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R05 > MOD 7 - R05 > Flashcards

MOD 7 - R05 Flashcards

1
Q

Someone under 65 is how many more times likely to suffer from a critical illness than die?

A

5x more likely

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2
Q

CIC policies may also pay out if the insured has a particular medical treatment (i.e. aorta surgery or a heart replacement) or goes on a waiting list for certain types of procedures. True or False?

A

True.

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3
Q

Sometimes a __________________ SA may be payable for some CIC illnesses (e.g. cancer where the chance of death is low); otherwise payment may depend on the severity of the condition.

A

Reduced SA

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4
Q

What does ABI stand for?

A

Association of British Insurers

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5
Q

Why was the ABI introduced?

A

The ABI was introduced in attempt to bring some level of consistency (i.e. requiring that the key features for each product contains an alphabetical list of conditions covered).

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6
Q

For most people, in the event of CI, what is their main concern?

A

Paying off their mortgage

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7
Q

Many offices offer CIC with no life cover, what is this called?

A

Stand-alone CIC

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8
Q

Stand-alone policies can be guaranteed or reviewable. They are often written as a __________________ plan.

A

Unit-linked plan

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9
Q

Some offices have policies that pay regular instalments of capital rather than lump sum (like a family income policy). Is this often cheaper or more expensive than a lumpsum policy?

A

Cheaper

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10
Q

CIC policies can have a limited term or be _______.

A

WOL.

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11
Q

Because CIC has a higher risk to the life office, premiums are _____________ than those for basic life cover and underwriting may be_______________.

A

1) Higher
2) Stricter

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12
Q

If CIC is added to a life policy, it is usually an ‘accelerated death paymnet’ made during life. This is an _________ not an ________ to the death SA.

A

1) Alternative
2) Not an addition

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13
Q

When is the SA payable for CIC when added to a life policy?

A

Payable on death or diagnosis of a CI, whichever occurs first.

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14
Q

When CIC is added to a life policy and there is a CIC payout, will there be a further payment on subsequent death?

A

No.

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15
Q

CIC that is added to life policies can sometimes have a facility for the client to buy back lost life cover if they survive how many years from the date of the CIC claim?

A

Two years

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16
Q

Where CIC is added to a Unit-Linked policy, the morbidity risk premiums are usually paid for by what?

A

Cancellation of units in the same way as mortality costs.

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17
Q

Where there is a SA to be paid on death as well as CIC, it is possible to write the policy under a special type of trust. What is this called?

A

Split Benefit Trust.

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18
Q

Under what types of trusts used for life insurance will the Settlor (insured person) usually not be a beneficiary under the trust?

A

Conventional, flexible or discretionary trust.

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19
Q

Under a life insurance contract that also includes CIC benefit what is the aim?

A

The insured person to benefit if they suffer from a CI and for their beneficiaries to benefit if they die.

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20
Q

Should CIC policies be written under trust if it is not combined with life?

A

No.

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21
Q

What is a survival period?

A

CIC is designed to payout on the diagnosis and survival of CI unless attached to life cover, the condition resulting in the immediate death of the insured (i.e. heart attack) will not result in the policy paying out.

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22
Q

How long are usual survival periods?

A

14-30 days. If the client dies before this, no SA will be paid.

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23
Q

What is children’s cover?

A

Offers an additional SA payable on the diagnosis of CI in the child of the policyholder.

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24
Q

Children’s cover is a under-writing free added value extra and generally pays out either….?

A

A set amount or percentage of the SA.

Note - this usually has a limit per claims.

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25
Q

Index-linking allows the SA to be ______________ each year either as a set percentage or inline with inflation without the need for further underwriting.

A

Increased

26
Q

What is life cover buy back?

A

Where CIC is sold with life cover on a first claim basis, once the insured suffers a CI, the policy pays out and cover ceases. It’s possible that a need for more life cover may remain and having suffered a CI it may be impossible to obtain this. The buy back options allow a restricted form of life cover to be taken out without the need for further medical underwriting.

27
Q

WOP allows for premiums to be waived or treated as paid should the policyholder suffer a prolonged period of sickness (or unemployment). Generally a deferred period of say ______________ applies and once this period has passed, the policyholder will not be expected to pay premiums and cover will continue until: claim, policy ends or return back to health.

A

26 weeks

28
Q

Where the policy is set up on a joint life basis, some insurers allow for the policy to be split in the event of __________.

A

Seperation/divorce.

29
Q

For the policy to be split is there a need for further underwriting from either party?

A

No.

30
Q

Under some joint policies where one party makes a claim, the other joint insured is allowed to take a new single life policy. Do they need to provide further medical evidence for this?

A

No.

31
Q

What is total and permanent disability?

A

This is effectively a ‘catch all’ for a condition where, although not specifically covered by the policy conditions the standard of the insureds life is so poor that they are unable to ever live a ‘normal’ life again.

32
Q

How many definitions for total and permanent disability can the insured choose between?

A

1 or more of 5 possible definitions.

33
Q

What is Terminal Illness cover?

