Chapter 7 - Critical Illness Flashcards Preview

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Flashcards in Chapter 7 - Critical Illness Deck (17)
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How would you define Critical Illness cover?

A long term insurance policy which pays a tax free lump sum on diagnosis of a specified critical illness


Is the payment from a Critical Illness taxable or tax free?

Tax free


Why would it not be recommended for an adviser to re-broke a Critical Illness policy?

As older policies typically covered more illnesses.

With a newer policy there is a risk you will not be covered for something which you were covered for on your old policy.


Name 3 common uses for a Critical Illness policy?

Any 3 of the following;

• Pay off debts – mortgage
• Adaption’s to the home
• Adaption’s to car
• Any other financial commitments that can no longer be met
• Payment of private medical care


When taking out a Life Assurance policy with in built Critical Illness why is it important to use a split trust?

A split trust should be used to split the potential death and critical illness benefits.

If premature death occurs then the death benefit should be paid out in trust (out of the estate and probate) to the beneficiaries.

If a critical illness occurs then the policy should pay out for the use of the insured.


Name 2 options that can be built into a Critical Illness plan

any 2 of the following;

• Children’s cover
• Index linking
• Life cover buy back
• Waiver of premium
• Disability


What is a survival period on a Critical Illness policy?

After diagnosis the insured must survive for a set period of time, typically between 14 and 30 days.


What is children's cover on a Critical Illness policy?

Pays out an additional sum assured if the child of the insured becomes critically ill. Usual max £25k pay out or a % of sum assured.


On a Critical Illness policy what is life cover buy back?

It is for combined policies, allows buy back of life cover after a pay out for CIC as the CI may mean life cover is still needed but not available elsewhere.


What are the 5 definitions of disability on a Critical Illness policy?

o Unable to do ones own occupation ever again
o Unable to do a suited occupation ever again
o Unable to do any occupation ever again
o Unable to do 3 specified work tasks
o Unable to look after oneself ever again


Who is the onus on the prove that a claim is payable?

The policyholder


What are the common exclusions for Critical Illness policies?

• Drugs and alcohol
• Criminal act
• Flying
• Dangerous sports
• AIDS or HIV (unless blood transfusion)
• Self-inflicted
• Failure to follow medical advice
• Pregnancy
• Living abroad (out of the free zone)
• War


Are Critical Illness policies based on morbidity or mortality?



The main underwriting considerations for Critical Illness policies are?

• Age
• Medical history
• History of family
• Lifestyle (drinking, smoking etc)


In respect to Critical Illness policies what is the difference between guaranteed and reviewable premiums?

The premium on a guaranteed policy is the same throughout the term "guaranteed to pay this premium"

A reviewable policy may start out cheaper but could increase at the review point which is typically every 5 years


What is the increase in premiums dependant on for reviewable Critical Illness policies?

It could be dependant on the claims record of the life office, or advances in medical science. Not necessarily the health of the insured.


As a member of a group Critical Illness scheme your employer pays the premiums. How is this taxed?

The premiums are taxed on the employee as a benefit in kind