CIC overview - severity based cover - sum assured, illnesses covered and why introduced, CIC can pay out for what
Min standard for CIC sets out;
- description, generic and wordings
Stand-alone CIC;
- premiums, reg instalments, prems compared to life cover and term
- Policies can pay out smaller sum assured for some illnesses e.g. cancer. Known as severity based cover.
- severity based cover covers more illnesses but pays pre-specified portion of sum assured on diagnosis and can then progress e.g. cancer
- these were introduced to meet consumer changing needs and advances in medicine/medical practice
- can pay out for particular medical treatment.
Minimum standards for CIC sets out;
- common format for the way CIC is described to buyers
- use of common generic terms
- use of model wordings for critical illnesses and exclusions.
Stand-alone CIC;
- can be guaranteed or reviewable
- some can pay regular instalments rather than lump sum (cheaper prems)
- premiums higher than life cover due to higher risk
- limited term or WOL
CIC + Life - payout and buyback
Children’s cover - what is it, free, pays out and limit
Life cover buy back - what is it
If CIC payout, then no life payment on death. Can buy this back if they survive for a certain amount of time.
Children’s cover - add sum assured for diagnosis of CI for child
- underwriting free added value
- pays out set amount or %
- usually has limit of two per policy and one per child
Life cover buy back allows for restricted form of life cover without need for additional underwriting.
Total permanent disability - four definitions insurers must follow
Insurers must follow one or more of the following definitions;
- unable to do own occupation
- unable to suited occupation
- unable to three specific work tasks ever (walking, climbing, writing etc)
- unable to look after oneself again
Premiums and underwriting - illness definition, important factors (4) and cost of premiums
Claims;
- careless misrep - void and alter
- Once policy is issued, illness definition will continue
- important factors include age, medical history, family medical history and lifestyle factors.
- cost of guaranteed premiums higher than reviewable for obvious reasons
Claims;
- if misrepresentation on application is careless then life office can take proportionate response;
- if wouldn’t have entered contract, can void it but must return premiums
- if would, they can alter contract (prem or sum assured)
Group policies- level of cover, ceases, spouse/child, cover and underwriting, survival period and costs for employer
- cover can be fixed or multiple of salary
- cease on leaving o retirement
- can allow to arrange cover for spouse or children
- illnesses covered are same as usual but reduced underwriting
- paid if employee survives 30 days after diagnosis
- high cost for employer therefore cover lower than for life
Benefits to employee;
- reduced underwriting makes it more accessible
- employee valued
- access to valuable benefit
Benefit to employer;
- relatively inexpensive part of employees package
- reduces strain of financial responsibility if claim
Taxation - employer
Drawbacks - price, cover and history
CIC vs IP;
- what covers more conditions, deferred period and mortgage + salary
- where premium paid by employer, taxable as benefit in kind.
Drawbacks;
- CIC expensive
- cover may not be sufficient despite core list
- those with previous health issues may find it hard to obtain cover
CIC vs IP;
- IP covers more conditions therefore higher priority
- IP has deferred period meaning delay on payment whereas only survival time for CIC
- as CIC can pay off mortgage, this means lower salary may be adequate
Must consider the following when selecting a policy;
- need over, total & perm, inclusions on policy, survival, basis and premium
Must consider following factors;
- is CIC needed over IP
- which total & perm disability cover option applies
- Is there children’s cover, WOP, guaranteed or indexation?
- survival period
- what basis should it be set up
- guaranteed or reviewable
