R05 - Critical Illness Insurance

What is CIC?

Lump sum payment upon diagnosis of a specified illness

High risk to the life office = higher premiums

What is a life cover and CIC policy?

Works as an accelerated death payment

Sum assured is paid to whichever occurs first

What trust would be used for a CIC and life cover policy

A split benefit trust

What is a survival period for CIC?

Typically 14-30 days after diagnosis

What is children’s offer for CIC?

An additional sum is payable on the diagnosis of a critical illness for children

Index linked CIC

The sum assured increases each year in line with inflation or a set percentage

The increase occurs without the need for further medical underwriting

Premiums will increase soon

What is life cover buy back for CIC?

A restricted form of life cover can be taken out without the need for further medical underwriting if the insured survives the critical illness

what is waiver of premium for CIC?

The premims are waived if the policy holder suffers period of unemployment or sickness and is unable to pay

What is total and permanent disability for CIC?

A condition that can be added which allows for benefit payment if the insured’s quality of life is so poor they’re unable to ever return to a normal life again

What is Terminal illness cover for CIC?

Often set up as a rider for term assurance

Benefit is paid if there is a diagnosis that leads to a life expectancy of less than 12 months

Underwriting for CIC

Based on morbidity

most important factor = age, lifestyle, personal and family medical history

Premiums for CIC

can either be guarenteed or reviewable

Claims for CIC

The insured must not mislead the life office or their contract could be terminated

Taxation of personal CIC

No income tax liability

Policies are not subject to CGT

Taxation of group CIC policies

No tax is due at the point of claim

Premiums are treated as a taxable benefit in kind on the employee when paid for by the employer