Learning Objective 7

Question 1

What is critical illness protection?

Answer 1

Long term insurance to pass on a lump sum after a diagnosis of a listed critical illness.

Question 2

How is the CI lump sum taxed?

Answer 2

Tax free

Question 3

What is the need for CI protection?

Answer 3

Lump sum benefit to pay off debts/mortgage, to adapt the home or to pay for private medical insurance

Question 4

What is the difference between a stand alone CI policy, and a combined policy with life cover?

Answer 4

• Stand alone - You need to survive the illness and beyond a specific survival period to receive the benefit
• Combined - You do not need to survive at all to receive the benefit

Question 5

CI in Trust

What is the benefit of placing the policy in trust?

Answer 5

If combined with life - The death benefit does not fall part of your estate and will be paid out to the policy holder

Can use either a split benefit trust (combined policies) or a carve out trust

Question 6

What is buyback cover?

Answer 6

• You are able to buyback life cover in the even of a CI claim.
• Only on combined policies
• No further u/w

Question 7

Reinstatement of cover

Answer 7

• Allows a joint policy to be split and reinstated in sole names
• used in divorce or separation
• No further u/w

Question 8

Total and Permanent disability

Answer 8

• ‘Catch all condition’
• When life condition is so poor that insurer pays out even if not a listed condition

Question 9

Terminal Illness Cover

Answer 9

• Won’t pay out in last 12-18 months of cover
• Must have less than 12 months to live in diagnosis

Question 10

How is critical illness underwritten?

Answer 10

Looks at morbidity and family history for hereditary diseases