Prize Indemnity Insurance

This type of insurance is taken out for a promotion in which the participants are offered the chance to win prizes. The promoter pays a premium to an insurance company for prize indemnity insurance instead of having to keep cash reserves to cover large prizes.

One of the earliest and most common forms of prize indemnity insurance is hole-in-one insurance. A golf tournament host or sponsor purchases this type of insurance. For example, if the golf sponsor offers $10, 000 for a hole-in-one on hole 17, your insurance company reimburses you the $10, 000 you have to pay out if a participant makes the shot. The odds of an amateur golfer hitting a hole-in-one on an arbitrary par 3 are about 1 in 12, 500. This is according to information published in the newspaper, USA Today. These low odds allow golf tournaments to offer expensive prizes to golfers able to hit a hole-in-one during tournament play.

Typically, these hole-in-one contests operate as part of a marketing promotion. A car dealership might offer a new car from that dealership as the prize for hitting a hole-in-one.

Especially relevant is the relationship between the tournament host and the sponsor. It is usually set up to provide advertising for the sponsor. The sponsor’s name will also be  prominently displayed next to the prize during the tournament.

Companies that provide hole-in-one prize indemnity insurance may furthermore provide signs or other accessories to help the tournament host promote the hole-in-one prize. The insurance contract between the golf tournament and insurance company will detail rules such as :

1. which holes on the course the prize will be insured on:
2. how to verify the hole-in-one was achieved legitimately;
3. what to do if a contestant hits a hole-in-one on a hole other than the insured hole.

Variables that furthermore affect the cost of the hole-in-one prize indemnity insurance include:
1. the number of participants in the tournament;
2. the skill of the participants (amateurs vs professional golfers);
3. the length of the insured hole;
4. the value of the prize being offered.

Many holes-in-one are not recorded. Jack Nicklaus has 20 aces; his last came in a practice round at the 2003 Senior British Open, when he was 63. Gary Player has 19. His most recent was when he was 70 in the pro-am of the Nelson Mandela Invitational in South Africa. Arnold Palmer has 18. He was 74 when he made his last one, in a casual round at the Bay Hill course in Orlando. Tiger Woods has 18.

Interesting hole-in-one snippets

Ryder Cup: Nick Faldo’s ace at the 14th in 1993 at The Belfry was only the second recorded in the history of the match.
First recorded: The earliest recorded hole in one as in 1868 at the British Open by Tom Morris on the No. 8, 145 yard hole at Prestwick.
Four in one: In less than two hours play in the second round of the 1989 U. S. Open at Oak Hill Country Club, Doug Weaver, Mark Wiebe, Jerry Pate and Nick Price each aced the No. 6, 167 yard hole. The odds against four professionals achieving such a record in a field of 156 are estimated at 1.89 quadrillion to 1.
The longest recorded straight drive hole-in-one is believed to be 517 yards by Mike Crean at the par 5 No. 9 at Green Valley Ranch Golf Club in Denver in 2002.

MOTOR RACING

Prize indemnity insurance is also used in motor sport. The highest recorded payout was $250, 000 during the 1992 Interserie. The 1992 Zolder 966 driven by John Bartlett at the Interserie in Belgium won $250, 000 for a podium position paid out by Lloyds of London.

OTHER USES

Coverages are offered for other contests as well. Examples are half-court shots in basketball, field-goal kicks in football, home runs in baseball, blue-line goals in hockey and also retail and casino-based promotions.

In the 2005 Super Bowl, prizes were set to be awarded for several events, including a return of the opening kickoff for a touchdown, a safety, and a fourth-quarter field goal of 50 yards or more. Prize indemnity insurance was purchased to cover all these events. However, none of the events occurred in the game.

In 2008 an insurance provider demanded that RTL (Europe’s leading entertainment group) and CBS toughen million dollar win provisions after The Price is Right $1, 000, 000 Spectacular produced three millionaires in the six episodes produced that season. After the four episodes aired with new rules RTL and CBS have not produced any further “million dollar” episodes since, possibly due to insurance concerns.

