7: Critical Illness Pt. 1 Flashcards
(38 cards)
What type of payment does CIC provide after a critical illness diagnosis?
A cash lump sum payment.
What type of CIC coverage provides payments based on disease progression?
Severity-based cover.
CIC can pay out for medical treatment. Give some examples.
Aorta surgery, heart valve replacement, and organ transplants.
What is meant by severity-based cover in CIC?
Paying a percentage of the sum insured depending on the severity of the illness/chance of death i.e., 10% if less serious, and 50-100% for more serious.
What did the Association of British Insurers (ABI) do in 1999 to ensure level consistency between providers offering CIC?
Set out guidance to help consumers choose and compare products more easily, for example requiring that key features for each product contained an alphabetical list of conditions covered.
ABI Statement of Best Practice included a standardised set of definitions for what?
Core conditions (however not all insurers actually follow this).
List the 3 minimum standards set by ABI when marketing CIC.
- Common format in the way it is described to buyers
- Common generic terms (the use of)
- Model wordings for critical illness and exclusions that meet minimum standards.
Critical illness cover is not recommended for paying off a mortgage. True of false.
False, it’s many people’s main concern.
Critical illness and income protection cover can be sold together to compliment each other. True or false.
True, they can meet different needs. CIC should not be used as replacement for “income” whereas income protection should.
What is a cheaper alternative to a CIC policy providing a lump sum pay out?
CIC that pays regular instalments (much like a family income policy)
Why are premiums higher and underwriting stricter on CIC policies?
Higher risk to insurer
What are the typical terms for CIC?
20, 25, and 30 years
Whole of life term exists within CIC. True of false?
True - although not many around these days
How is an accelerated death payment achieved through CIC?
Adding it to a life policy (i.e., life and CIC)
On a life with CIC policy, can it pay out on both critical illness, and then later when the policyholder dies?
No, if CIC is claimed and paid out, there will be no further payment on death. Unless the policy has a buy-back option.
What is a buy back option in a life with CIC policy?
If a client survives 2 years after a CIC claim is paid out, they may have the option to buy back the life cover element so that a payment is made upon death too. Without buy back, the death element would not be paid where CIC has.
How does a split benefit discretionary trust work within a life with CIC policy?
Where you put the death lump sum in trust for your beneficiaries, and the CIC benefit can be held in trust for the policyholder.
Why is it not recommended to put a standalone CIC policy in trust?
Putting a CIC policy in trust can make it difficult for the policyholder to access the benefits if they become critically ill, as the trustees may need to make decisions that are not aligned with the policyholder’s needs. This could be a lengthy process.
Will a standalone CIC policy pay out in the immediate death of the policyholder, i.e., a heart attack?
No - CIC suggests that the policyholder will not only suffer a critical illness, but survive it too.
Different CIC policies require different survival periods, usually how long?
14-30 days
Survival periods are relevant to which type of CIC policies and why?
Standalone - because life with CIC will pay out on death too, if survived after a period of time of CI pay-out.
How does children’s cover work with a CIC policy?
Covers also the critical illness of a child of the policyholder, usually a set amount of £25,000 for example.
How are claims typically limited on CIC with child cover?
Usually two claims per policy, and one per child.
Why might a CIC policy be decreasing in term?
To pay of a debt that is decreasing in time through normal repayments
