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R05 > MOD 6 - R05 > Flashcards

MOD 6 - R05 Flashcards

1
Q

Statistics show that an individual is how many more times likely to be off work as a result of illness or incapacity than they are to die?

A

5x more likley

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2
Q

What is IP also known as?

A

Permanent Health Insurance (PHI)

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3
Q

As long as the insured keeps paying premiums and complies with any relevant policy conditions, the insurer cannot cancel the policy or increase the premiums no matter how many claims are made. Is this true or false?

A

True

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4
Q

Some long-term policies have a limited payment period such as ____ years.

A

Two years

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5
Q

What is the main need for Income Protection?

A

Protect the insured against loss of earnings from sick health/accident or disability

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6
Q

IP should be a high priority for who?

A

Those not covered as a member of an employer scheme and who is in eligible occupation.

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7
Q

What does the amount of cover depend on?

A

-Clients expenditure (i.e. mortgage costs)
-Max permitted cover allowed by the insurer
-Estimated level of expenditure of the individual or family while the insured is incapacitated, less any other ongoing income (i.e. partners salary, rental income, dividends etc.)

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8
Q

For standard policies, conventional IP pays out after a pre-specified length of illness known as a _____________________________.

A

Deferred period

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9
Q

When does the IP policy pay out until?

A

The individual returns to work, dies or reaches the end of their policy

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10
Q

Benefit will be limited to a specified percentage of pre-claim income. This is usually _____% for individual policies or up to _____% for group policies.

A

50-60% for individual policies
75% for group policies

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11
Q

It’s more common to provide cover to age _____ but the max ceasing age for policies is usually around _________________.

A

1) Cover to age 70
2) Around State Retirement Age (SRA)

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12
Q

If the individual selects a lower age, they will have a correspondingly lower ________________.

A

Premium

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13
Q

For limited IP cover, the benefit may last for a short term (_______ years).

A

1-5 years

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14
Q

Cover with a limited term represents a lower cost, lower value option. There may be no further benefit at the end of the term or lump sum may be paid if the customer is still incapacitated for __________________.

A

For short-term benefit periods

Note - A stricter definition of disability may apply/reduced benefits.

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15
Q

What type of policies are designed primarily for the self-employed who have no sick pay arrangements?

A

Day one and back to day one policies.

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16
Q

Day one and back to day one policies usually begin from _________________ and generally pay out ________________ to help cash flow issues.

A

1) The first sick day
2) Weekly

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17
Q

Newer back to day one policies - The benefit isn’t paid until a specified period (i.e. 30 days) of continued sickness has elapsed, but when the policy does pay out, the claim is _____________.

A

The claim is backdated to the first day of illness.

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18
Q

A few policies (mostly legacy) are unit-linked and may provide eventual investment returns for policyholders. These policies are classed as investments and come under ______ not ICOBS.

A

COBS (Conduct of Authority Sourcebook)

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19
Q

Some insurers offer additional unemployment cover as part of their IP proposition. This is usually written as a monthly or annually renewable policy and underwritten by ________________________.

A

A seperate insurance company.

NOTE - Insurers often have a right to discontinue/change the terms of cover as well as the premium rates for these policies.

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20
Q

Some policies having an initial waiting period. What does this mean?

A

The claim cannot be made for a specified number of weeks/months since the inception of the policy.

21
Q

What are the different definitions of incapacity and which one provides the highest level of cover?

-Own occupation:
-Suited occupation:
-Any occupation:

A

Own - Unable to perform ones own occupation and not following any other employment (this provides the highest level of cover).

Suited - Totally unable to follow any occupation to which is suited by reason or education, training or experience.

Any - Totally unable to follow any occupation whatsoever.

22
Q

The most common deferred periods are ____+____ weeks.

A

13 + 26 weeks.

23
Q

The longer the deferred period, the lower the risk for the insurer, why is this?

A

It is more likely for the individual to recover from the illness before a claim begins to be made.

24
Q

Longer deferred policies are cheaper than those with __________________________.

A

Shorter deferred periods.

25
Q

What is a split-deferred period?

A

Individual receives full pay for a number of weeks followed by half pay for a period.

26
Q

What is rehabilitation benefit and why is it good?

A

If in the case that the insured is not ready to go back to work full time after recovery, they have rehabilitation benefit as they will be on a reduced pay.