Policy premiums are based on the number of participants, the amount of the prize being offered and the parameters of the contest itself.

The parameter refers to the length of the hole on which the prize is being offered. US Hole in One’s average policy covers a $25, 000 prize for a contest involving 100 golfers and a 165 yard hole, for a $360 insurance premium.

Problems home insurance

 

Problems you may encounter are covered by a Standard Home Insurance Policy.   Insurers require special policies for some risks.  Most basic policies exclude claims for earthquakes, floods and landslides.  If you have an exposure, you should definitely look into coverage.

Many homeowner’s policies are however becoming more difficult to understand.  Insurance carriers are adding language that shifts risks and costs to policyholders.  All contracts which contain fine print should be carefully read.  By doing so you may thus discover problems that could be hiding in your home insurance policy.

Earthquakes:

In the past, earthquake loss was assessed using a collection of mass inventory data and was based on experts’ opinions.  Today it is estimated using a Damage Ration (DR), a ratio of the earthquake damage money amount to the total value of a building.  Another further method is the use of HAZUS, a computerised procedure for loss estimation.

California however is not the only state with a serious earthquake hazard problems.  There are several lesser-known fault zones in other parts of the country.   Another danger zone with problems is New Madrid, Missouri.  The Wasatch Fault is especially relevant because it lies underneath Salt Lake City.  This could be bad news for the area that has 185, 000 vulnerable buildings made of unreinforced masonry that are not built to survive an earthquake.  Alaska and Hawaii are also another two earthquake hotspots.

You can also view earthquake hazard maps on U. S. Geological Survey’s website.

Flooding:

Most natural disasters, such as hurricanes, tsunamis, and rainstorms involve flooding.  You can determine your flood risk by visiting FloodSmart.gov.  Flood coverage is also available from the National Flood Insurance Program (NFIP) and some private insurers. While flood insurance may be available to you, its cost will be tied to your risk.  If you are in a community prone to flooding, flood insurance may be costly.

Landslides:

Although landslides happen throughout the country, some regions are more susceptible.  The U. S. Geological Survey’s website has a map highlighting landslide-prone areas

Wind Deductibles

The Insurance Information Institute (III) says your homeowner’s policy deductible may be a specific dollar amount or a percentage of the total amount of insurance on your policy.  In addition, there are two common types of home policy deductibles, which cover most mishaps, such as fires and burglaries.  The second type is a wind deductible for properties in hurricane or windstorm prone regions.

Problems that could be hiding in your home insurance policy may be related to wind deductibles.  Hurricane deductibles apply to damages solely from hurricanes.  Windstorm deductibles apply to any wind damage, including hurricanes.  Wind deductibles can be for a fixed amount or a percentage of the insured value.  If your house is insured for $500 000 and has a 5% deductible, the first $25 000 of a wind-related claim must be paid out of your own pocket.

Anti-concurrent causation clause

Check your policy closely to see if it includes an often-overlooked anti-concurrent causation (ACC) clause.  If a structure is damaged by two causes, such as wind and flood, and one cause is covered by insurance and one is not, an ACC clause may limit your claim or block it completely.

It is a trap door built into the back of your policy.  Try to find a homeowner’s policy without an ACC clause.  If  you can’t, ask your broker about buying an add-on policy to fill any gap in coverage.S

Spikes in building costs

If you have a mortgage on your home, your lender likely requires you to buy a homeowner’s policy.  Typically homeowners insure their homes for an amount that is adequate to replace it.  Your rebuilding costs will include the price of materials and labour.  When there are problems such as fires or floods that damage numerous structures throughout a single community, building materials and labour temporarily are in high demand.  This can cause a spike in your rebuilding costs.  Most insurers sell extended coverage add-ons that increase your basic homeowner’s policy coverage to make sure you have enough money to rebuild.

