 30 years.
When is CIC paid out under a combined LA & CIC?
Death or diagnosis or a CI, whichever comes sooner. Aka “accelerated death payment”
How does a split benefit trust work?
Death benefit held in trust for beneficiaries &
critical illness benefit held for absolute benefit of insured person if there is a claim
For standalone CIC policies (not relevant for combined CIC & LA policies), typically how long is the survival period?
14-30 days.
Children’s cover is an underwriting-free ‘added value’ extra and usually pays out what? [2]
- a set amount e.g. £25k
- or a % of the sum assured with a limit of say 2 claims per policy and 1 claim per child
What does life-cover buy back enable?
For a restricted form of life cover to be taken out without the need for further medical underwriting, which may be difficult to obtain after suffering a CI.
What generally applies for WOP to kick in?
A deferred period.
Where policies are set up on a joint-life basis, what do some insurers allow for?
The policy to be split in the event of a separation or divorce without the need for further underwriting on either party.
What is total and permanent disability?
Effectively a catch-all for a condition for a condition that although not specifically covered, the standard of the insured’s life is so poor they can never live a normal life again.
What are the 4 ABI possible definitions for total & permanent disability?
Unable to do:
- own occupation again
- suited occupation again
- 3 specified work tasks again
- look after oneself again (3 from list)
When is terminal illness benefit paid out, and when is it usually not paid out?
- life expectancy < 12 months
- life expectancy 12 - 18 months
List 6 typical conditions covered by CIC in addition to cancer, heart attack & stroke.
- loss of hearing, speech or sight
- coma (resulting in perm symptoms)
- dementia inc Alzheimers (pre age x)
- loss of hand or foot
- Parkinsons (pre age x)
- brain tumour
- motor neurone disease
- multiple sclerosis
Who is the onus on to prove a CIC payout is due?
Policyholder
Exclusions to payout are largely the same as for IP. Name 5.
- alcohol / drug misuse
- criminal activity
- hazardous activities
- going against medical instruction
- pregnancy
- war disabilities
- self-inflicted injury
CIC underwriting focuses on morbidity. Name 5 important factors affecting premiums.
- age
- medical history of insured
- medical history of insured’s family
- lifestyle factors e.g. alcohol/smoking
Why might a client choose reviewable over guaranteed premiums?
Cheaper.
Name 3 things the insurer will check before payment of a claim.
- the diagnosed illness is covered by the policy
- it was not a pre-existing condition
- policyholder disclosed everything relevant at inception
What happens if a qualifying misrepresentation was deliberate or reckless?
Insurer can void contract and retain premiums.
