Income Protection

Question 1

What is a back to day one policy

Answer 1

One that doesn’t pay out until a certain time has lapsed but back dates to the day of the illness when it starts.

Question 2

How can IP be made cheaper?

Answer 2

Setting a short-term rather than a full one.

Question 3

What is pure protection?

Answer 3

One that doesn’t build up cash value.

Question 4

What is investment-linked cover?

Answer 4

A rare legacy policy where part of each premium goes into a pot to cover more expensive premiums later.

Comes under RDR regime so no commision.

Question 5

What are Holloway policies?

Answer 5

Policies sold by friendly societies (tax free) for self-employed to build up cash for retirement.

RDR exempt provided certain rules are met.

Question 6

What percentage of policies sold are Holloway policies?

Answer 6

10%

Question 7

How much is ADL usually limited to?

Answer 7

£10000 per annum

Question 8

What are the main deferred periods?

Answer 8

4, 8, 13, 26, 52, 104

Question 9

How much sick pay do teachers get?

Answer 9

6 months full then 6 months half

Question 10

What might a typical policy restrict maximum benefits to?

Answer 10

A percentage of pre-disabilty earnings, less any standard disability benefit.

Or

Percentage on a first tranch of income, then progressively lower.

Question 11

What are the two risks an underwriter will split their risks into?

Answer 11

Physical hazards

Moral hazards - over insuring, taking out cover in poor health

Question 12

What are the levels for occupation underwriting?

Answer 12

1 white collar, managerial, or office types
2 skilled workers in light manual work, no machinery.
3 skilled workers engaging in non-hazardous but manual work
4 heavy manual work and skilled workers in hazardous manual roles
5 unclassified - too dandlgerous to insure

Question 13

How long is smoking usually considered?

Answer 13

12 months

Question 14

What are 4 of the main bells and whistles for IP?

Answer 14

Waiver of premium
Auromatic increase option
Discounted gym membership
Other ancillary benefits.

Question 15

What is automatic increase? Increasing income protection
Opinion to increase

Answer 15

Increases automatically by a set amount or index linked to inflation.
Premiums also increase.
Can be declined, but if 2 years in a row, it might be removed.

Question 16

What are 6 exclusions that could lead to refusal?

Answer 16

Self-inflicted injury
Engaging in illegal activity
Complications of pregnancy
HIV/AIDS unless contracted through work.
Drug alcohol misuse
Failing to take the advice of a doctor.

Question 17

Describe proportionate benefit?

Answer 17

Pays out a proportionate amount to bring wages up to pre-injury amount where a claimant goes back to work in a less well-paid role. Incetivising work.

Question 18

Describe rehabilitation benefit

Answer 18

Where the claimant goes back to work in their own job bit at a lower pay this makes up the difference.

Question 19

How does tax work on individual IP policies

Answer 19

No tax relief on premiums, but benefits are tax-free.

Question 20

Who do group IP policies belong to?

Answer 20

An employer. They receive claim costs and pay it back to the employees as a form of continuing pay.

Question 21

What is free cover?

Answer 21

The amount that can be insured without medical underwriting for group IP policies.

Question 22

What is the second difference between group and individual IP.

Answer 22

Group polices are an allowable expense for the employers corporation tax.

When benefits are received, they are a taxable trading expense, but when paid, they also pay income tax and national insurance

Because of this group, IP allows potential 75% of previous income.

Question 23

What should be remembered about IP and state benefits?

Answer 23

Employment support allowance will be taken into account regarding setting max IP

PIP/DLA don’t affect IP