Updates in building regulations

Changes in building codes sometimes require construction upgrades if your home is badly damaged and must be repaired or replaced.  For example, most noteworthy,  the new code may require a higher elevation for your home if you are in a flood zone.

Standard policies will not cover these extra construction costs.  You can purchase supplemental insurance to cover your risk.

Certain information Insurers will not disclose

A physician in suburban Chicago had insured his life, home and car with a particular insurer.  However, during a period of 10 years, he had never filed a claim, until a damaged roof and a burglary led to two claims totalling $3, 000.  He immediately installed a home security system.  The insurer did not give him a discount, but dropped him from its preferred coverage citing his “claims history” and instead offered him its standard carrier at a higher rate even though his risk profile had not really changed.

Finally if your home is near the water or in an earthquake-prone zone, insurers will shun you.  Some insurers use illegal underwriting guidelines to redline (discriminate against).  Agents say they often get memos identifying undesirable ZIP codes or reminding them to stay away from couples who are having problems in their marriages.

In conclusions, you could potentially file your one claim and then have your coverage terminated.  Some insurers will unfortunately drop you if you start an at-home business, while others will furthermore label you too risky if you have missed a credit card payment or two.

 

 

 

 

Global Cyber Attack

Days after the global cyber attack crippled the country’s health service, the U. K. police are trying to establish whether the culprits were part of an established network or bored teenagers.

200,000 Computers in at least 150 countries were affected. Security experts have so far contained the cyber attack infection. Police are looking for the creators.

The worst hit countries are the U. K. and Russia. Finding and locking up hackers is the toughest job in law enforcement. It is likely that the dark web was used to disguise these hackers. Conventional search engines are unable to reach this dark side of the internet. Suspects are however often from Eastern Europe, Russia other other difficult-to-reach jurisdictions.

The “WannaCry” virus replicated itself. As it spread there were demands made for bitcoin, an online currency which is however difficult to track.

Elements that belong to the U. S. National Security Agency were leaked online. A group who has called itself Shadow Brokers has taken credit for the leak. Shadow Brokers is however threatening to release more recent code to enable  cyber attack hackers to break into the world’s most widely used computers, software and phones.

Older versions of Microsoft Corp’s Windows operating system were targeted. In March Microsoft had released a patch to protect users from vulnerability exploited by the attack. Compared to other regions of the world, U. S. users have licensed, up-to-date patched versions of the software. The U. S. was thus less vulnerable to this attack.

A North Korea hacking operation called the Lazarus Group has been found to have some codes related to the “WannaCry” software. Symantec and Kaspersky Lab confirmed these findings. This may not be true but is highly suspect.

The Lazarus hackers were blamed for the theft of $81 million from the Bangladesh Central Bank. They have also been accused of being behind the attack of Sony Pictures in 2014.

Car Insurance Obsolete?

Will car insurance become obsolete? Auto technology has progressed to such a degree that there is a downward trend in vehicle accidents.

Improved safety features such as advanced braking systems and auto impact protection have resulted in less claim frequency. There has been a 7% drop in total car insurance premiums.

Globally 1.3 million people die in car accidents each year. Last year four companies made up 50% of the car insurance market. State Farm, Geico, Allstate Corp and Progressive Corp. The worth of the industry is around $220 billion and supports 277,000 jobs.

Volvo has stated that by 2020 all car accidents will be eliminated. Smart cruise control, accident avoidance as well as crash monitoring and reporting will drive down the vehicle accident rate. Further assistance is given to driverless cars such as hazard free parking and the level of traffic congestion en route to a destination.

However, new risks associated with driverless cars may change the insurance industry’s pricing formula. Although human error is removed from the equation, liability may change if software defects become the cause of accidents. Vehicle manufacturers will need to be protected against an increase in lawsuits.

Google, Mercedes and Volvo are already planning to self-insure their products.