This is a reduced level of benefit, aiming to top up the new lower earnings. This encourages people to go back to work, even if only part time.

27
Q

What is proportionate benefit?

A

In cases where the insured can’t return to their old job but may get reduced pay in a new job, proportionate benefits offered in policies to encourage claimants to return to work so they are no worse off. ‘Makes up the loss of earnings’.

28
Q

What is the definition of previous earnings?

A

The average earnings for the year or 6 months prior to incapacity.

29
Q

Increase options (for keeping inline with inflation):

1) IP benefits can be given some inflation protection or increased in other ways without the need for medical underwriting such as ___________________________.

2) Where an auto increase is attached to a policy, premiums will increase inline with the increase in _____________.

A

1) Linking cover to an increase in the level of inflation by the RPI or CPI or a measure of earnings inflation; or by a determined percent (%) each year.

2)benefit.

30
Q

Some policies may include guaranteed insurability options, allowing the benefit to increase up to a limit such as ________________…

A

job promotion, marriage, child birth or taking out a new mortgage.

31
Q

Some insurers look to provide practical help as well as money (e.g. offer therapy to help manage stress, provide helpline/counselling, advise on adapting a workplace for disability. What kind of benefit is this?

A

Non-financial benefit.

32
Q

WOP is a feature of IP policies and a form of IP within itself. What does it do?

A

WOP covers the payment of the premiums for the policies which it is connected.

33
Q

WOP rates are often higher. Charges vary on age, occupation etc. typically 2.-5% of the insured premiums. This is continued until ____________________.

A

Return of work, expiry of the policy or an age (usually 60/65).

34
Q

Until what date did most providers offer WOP on personal pension plans?

A

06 April 2001

35
Q

Does the insurer require the insured to notify them of a change in occupation once the policy is in force?

A

No.

36
Q

The definition of incapacity will be based on what?

A

Will be based on the insureds occupation immediately prior to the claim (i.e. if they are to claim during a period of unemployment they may find that the benefit is restricted to the level of a house persons income benefit or depending on the policy, they may receive no payment at all).

37
Q

IP can be issued on a guaranteed basis. What does this mean?

A

Premiums remain constant throughout the life of the contact.

38
Q

IP can be issued on a reviewable basis. What does this mean?

A

The premiums are periodically reviewed in light of the insureds overall claims history.

39
Q

Premiums for guaranteed premiums tend to be much ______________ but the policyholder has the comfort of knowing the premiums wont rise.

A

higher.

40
Q

Reviews on reviewable premiums tend to take place every _________ years.

A

5-10 years.

41
Q

What is a renewable policy?

A

Policies structured over a short-term (e.g. 5 years) with guaranteed renewal at expiry. The insured may renew the contact and the insurer cannot decline but premiums will be revised at renewal in line with the insurers current rates.

42
Q

Are the underwriters for IP looking at Morbidity or Mortality?

A

Morbidity.

43
Q

If the insured is not expected to recover from their incapacity, the insurance company may offer a commuted lump sum rather than continuing to pay the benefit on a regular basis for the rest of the claim period.
True of False?

A

True.

44
Q

Linked periods of illness:

In some cases, an individual may make a claim, recover/return to work and then later on have a relapse or reoccurance of the illness causing them to claim again. In such cases, policies generally allow _______________________.

A

Allow the deferred period to be waived on the SECOND claim.

45
Q

What is foreign residence travel conditions?

A

Benefit is only payable while the insured is permanently resident within areas known as free limits.

46
Q

1)Some employers provide IP for employees. Such policies usually have a higher max benefit (up to _____%).

2)Benefits are then payed to the employer who then pays the employee. Such benefits are_______________.

A

1) 75%

2) taxed as income in the hands of the employee (hence the higher benefit).

47
Q

What is the main advantage of IP?

A

It provides an ongoing income to replace lost earnings during periods of illness.

48
Q

What is the downside of IP?

A

It is difficult for all but the fittest to obtain cover on standard terms and the cost may be prohibitive for those on lower incomes.

49
Q

When selecting a policy, what do you need to take into consideration?

A

-deferred period
-definition of incapacity
-benefit level
-indexation or increased
-guaranteed or reviewable premiums

R05 (4 decks)

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