Income Replacement in Sickness and

Transcription

1 Income Replacement in Sickness and Death Brian Allen ACII. DMU,AMS, Head of Underwriting Zurich life 1

2 Agenda How do you replace income in Death individual and companies How do you replace income in Sickness Group benefits 2

3 Income replacement on Death Individual Life Cover Multiple of Salary is main guideline We must establish is the sum insured is reasonable in view of the client s circumstances. AGE Multiple of salary rule times times times times times (It must be noted that the above are guidelines only and that the presence of young children is a positive factor in maximising the sum insured.) 3

4 Income replacement on Death Individual Spouse Cover Generally up to 1m is acceptable For a spouse with no income the underwriter would consider the number and age of dependants. A life insured with young dependents will help maximise the sum insured as there should be a fund available on death to provide care for these in the event of a spouses death. Mortgages in respect of a main residence would also be added to the sum insured allowed. 4

5 Income replacement on Death Companies Keyman Cover Keyman cover is designed to compensate a company for financial losses that might occur on the death or Serious Illness of the keyman. A Keyman is somebody whose loss would result in Reduction in profits Costs of recruitment/training/replacement Loss of contracts Termination of projects - particular if client is creative Loss of goodwill Loss of opportunities for future exposures Loss of stable management and good labour relations Impingement of credit standing (guarantee of loans) 5

6 Income replacement on Death Companies Keyman Cover Keyman Life cover is calculated in the following ways 1. Multiple of salary Maximum 10 times salary for life cover (3-5 times for Serious Illness) 2. Multiple of profits (Maximum 2 times gross profit or 5 times net profit) It must be noted that the factors above cannot be taken in isolation and that the sum insured requested must be reasonable in relation to each of the multiples. Special Considerations for Keyman cover 1. Policies on other Keyman will reduce the overall sum insured 2. Stand Alone cover is not available as this results in over-insurance due to the potential of a double payout of risk benefits.. 3. Cover is for a limited term. 4. Each case throws up a different scenario and each case is treated on an individual basis. 5. New start up or loss making companies will have special individual requirements. 6

7 Income replacement in Sickness - Individual and Company Various types of Benefits that will replace Income Permanent Health Insurance Benefit (covered later by Jean Larkin) Serious (specified) Illness benefit Permanent and Total Disablement (PTD) benefit Personal Accident benefit 7

8 Serious (Specified) Illness Benefit Lump sum paid on diagnosis of a Serious Illness Usually four to six times salary is a guide for benefit but the maximum personal cover sum insured allowed is 1m. 8

9 Permanent Total Disablement (PTD) benefit Lump sum payable if individual is Permanently and Totally disabled. Usually sold in conjunction with Serious Illness benefit Usually four to six times salary is a guide for benefit but the maximum personal cover sum insured allowed is 1m. Note PTD (own Occupation) is restricted to Class 1 occupations usually 9

10 Personal Accident cover This benefit pays a regular income payable if unable to work due to an accident Usually 50% of salary is a replacement ratio to a max of payable for a Maximum of 52 weeks 10

11 Underwriting Terms Life Cover 90% Life Cover 6% 4% Standard Rates LoadingsApplied Postpone/Decline 11

12 Underwriting Terms Serious Illness 88% Serious Illness 6% 3% 3% Standard Rates Loadings Exclusions Postpone/Decline 12

13 Group Income replacement benefits Life Cover Permanent Health insurance Cover Serious Illness Cover 13

14 Group Scheme Underwriting Underwriting more lenient as selection is reduced (Generally the cover is not sought by the individual) Membership is compulsory Benefit levels are same for all members i.e. Multiple of salary Free cover is available 14

15 Free Cover Free cover means that the cover is not Underwritten Available to all members who satisfy Actively At Work (AAW) Declaration Typical Actively At Work wording Currently actively at work and not absent for more than 5 continuous days in past 3 months. p The Larger the membership of the scheme the more lenient the AAW declaration will be. 15

16 Calculations of free cover levels life cover The Cover Limits formulae for five or more lives, is calculated as the lesser of: 30,000 * number of members Or 10% of total scheme sum assured plus average sum assured. Maximum of 1,400,000 or 1,700,000 if at least 100 members in the scheme. 16

17 Calculations of free cover levels Permanent Health Insurance (Income Protection) The Free Cover Limits for ten or more lives, is calculated as the lesser of: 2,500 * number of members Or 5% of total scheme sum assured plus average sum assured Maximum m of: 100,000 for up to 99 lives 130,000 for 100 to 199 lives 170,000 for 200 plus lives 17

18 Calculations of free cover levels -- Serious Illness Minimum number of members 10 Limit of 5,000 per member Maximum Free Cover limits 150,000 Smaller number of illnesses covered than on an individual policy Pre-existing conditions apply 18

19 Income Replacement in Sickness and Death Thank You Any yquestions? me: Ph 01/