Protection

Question 1

Benefits of Nick accepting employer PMI (5)

Answer 1

• fast track NHS waiting lists
• return to work quicker
• choice of treatment times and locations
• private room
• likely to be minimal underwriting
• provider takes care of payments / admin
• maybe able to provide for Jane
• costly for him to go to open market
• may not get cover in open market due to smoker / family health

Question 2

Drawbacks of nick accepting employer PMI (5)

Answer 2

• only covers accurate illnesses / not chronic
• excess maybe payable
• some conditions may not be covered
• will incur a tax charge as p11d benefit
• cover may cease when he leaves employment

Question 3

Benefits to Nick of employer PMI (5)

Answer 3

• fast track nhs waiting lists
• private room available
• minimal underwriting
• provider takes care of most payments/admin
• may also cover Jane

Question 4

Drawbacks for Nick of employer PMI (5)

Answer 4

• only cover acute illnesses (not chronic)
• excess maybe payable on claim
• some conditions excluded
• will incur a tax charge as a P11D benefit
• cover may cease when leaving employment

Question 5

Explain why Jane should take ASU over IPI (12)

Answer 5

• ASU is cheaper than IPI
• less likely a claim will be paid (1) but it is a Less rigorous underwriting.
• although it will only pay out once (1)
• it will provide cover for you to two years
• and Jane plans to retire in less than 4 years
• although jo proportionate benefit
• can pay out alongside employer sick pay
• with no reductions (unlike IPI)
• ASU covers redundancy (unlike IPI)
• helping ensure they can retire when Jane reaches 60

Question 6

Comment briefly on N and J’s current protection arrangement and identify any weaknesses (12)

Answer 6

JANE:

• Jane is main earner but has no IPI
• no nomination form on SIPP
• she has 3 x DIS
• she has no CIC which would cover income between now and 60

NICK

• 4x dis at new employer covering income until Jane is 60
• he will have IPI
• can chose CIC
• has the option of PMI which should be considered given his family health
• unclear what level of cover is available with PMI
• or if Jane can be covered
• will lose DIS and IPI if he ceases work
• IPI, PMI, CIC are P11D benefits and so taxed
• minimal state benefits
• private PMI maybe expensive given Paul’s smoker status and family history