Topic 18: Types of financial protection II Flashcards
Types of financial protection II (56 cards)
What are rider benefits on life assurance, CIC or IPI plans?
Rider benefits are optional or automatic additional features that increase cover on a protection plan, often for an extra cost, making it more suitable than taking out a new policy when circumstances change.
What is Waiver of Premium (WoP) and why is it useful?
WoP ensures policy premiums are maintained if the insured cannot work due to accident, illness, or disability, preserving benefits when income may fall. It typically raises premiums by 4–6%.
Who benefits most from Waiver of Premium (WoP)?
It particularly appeals to the self-employed and employees whose sickness benefits are limited.
What is Terminal Illness Cover?
It allows an accelerated payment of the death benefit on a life or IPI policy when the insured has a life expectancy of under 12 months.
What does Accidental Death Benefit provide?
It pays a multiple of the sum assured if death results from an accident.
What is Total and Permanent Disability Cover?
It provides an accelerated payment of the death benefit if the insured becomes permanently incapacitated and unable to work.
What are Guaranteed Insurability Options?
They allow the sum assured to be increased without medical underwriting, either at set points in the plan or following life events like marriage, a mortgage, or childbirth.
What is Life Changes Benefit?
It lets customers increase their life policy’s sum assured without further underwriting after significant life events (e.g., divorce, moving house, having a child), typically up to 100% of the existing sum assured.
What is a Replacement Benefit in joint life policies?
It allows the surviving policyholder to start a new single policy without further underwriting after the death of the other policyholder.
What is a Separation Benefit in joint policies?
It allows a joint life or CIC policy to be split into two single policies if a couple separates, subject to new terms and conditions.
What is Employee Protection?
It includes workplace pensions and group benefits like life assurance, CIC, or IPI to provide income or a lump sum if employees can’t work or die while employed.
What is a Death-in-Service Benefit?
A group scheme that pays a multiple of an employee’s salary to their family if they die while employed.
What is a Relevant Life Policy?
A tax-efficient alternative to death-in-service benefits for employers.
What are the advantages of group schemes for businesses?
They reduce long-term absences, promote workplace wellbeing, and premiums usually qualify as an allowable business expense for tax purposes.
What additional support might workplace group schemes provide?
Wellbeing services such as health promotion, mental health training, physiotherapy, stress management, and return-to-work support.
What is Buildings Insurance?
It covers a building and its fixtures (e.g., fitted kitchens, wardrobes, windows) against risks like fire, storm, flood, theft, and accidental damage, typically renewed annually.
Why do lenders require buildings insurance?
Because the property is the main security for a mortgage, and damage could reduce its value.
What additional features do buildings insurance policies often include?
Cover for alternative accommodation during major repairs and architects’/surveyors’ fees.
What is an excess in buildings insurance?
A fixed amount the policyholder must pay towards a claim, usually £50 for minor claims and up to £1,000+ for subsidence claims.
What are common exclusions in buildings insurance?
Damage when unfurnished, theft if unsecured, damage to heating from wear and tear, and damage to gates/fences from falling trees.
What does public liability insurance typically cover in a buildings policy?
It covers the owner’s legal liability to others, often up to about £5m, and usually extends to the owner, their family, or their personal representatives if a claim arises after their death.
Why do insurers set a standard upper level of cover for buildings policies?
To provide a maximum level of cover (e.g., £500,000) regardless of the property’s reinstatement cost, though higher-value or unusual properties may require specific sums assured.
What happens if a property is underinsured?
The insurer will reduce any claim payment proportionally to the level of underinsurance, a process known as averaging.
Can a borrower choose their own insurer for a mortgaged property?
Yes, but the lender can require the policy to meet its minimum standards and be with a reputable insurer, typically an ABI member.