Driverless cars may cause less accidents, but the costs to repair all the high-tech features will be high. Premiums will only decrease when there is enough evidence to prove that driverless cars increase safety.

What about cyber security? A driverless car is a target for cyber attacks from hackers. Basically, a driverless car is a moving computer on wheels. Criminals will most likely find some way to take advantage of that situation.

Types of insurance that will alway be needed are for theft from the vehicle, vandalism to a car and any weather-related damage to the vehicle.

Insurance companies have a lot of planning to do if they are to provide customer satisfaction whilst still maintaining full coffers.

Credit Insurance

Credit insurance is purchased to cover specific debts against the risk of non-payment. A company (the insured) takes out credit insurance.

The credit insurance company determines and underwrites credit limits.

Those limits are set for the insured’s various clients. The insured may trade with the client up to the value of the credit limit issued. If the credit limit is exceeded, the risk of any excess amounts will be for the insured’s own account.

Should the insured’s client (the debtor) fail to pay for a variety of reasons, the credit insurance company will assess the claim. The insured will therefore receive an indemnity if the claim is valid.

Possible reasons for non-payment by the debtor include:

Insolvency: sequestration, liquidation, judicial management and the closing of a company;

Protracted default: the failure to pay for goods or services.  This might be due to an inability to pay or a simple lack of desire to do so;

Repudiation: failure or refusal to accept goods or services.  This would be a unilateral cancellation of the contract;

Importation problems: a strike or sanctions being imposed on a particular country;

Transfer problems: a shortage of foreign exchange in the importing country.

Conflict: occurrence of hostilities within an importing country, for example, civil war.

A careful analysis of each debtor must be made however, to determine the company’s financial situation and previous credit history.

Trade credit is offered by vendors to their customers as an alternative to prepayment or cash on delivery terms. This thus provides time for the customer to generate income from sales to pay for the product or service.

It requires the seller to assume non-payment risk. In a local or domestic situation as well as in an export transaction, the risk increases.

In addition to increased risk of non-payment, international trade however, presents the problem of the time between product shipment and its availability for sale. The account receivable is like a loan.  It represents capital invested, and often borrowed by the dealer. However, this is not a secure asset until it is paid. If the customer’s debt is “credit insured”, the large, risky asset becomes more secure. This asset may then be viewed as collateral by lending institutions.and a loan based upon it.

Credit insurance is purchased by business entities to insure their accounts receivable.

The premium for this is usually charged monthly and is calculated as a percentage of sales for that month or as a percentage of all outstanding receivables.

Trade credit insurance usually covers a portfolio of buyers.  It pays an agreed percentage of an invoice. Policyholders must apply a credit limit on each of their buyers, for the sales to that buyer to be insured. The premium rate furthermore reflects the average credit risk of the insured portfolio of buyers. In addition, credit insurance can also cover single transactions.

 

 

Crime Insurance

Crime insurance is a broad term to describe a selection of individual coverages relating to the taking of money, securities and other property from a business or organisation.

It is sometimes divided between losses that take place “inside” the business premises and losses that occur “outside” the business premises.  This can include employee dishonesty, forgery, theft, robbery and holdup, burglary and fraud.

THE COSTS

There are a multitude of criminal exposures that can threaten the financial growth of your business. This can occur whether you are a small or large organisation. Fraud and theft in the workplace is on the rise.  It happens in even the best work environments. These frauds can go on for years.   When finally discovered, the ultimate impact can be enormous, Employee theft crimes can have a devastating impact on any business.

Vast data warehouses and electronic commerce may be modern wonders.  They do however also create new opportunities for dishonest employees to engage in unlawful acts.

Current schemes aim at taking advantage of potential weaknesses in your company’s financial controls.  This can be from fictitious employees, cheque forgery, dummy accounts payable, non-existent suppliers to outright theft of money, securities and property.