A

SA to be paid out to the insured where medical evidence acceptable to the insurer points to an incurable and deteriorating condition giving a life expectancy of less than 12 months.

34
Q

Terminal Illness (TI) cover allows for the insured to have cash available in the last months of life. What is this cash used for?

A

Ease suffering or provide for personal goals to be accomplished.

35
Q

TI benefit is NOT usually paid out in the last _____ months of a policy.

A

18 months.

36
Q

What kind of trust may be used to pay the terminal illness benefit on diagnosis to the life assured and to other beneficiaries on death?

A

Split trusts.

37
Q

Where the policy is in trust (not split) who has the ownership of the policy?

A

Trustees.

38
Q

Many policies cover most or all of what conditions?

A

-Alzheimer’s
-Aorta Surgery
-Benign brain tumour
-permanent blindness
-cancer
-coma
-cornory by-pass
-permanent deafness
-heart attack
…Continued in Chapter 7 of R05 book

39
Q

Certain events are excluded from cover to prevent claims being made where the condition is brought by either the individuals own doing or a situation which the individual could have been expected to prevent. What is this called and what are examples of this?

A

Called common exclusions.

Examples:
alcohol/drug abuse, taking part in a criminal act, flying other than as a passenger, engaging in dangerous hobbies (like boxing), aids or HIV, living abroad, intentional self-inflicted injury etc.

40
Q

Previous medical history is an important factor for premiums and underwriting. Once a policy has been issued, will its illness definition continue for the life of that policy?

A

Yes.

41
Q

What exactly are the 4 main factors for the underwriters?

A

-age
-medical history of the insured
-medical history of the insureds family
-lifestyle factors (alcohol consumption or smoking).

42
Q

CIC can either be issued on a ____________ basis (where premiums remain the same throughout the life of the contract) or on a ____________ basis (where premiums are periodically reviews in light of the insureds overall claims).

A

1) Guaranteed
2) Reviewable

43
Q

Guaranteed premiums are almost _____ times the cost of reviewable premiums at the outset?

A

Two times.

44
Q

How often are reviewable premiums reviewed?

A

Every 5-10 years?

45
Q

Who’s responsibility is it to prove a claim?

A

Policyholder

46
Q

To combat the risk of claims being repudiated, the consumer Ins Disclosure and Representation Act ______ sets out two forms of ‘qualifying misrepresentation’.

A

2012

47
Q

Where the qualifying misrepresentation was deliberate or reckless (i.e. the consumer knew or did not care that the info was relevant to the insurer). The insurer may…?

A

The insurer may void the contact (they will not payout a claim and may retain premiums).

48
Q

Where the qualifying misrepresentation was simply careless, a range of possible remedies is also available to the insurer depending on what would have happened had the consumer made full disclosure. If the insurer would not have been willing to enter the contact, they are allowed to…?

If the insurer would have accepted the risk but on different terms, they can…?

Where the insured would be charging a higher premium, any claim on the policy can be _________________ proportionately.

A

1) Void the policy and refuse all past and future claims, but it MUST return the premium.

2) Treat the policy as if those terms applied.

3) Reduced.

49
Q

Employers can take out group CIC for their employees. This can be either _____________ or a multiple of their ______________. When will this cover cease?

A

1)Fixed
2)Salary
3)Cover will cease on leaving or retirement.

50
Q

A number of schemes allow an employee to arrange cover on the life of their spouse and/or partner and include ______________ cover.

A

Include children’s cover

51
Q

Group schemes have _______ underwriting. Claims are usually only paid if the employee survives ________ days after diagnosis.

A

1) Less
2) 30 days

52
Q

These policies are more expensive than group life and therefore the level of cover also tends to be _____________.

A

Lower.

53
Q

What is the benefit of CIC to the employer?

A

It is seen as a ‘high added value’ benefit by employees while at the same is relatively inexpensive.

54
Q

There is NO income tax liability on payment of the SA, even if the insured is a ______________ rate tax payer.

A

Higher

55
Q

What are policies not subject to?

A

Capital Gains Tax

56
Q

In group policies, payment is usually made direct to the employee and no tax is due at the point of claim. Where the premium is paid by the employer, it is taxable as a _______________________ on the employee.

A

Benefit in kind.

57
Q

What are the adviser considerations?

A

-it’s not cheap
-may not be suitable
-someone with previous health issues may find it hard to obtain cover at all

58
Q

CIC and IP are complimentary policies rather than alternatives. CIC provides lump sum on diagnosis of CI and IP provides _____________ after a deferred period if the insured person is unable to work due to incapacity.

A

Income

59
Q

What is likely to be a higher priority, CIC or IP? And why?

A

IP as it will likely cover more conditions.

60
Q

What should you consider when selecting a policy?

A

-policy options (WOP, indexation, children’s cover)
-definition of survival when there is a survival period
-joint/single life, stand alone (combined?)
-guaranteed/reviewable
-total and permanent disabilities
-claim paying history of the insurer in question

R05 (4 decks)

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