Chapter 9

Question 1

What are the 2 main types of short term insurance policies? What types of policies fall under these groups

Answer 1

Sickness, accident and unemployment - personal accident and sickness, accident sickness and unemployment, mortgage payment protection insurance, payment protection insurance
Medical treatment - private medical insurance, health cash plans, dental plans

Question 2

What is the difference between IPI and ClC when compared to shorter term insurance policies in terms of renewability?

Answer 2

Shorter term policies are usually annually reviewable by the insurer whereas policies such as IPI are permanent contracts which cannot be cancelled as long as premiums are paid

Question 3

What kind of individuals is PAS aimed at?

Answer 3

Individuals who want to protect themselves against certain types of one-off event, which are not usually covered under other policies
This can include limb and eye loss for example

Question 4

Is PAS cover fixed?

Answer 4

Yes, fixed rather than related to earnings

Question 5

What are the 3 ways PAS benefits can be paid?

Answer 5

Weekly sickness benefit
Lump sum payment
Covering medical expenses

Question 6

Describe the features of PAS as a weekly benefit

Answer 6

Pays usually a fixed amount eg £250 weekly
Short deferred period of 4 weeks
Maximum payment period - benefit could stop after 25,52 or 104 weeks
Max 2 years

Question 7

Describe the features of PAS as a lump sum payment

Answer 7

Paid in cases such as limb loss, death and permanent disablement
Lump sum varies according to event suffered
Laid out in policy document how much paid as well as definitions of each event

Question 8

What events are excluded from PAS coverage? Name 3

Answer 8

Accidents under the influence
Self inflicted injuries
Pre existing conditions
Hazardous activities
Complications from preganancy

Question 9

Is PAS taxed?

Answer 9

Individual - no taxation applied to premiums or proceeds, although premiums paid with income that is already taxed
Employer - likely to be able to offset premiums paid as a business expenses against income or corporation tax
Premiums treated as a benefit in kind for employees
Taxable value added to individuals income tax
Benefits paid tax free still

Question 10

What is accident, sickness and unemployment cover?

Answer 10

Short term form of income protection
Pays an income to an individual if they are sick, disabled or made redundant from employment
Either accident and sickness or all 3 element can be included

Question 11

What is a group ASU policy? What are the benefits?

Answer 11

Group ASU policies can be free to employee, with employer meeting cost of premiums or premiums can be deducted from wages
Even if the premiums are paid by the employee, they will often receive preferential underwriting and discounted premiums due to bulk buying

Question 12

Who is eligible for a group ASU policy? What is excluded from these policies

Answer 12

Individual must be aged between 18 and 64
Employed or self employed
Working minimum 16 hours a week for last 6 months
Pre existing conditions excluded

Question 13

What are the features of the benefits paid by ASU?

Answer 13

Capped at 75% of earnings or maximum monthly benefit amount
Not paid for initial deferred period usually 60 days
Paid for maximum of 2 years
Lump sum benefit for events such as limb loss

Question 15

What events can group ASU policies often be restricted to?

Answer 15

Accidents in the work place

Question 16

How is ASU treated in relation to tax?

Answer 16

Benefits always paid tax free
Individual ASU - no taxation in premiums
Group ASU - treated as benefit in kind for employees

Question 17

What is mortgage payment protection insurance?

Answer 17

Similar to ASU ie short term form of income protection but the benefit is instead linked to an individual’s mortgage and mortgage related costs

Question 18

Who is eligible for MPPI?
What is excluded?

Answer 18

Aged between 18 and 64
Employed or self employed for at least 6 months
Minimum of 16 hours a week
Must have a mortgage on a property in UK, Channel Islands or Isle of Man and resided here
Pre existing conditions excluded

Question 19

What are the features of the benefits paid for MPPI?

Answer 19

Up to 125% of mortgage and associated costs if individual is unable to work due to accident, sickness or unemployment
Deferred period between 30 and 180 days the monthly benefit payments made
Paid maximum of 2 years but often only 12 or 18 months

Question 20

What things class as mortgage related costs?