PEACE OF MIND

Other commercial risks, including theft by directors and partners, not just employees, can also be safeguarded with proper crime insurance. There is also protection from the loss of irreplaceable items such as an author who wishes to insure a working manuscript. Furthermore a software company that wishes to insure all of its data and customised software. This protection can help you stay afloat should a security breach stop the operation of your business.

WHO NEEDS IT?

If your business or organisation has employees and/or handles cash, securities or other property, you most likely need crime insurance.

Ask yourself the following questions:

Do you have employees who handle cash?

Is there a computer on the premises?

Has your software been customised for you?

Are you an owner or tenant in a building?

Is inventory on the premises?

If you answered YES to any of these questions, you likely need crime insurance.

The following list examines in greater detail the more common types of crime insurance. Please keep in mind that this list is by no means exhaustive.

ROBBERY AND HOLDUP

Only people or business property can be robbed. You need separate insurance to protect damage to your premises.

ROBBERY AND HOLDUP is the unlawful taking of money, securities and other property using force or violence as well as the threat of force or violence. Premises cannot be robbed. Only people or business property can be robbed.  If you carry Robbery and Holdup Coverage, you have coverage only when the premises are open for business, and your business funds are in the custody of the business owner or and employee.

For “inside” Robbery and Holdup, this also means that a criminal must enter the premises under these conditions and “rob” you or your employer being held at gunpoint (or some other threat of force or violence) at the cash register.

Robbery and Holdup may also take place “outside” the business premises, while business funds and/or property is in the custody of the business owner or an employee. This would include the example of an authorised employee being robbed on the way to making a lunch hour deposit. This coverage appears on your policy as Robbery/Holdup Insurance or Inside/Outside Holdup Insurance.

BURGLARY

Premises that are closed for business are burglarised. Burglary coverage means that you have coverage when someone breaks into your premises at night.  It happens when the premises are closed for business. and destroys Property is destroyed or unlawfully taken.   This may include  money, or other negotiable securities. For “inside” burglary, this would include, for example, a computer store owner whose computer equipment is stolen from his business premises overnight.

The computers as well as any damage done to the premises during the burglary would be covered under this policy. For “outside” burglary, the police would include the situation of an unauthorised employee taking equipment home to prepare for a trade-show and then being robbed in her home overnight of that equipment.

Unless you have a special burglar resistant safe for holding money overnight in the premises, most insurance policies exclude loss of funds left on the premises.   Losses to stock, equipment and other non-monetary property can be easily covered. Coverage for burglary damage or loss to stock and equipment is called Mercantile Stock Burglary coverage. Coverage will not be recognised unless there are physical signs of forced entry onto the premises.

SAFE BURGLARY

This is a separate coverage that is available for damage or loss to your safe of the property contained within your safe. This coverage can be purchased separately, but is usually added, if you have a safe, to some other form of crime coverage being carried under the policy.

DAMAGE TO A BUILDING CAUSED BY A BURGLARY

If you are the owner of a building and carry only a specified perils form of fire coverage on your building, you probably need to enhance your building fire insurance coverage.  This would be done by including a small limit of insurance for damages done to the building during the course of a break-in. You may also be obligated to pay these repairs if you are a tenant in a building.

EMPLOYEE DISHONESTY CRIMES

When property or money has disappeared due to the criminal act of an employee, your crime coverage will not respond unless you carry an “employee dishonesty policy”. All crime coverages as issued and priced by insurance companies are based on an outsider committing the criminal act, not an employee who is in an entrusted position.

There is no tried and true method of completely safeguarding yourself from the risk of employee dishonesty, but you can minimise the risk by taking certain steps.

1. Have bank reconciliations completed by people who do not deposit funds or have cheque signing authority.

2. Centralise your account procedures. If you operate branch or remote offices, have all month-end and year-end accounting done in a centralised location.

3. Restrict evening and weekend access to warehouses and shops. Have just one or two keys and make employees sign for access after hours.

