Income Protection Flashcards
(23 cards)
What is a back to day one policy
One that doesn’t pay out until a certain time has lapsed but back dates to the day of the illness when it starts.
How can IP be made cheaper?
Setting a short-term rather than a full one.
What is pure protection?
One that doesn’t build up cash value.
What is investment-linked cover?
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.
What are Holloway policies?
Policies sold by friendly societies (tax free) for self-employed to build up cash for retirement.
RDR exempt provided certain rules are met.
What percentage of policies sold are Holloway policies?
10%
How much is ADL usually limited to?
£10000 per annum
What are the main deferred periods?
4, 8, 13, 26, 52, 104
How much sick pay do teachers get?
6 months full then 6 months half
What might a typical policy restrict maximum benefits to?
A percentage of pre-disabilty earnings, less any standard disability benefit.
Or
Percentage on a first tranch of income, then progressively lower.
What are the two risks an underwriter will split their risks into?
Physical hazards
Moral hazards - over insuring, taking out cover in poor health
What are the levels for occupation underwriting?
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
How long is smoking usually considered?
12 months
What are 4 of the main bells and whistles for IP?
Waiver of premium
Auromatic increase option
Discounted gym membership
Other ancillary benefits.
What is automatic increase? Increasing income protection
Opinion to increase
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.
What are 6 exclusions that could lead to refusal?
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.
Describe proportionate benefit?
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.
Describe rehabilitation benefit
Where the claimant goes back to work in their own job bit at a lower pay this makes up the difference.
How does tax work on individual IP policies
No tax relief on premiums, but benefits are tax-free.
Who do group IP policies belong to?
An employer. They receive claim costs and pay it back to the employees as a form of continuing pay.
What is free cover?
The amount that can be insured without medical underwriting for group IP policies.
What is the second difference between group and individual IP.
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.
What should be remembered about IP and state benefits?
Employment support allowance will be taken into account regarding setting max IP
PIP/DLA don’t affect IP