Answer 20

Utility bills
B&C insurance
Endowment premiums
Council tax payments
Any other property associated bills

Question 21

How is MPPI taxed?

Answer 21

Premiums - premiums will not benefit from tax relief
Proceeds - paid to the individual tax-free

Question 22

How long must a lender wait before advising a borrower to take out MPPI?

Answer 22

Minimum of 7 days after mortgage interview

Question 23

What is payment protection insurance?

Answer 23

Protects loan repayments for an individual that is unable to work due to accident, sickness or unemployment

Question 24

What benefit does PPI pay?

Answer 24

Loan payments paid for by the insurer if individual unable to work due to accident, sickness or unemployment
Usually loan repaid by the insurer if the individual dies

Question 25

How is PPI taxed?

Answer 25

Premiums do not qualify for tax relief and benefits paid tax free

Question 26

What is private medical insurance?

Answer 26

Provides financial help with the costs of private medical treatment An indemnity policy - insured can only claim up to the value of of costs of any private treatment

Question 27

What kind of medical conditions is PMI geared towards?

Answer 27

Short term and acute conditions

Question 28

What are the 4 principles the ABI created for selling PMI

Answer 28

1 - ABI common definitions must be used in all policy documents 2 - Customers should get all the information contained in the ABI statement 3 - Core terms and conditions must be fully explained, as appropriate to customers circumstances. Must be clear which conditions are covered, what the claims process is and underwriting tools must be explained 4 - Customers must received specific information usually at point of sale

Question 29

How is cancer treated by PMI?

Answer 29

Advances in technology have lead to many more treatments Rises in costs mean insurers limit maximum payment for cancer treatment or exclude cancer cover completely

Question 30

What are the 3 types or PMI?

Answer 30

Basic - low-cost with no extra benefit, out patient costs usually excluded and annual cover capped Mid-range - Greater range of costs covered but usually still a cap on amount covered Comprehensive- Highest premiums but best range of cover and additional treatments, some alternative therapies also covered

Question 31

How can PMI be set up?

Answer 31

Single policy Joint policy Single parent and dependent children Family policy Private or employer sponsored

Question 32

How are private policies underwritten?

Answer 32

Either fully underwritten or subject to a moratorium

Question 33

How are claims for conditions related to HIV/AIDS treated by PMI?

Answer 33

Usually a standard exclusion If such conditions picked up through work related duties for member of emergency services or through UK blood transfusion, may pay out

Question 34

How are the benefits paid for PMI?

Answer 34

Paid direct to the treatment provide

Question 35

What is meant by an excess?

Answer 35

Individual pays first £x of cover but the insurer pays the rest

Question 36

What is the claims process for PMI?

Answer 36

Most claims require an initial GP referral unless emergency treatment leads to private treatment referral Insurer must be notified ASAP Insurer will then send out forms for completion by the policy holder which involve providing evidence of treatment and costs Sometime moratorium underwriting will apply

Question 37

What impact does a PMI claim have on premiums?

Answer 37

PMI renewable annually Thus any claim will increase premiums for the next year of cover if renewed

Question 38

How is PMI taxed?

Answer 38

Individual- premiums do not qualify for tax relief Employer - premiums paid by employer treated as benefit in kind for employee Benefits paid tax-free direct to care provider

Question 39

What is a health cash plan and what features does it have?

Answer 39

Pay out a certain amount for each night an individual spends in hospital No claims can be made in first 6 month Pre-existing conditions excluded for first 2 years

Question 40

What benefits are paid by health cash plans?

Answer 40

A cash sum such as £50 will be paid for each night spent in hospital Annual cap usually in place

Question 41

How are health cash plans taxed?

Answer 41

Premiums do not qualify for tax relief and benefits are paid tax free

Question 42

How are health cash plans usually marketed?

Answer 42

As a compliment to standard PMI policies