IIQE Paper 3 English Quiz 22

Annuity certain provides for annuity benefit payments to be made for a fixed number of years only, whether death occurs in the meantime or not. It may have high upfront costs and other fees as with traditional annuities. It is an investment in retirement income offered by insurance companies.

Premium frequency
Differing practices exist as to what mode of premium payment is assumed when premiums are being waived. For example, if premiums are being waived on a monthly basis, the insured person who recovers, say, 25 days after a premium has been waived would have to resume premium payments the following month.

Life annuity
The term life annuity refers to a financial product that features a predetermined periodic payout amount until the death of the annuity owner—called the annuitant. An annuitant typically pays into the annuity periodically when they are still working.

The cover given by this rider is similar to personal accident or medical insurance, so it normally carries some similar exclusions. Which of the following are included in this?
• Intentional self-inflicted injuries
• Injuries sustained whilst engaging in criminal activities
• Pre-existing condition
• Injuries resulting from war while the policyowner-insured is in military service

Two alternative methods are used to establish the amount of disability income to be paid – an income formula and a flat benefit amount. A flat benefit amount is a method for calculating a pension payout from an employee’s defined benefit plan.

Accidental Death and Dismemberment (AD&D) Rider usually takes the form of a rider to a life insurance policy. It pays benefits in the case of a person’s accidental death or dismemberment, which is the loss—or loss of use—of body parts or functions. It comes with significant coverage limitations, so always read the fine print.

The customary provisions of the accidental death benefit (ADB) are:
• Death must have been caused directly and independently of all other causes, by an accidental bodily injury, and have occurred within one year after that injury
• Customary personal accident insurance exclusions apply

Guaranteed annuity provides the total security of knowing that the retirement income is guaranteed at a certain percentage of your accumulated fund. Annuities with a guaranteed retirement income can do a lot to boost your pension income.

Accidental bodily injuries being covered, a schedule (or list) of specified injuries is given, with a corresponding benefit against each. It includes:
• Death
• Disease or illness
• Loss of Two Limbs
• 1 Limb & Sight in 1 Eye
• Either 1 Limb or Sight in 1 Eye
• Various specified lesser injuries

The normally applicable exclusions, which are commonly found with personal accident covers the following:
• Self-inflicted injuries (including suicide, at any time)
• War-related injuries
• Injuries whilst involved in illegal activities
• Disease or illness (unless caused by an accident)
• Childbirth & pregnancy
• Injuries resulting from hazardous sports (as defined)

Accelerated death benefits
The meaning of this is that when a policyowner-insured in a prescribed serious situation, all or part of the death benefit under the policy may be payable to him, although death has not yet occurred.

Provisions for accelerated death benefits are contained in an accelerated death benefit rider (ADB rider), also known as a living benefit rider. Common features with the different riders concerned. It includes:
• The benefits are released at times of great personal stress, under grave and life-threatening circumstances.
• The riders are only likely to be permitted with policies having a significant face amount for the sake of keeping administrative costs down.
• Since pre-death payments to the policyowner-insured will have an impact upon the expectations of the beneficiaries, some insurers will, in the event of a claim under the rider.
Provisions for accelerated death benefits are contained in an accelerated death benefit rider (ADB rider), also known as a living benefit rider. Common features with the different riders concerned. It includes:
• The benefits are released at times of great personal stress, under grave and life-threatening circumstances.
• The riders are only likely to be permitted with policies having a significant face amount for the sake of keeping administrative costs down.
• Since pre-death payments to the policyowner-insured will have an impact upon the expectations of the beneficiaries, some insurers will, in the event of a claim under the rider.
• If the policy has been assigned, the assignee must sign such a release form, before an ADB is paid.
• It has two accelerated death benefits, namely the critical illness and the long-term care benefits.

This is not a very common product in Hong Kong at present, but the basic features of this rider are a stated portion of the death benefit is payable to a policyowner-insured who requires constant care for a condition.

