Hi, I attempted the 2013 April past paper which flagged some calculation doubts I have around income protection schemes. In question 7 part ii of this paper, we were told £500 is payable for absences to work due to sickness or accidents. There is no claim definition provided in the question, so I had to work out what could logically be considered a sickness or accident. I treated this as an income protection policy, so sickness is any illness that will be recovered fairly quickly; accidents can be anything that results in bodily injury. My questions are: 1. I didn't consider terminal cancer as a sickness, if one is terminally ill there is no scope of recovery, it shouldn't be covered by an IP (probably yes in a CI policy). However the solution considered this. Under an exam setting, how do we correctly identify what is/isn't covered? 2. If the policyholder falls sick again shortly after returning to work, ie: falling ill again within the linked period. Will the linked period get reset? For example: Deferred period: 4 months, linked period: 6 months The policyholder falls sick & us absent from 1/1/2020-1/7/2020 So claims are payable from 1/5/20 to 30/6/20. If the he returns to work on 1/7/20, and then subsequently falls ill again on 1/9/20. Benefits are payable immediately as it is only 2 months in the linked period. Lets say he returned to work again on 1/10/20 after falling ill for 1 month. Will the linked period continue, leaving 3 months left as at 1/10/20, or does the linked period restart, so there will be 6 months of linked period again starting on 1/10/20? (This scenario isn't covered in the question, but it made me think about such case, and then what is the treatment?) Thanks, Trevor
Hi Trevor Your interpretation of sickness is not correct. IP doesn't just cover relatively short term sicknesses of a few months (although these will make up the majority of claims), it does cover long term and permanent sicknesses too. You can see why if you go back to the different claim definitions in the notes. Often IP pays out if someone is unable to perform their own job (alternatively another common definition is any job). Clearly someone who is permanently ill will qualify under this definition. Whether the linked claims definition resets as you've suggested will depend on the policy conditions - in theory bot are possible (ie it may reset or it may not). However, normally I would expect it to restart at 6 months as this will give the most encouragement to return to work and this is what the insurer wants. Best wishes Mark
