CII R05 Critical Illness Cover 2

Question 1

Under CII R05, what is meant by a 'total and permanent disability' (TPD) definition within a critical illness policy?

Accepted Answer

A definition that covers the inability to perform one's own occupation or any occupation, depending on the policy wording, on a permanent basis

Answer

TPD cover within critical illness policies can use either 'own occupation' or 'any occupation' definitions. Own occupation TPD means the claimant cannot perform their specific job, while any occupation means they cannot perform any job suited to their training and experience. The disability must be permanent, and the definition used significantly affects the likelihood of a successful claim.

Question 2

A client is considering critical illness cover and asks about 'additional payment' conditions. What are these?

Accepted Answer

Less severe conditions that trigger a smaller partial payment, separate from the main sum assured

Answer

Additional payment conditions (sometimes called 'additional' or 'severity-based' conditions) are less severe illnesses that trigger a smaller, partial payment — typically a percentage of the sum assured or a fixed amount. Examples include less advanced cancer or a less severe heart condition. These payments usually do not reduce the main sum assured.

Question 3

Which of the following is a key advantage of a standalone critical illness plan over an accelerated plan?

Accepted Answer

A standalone plan preserves the full death benefit even after a critical illness claim

Answer

The key advantage of standalone critical illness cover is that claiming for a critical illness does not reduce the death benefit. The life cover and critical illness cover operate independently. Under an accelerated plan, a critical illness claim reduces or eliminates the death benefit, potentially leaving dependants without life cover.

Question 4

A critical illness policy may include a 'waiver of premium' benefit. What does this provide?

Accepted Answer

Continued policy cover without the need to pay premiums if the policyholder is unable to work due to incapacity

Answer

Waiver of premium is an optional benefit that ensures the policy remains in force without the policyholder having to pay premiums during a period of incapacity. Typically, there is a deferred period (e.g., 13 or 26 weeks) before the waiver begins, and the policyholder must meet the definition of incapacity specified in the policy.

Question 5

In the context of critical illness cover, what does 'indexation' mean?

Accepted Answer

The sum assured and premiums increase annually, typically in line with RPI or a fixed percentage, to maintain the real value of cover

Answer

Indexation (also called 'index-linking') automatically increases the sum assured annually, usually in line with the Retail Prices Index (RPI) or a fixed percentage (e.g., 3% or 5%). Premiums also increase to reflect the higher cover. This protects against inflation eroding the real value of the benefit over the policy term.

CII R05 Practice Test

CII R05 Practice Test

CII R05 Critical Illness Cover 2