7: Critical Illness Pt. 2 Flashcards
(30 cards)
The Association of British Insurers requires that all critical illness policies will cover which three conditions?
Cancer
Heart attack
Stroke
What is an ABI+ definition of a condition?
“Better” cover for CIC, but hard to prove/define.
What is severity-based cover?
Pays out an amount based on the severity of the condition.
For example, 10% of the sum insured may be paid if the condition is less serious, rising to 50% or 100% for the most severe conditions.
In which circumstances could it be possible to make more than one claim on your CIC policy?
If you have severity-based cover and were only paid a portion of the sum assured on a claim. A further claim could be made if the illness is progressive.
If you have children’s cover, you can usually claim for each child (if specified at policy inset), but not more than once per child.
Whose responsibility is it to prove that a CIC claim is payable?
Policyholder
Some offices allow additional illnesses to CIC cover. True of false?
True, however most do not!
Living abroad (outside EU), for how long, will void a CIC claim on a policy set up in the UK?
More than 13 consecutive weeks in 12 months
Conditions arising from war or civil commotion are included on CIC policies. True or false?
False.
What are the 4 most important factors to consider when underwriting a CIC policy?
- Age
- Medical history
- Medical history (family)
- Lifestyle (smoking, alcohol, weight etc.)
Premiums on CIC policies are based on morbidity or mortality statistics?
Morbidity
Once a CIC policy has issued, can its illness definition be amended?
No
What are the indexation options on CIC premiums?
Guaranteed or reviewable
How often are reviewable CIC premiums actually reviewed?
5 or 10 years approx.
Which type of premium with CIC is highest
Guaranteed.
A CIC policy pays out a lump sum when a critical illness is diagnosed, subject to what?
Survival period, where there is one.
What is meant by “underwritten twice” with CIC policies?
The policyholder has to prove their claim, so you could argue it’s underwritten at both onset, and at claim stage.
Who publishes industry figures for individual and group policies?
Association of British Insurers and Group Risk Development
Which act sets out the two forms of ‘qualifying misrepresentation’, what are they, and why?
Consumer Insurance (Disclosure and Representations) Act 2012.
- Qualifying misrepresentation was deliberate/reckless. Claim likely to be voided, and premiums not returned.
- Qualifying misrepresentation was carless. Claim could be voided but likely premiums are returned.
These are in place to combat the risk of a claim being repudiated/rejected.
Employers who offer group policies can allow employees to arrange cover for their spouse and/or children. True or false.
True, some do.
Which has stricter underwriting, single life CIC, or group CIC?
Single life. Would be far too complicated to underwrite a number of employees in a group scheme so they don’t go into too much detail and offer/sell it as more of an employee benefit.
CIC claims on group policies are usually only paid out if the employee survives for how long after diagnosis?
30 days
What is the taxation status on CIC claim pay-outs?
Not a chargeable gain, not liable to CGT, no income tax.
However, could be liable to IHT if the claim is left unspent and in the policyholders estate still at death (i.e., they claimed, lived a little, didn’t get time to spend it all, then died).
If no CIC was claimed and it’s attached to a life policy then the whole things goes into trust and escapes the estate for IHT.
In group CIC policies, who receives the pay-out upon making a claim, and what is the taxation status?
Employee normally receives it, and it is tax-free
Where the employer pays the premiums on group CIC cover, what is the taxation treatment on that premium?
Taxed as a benefit in kind on the employee