In accelerated death benefits, the list of insured diseases is not identical with all insurers, but they all can be categorized into the following:
• Cancer
• Illnesses related to the heart
• Disability
• Illnesses related to a major organ
• Illnesses related to the nervous system
• Illnesses related to the immune system

Release form
Since pre-death payments to the policyowner-insured will have an impact upon the expectations of the beneficiaries, some insurers will, in the event of a claim under the rider, require the latter to sign a release (or release form), acknowledging that the death benefit stands reduced by the amount of the ADB payment.

In critical illness benefit, a stated portion of the death benefit is paid to the policyowner-insured when:
• He/she is diagnosed with a specified disease
• He/she is diagnosed with a terminal illness and has a life expectancy of 12 months or less
• It is necessary for him to undergo a specified medical procedure.

One of features of critical illness is its medical evidence such as a statement from an attending physician is necessary, confirming the condition and, in the case of a terminal illness, the assessed life expectancy as well.

The usual provision of dismemberment includes:
• Normally, a sum equal to the accidental death benefit is payable if the life insured loses any two limbs or the sight in both eyes as a result of an accident.
• Often policies provide for payment equal to a stated proportion of the accidental death benefit if an accident results in the loss of one limb, the loss of sight in one eye, or another specified lesser injury.
• The loss of a limb may be described as the actual loss of limb (by physical severance at or above the wrist or ankle) or the loss of the use of the limb.

The basic policy remains in full force during total disability so that if death occurs during a period of total disability the face amount of the basic policy is payable in addition to any income benefits paid or payable.

In accidental benefits, other benefits cover may include one or more of the following:
• Serious Burns
• Weekly Benefits
• Hospital Benefit
• Double Indemnity

Double Indemnity Benefit
The term ‘Indemnity’ is technically inaccurate since life insurance is normally not subject to the principle of indemnity.

Lump sum payment
The amount of benefit will vary between companies and depend on the type of disease contracted, payment of the full death benefit being a possibility. Critical illness benefit is invariably paid as a lump sum.

Restrictions in the critical illness benefit include:
• Critical illness cover is only available up to a specified age, say, age 80
• Critical illness cover is only available to standard risks
• Payments may not be made for multiple/recurring events, perhaps subject to exceptions with a couple of diseases
• In the waiting period, the diagnosis mentioned in (a) above has to be done when the rider has been in effect for a specified number of days, say, 90 days.

In earlier days, medical benefits would not be provided under life insurance policies. Such cover was considered to be part of the “Accident” (Personal Accident) portfolio. The basic plan of medical benefits is intended to cover the expenses related to medical treatment and hospitalization.

A critical illness package policy comprising a death cover and a critical illness cover is now widely available in Hong Kong, with both sharing the same face amount. Yet critical illness benefit plans offering no death benefit and critical illness benefit riders with death benefit are also available.

Intended to cover the expenses related to medical treatment and hospitalization, the Basic Plan has a number of headings under which cover is given. It includes:
• Hospital charges
• Private nursing
• In-patient physician’s fees
• Surgeon’s, anesthetist’s and operating theatre fees
• In-patient physician’s fees
• In-patient specialist’s fees
• Out-patient follow-up care
• Free worldwide assistance

Surgeon’s, anesthetist’s and operating theatre fees
Surgeons, anesthetist’s and operating theatre fee’s maximum benefit/cover is specified according to the three categories and the seriousness of the operation involved.

There are limits to the time during which various benefits under the Basic and Other Plans may be paid, but these are part of the description of the cover. Specific exclusions are very likely to include the following:
• Pre-existing conditions
• Pregnancy and childbirth-related expenses
• Drug or other substance abuse, self-inflicted injury, and sexually transmitted diseases
• AIDS or HIV related conditions
• Congenital abnormalities treatment

Insurability means that by normal underwriting and business standards a particular risk is acceptable for insurance. The usual feature that affects this is, of course, the health of the person who is to be the life insured.

Private nursing
The basic plan is intended to cover the expenses related to medical treatment and hospitalization such as private nursing. Private nursing includes nursing treatment at home, in hospital by a qualified nurse, or as recommended by the attending medical practitioner.