4. Make sure all shop, warehouse and office keys are the type that cannot be duplicated without the master. If not, change locks whenever an employee leaves or is dismissed.

Bond Insurance

Bond Insurance guarantees expected payments of interest and principal on a bond.   This occurs in the event of a non-payment by the issuer of the bond or security.

As compensation for its insurance, the insurer is paid a premium (as a lump sum or in instalments) by the issuer or owner of the security to be insured.

Bond insurance is a form of “credit enhancement”.   This  generally results in the rating of the insured security being the higher of:-

(i) the claims-paying rating of the insurer and

(ii) the rating the bond would absent insurance (also known as the “underlying” or “shadow” rating.

The premium asked for insurance on a bond is a measure of the understood risk of failure of the issuer. It can also be a function of the interest savings raised by an issuer from employing bond insurance.

Insured securities range from municipal bonds and infrastructure bonds to asset-backed securities (ABS) such as residential backed securities (RMBS) and collateralised debt obligations (CDO) (CDO is a type of structured asset-back security (ABS).  Originally developed for the corporate debt markets, over time CDOs evolved to encompass the mortgage and mortgage backed security (MBS) markets).  domestically and abroad.

The economic value of bond insurance to the government unit, agency, or other issuer offering bonds or other securities is a saving in interest costs reflecting the difference in the return payable on an insured bond from that on the same bond if uninsured.

The economic value of bond insurance to the investor purchasing or holding insured securities is based upon:-

(i) the additional payment source provided by the insurer if the issuer fails to pay principal or interest when due (which reduces the probability of a missed payment to the joint probability that both the issuer and insurer default).

(ii) rating downgrade protection so long as the insurer is more highly rated than the issuer.,

(iii) improved liquidity and

(iv) services provided by the insurer such as credit underwriting, due diligence, negotiation of terms, surveillance and remediation.

Bond insurers generally insure only securities that have underlying or shadow ratings in the investment grade category, with unenhanced ratings ranging from “Triple-B” to “Triple-A”.

Beginning in 1970, municipal government bonds were insured by bond insurers, also known as the “monolines”. The global financial crisis of 2008 seriously harmed their business model, to the point where the continued operation of a number of bond insurers is in doubt.

Bond insurers are sometimes also referred to as “financial guaranty insurance companies” or “financial guarantors”. Companies whose sole line of business is providing a particular type of insurance, in this case bond insurance, are called “monoline” insurers.

Not that the insurance term monoline” means only that these companies do not have other insurance lines, such as life or property/casualty. It does not mean they operate only in one securities market, such as municipal bonds, as the term is sometimes misconstrued.

Bonds insured by these companies are sometimes said to be ‘wrapped” by the insurer.

MONOLINE EXPOSURE TO RESIDENTIAL REAL ESTATE

Bond insurance of residential mortgaged-backed securities (RMBS) (RMBS is a reference to the general package of financial agreements that typically represents cash yields that are paid to investors and that are supported by cash payments received from homeowners who pay interest and principal according to terms agreed to with their lenders) commenced in the 1980s.   This expanded at an accelerated pace in the 2000s, leading up to the 2008 financial crisis.

As the housing bubble grew in the mid-2000s, bond insurers generally increased the collateral protection required for RMBS. However, both the bond insurers and the rating agencies that evaluated their credit did not anticipate the collapse of the real estate market.

In addition, following the crisis, the bond insurers became aware that many RMBS they had insured included large percentages of loans that were ineligible for securitisation. They were subject to repurchase obligations by the RMBS sponsors who originated the securitisations based upon certain representations and warranties made by the sponsors of such loans.

Unlike mortgage insurance bond insurance generally provides for unconditional payment of claims.   The insurers reserve the right to pursue contractual or other available remedies. As a result, the bond insurers were faced with billions of dollars of claims to insured security holders associated with their exposure to RMBS following the financial crisis.

One indication of the extent of loan quality misrepresentation was the settlement in 2011 between Assured Guaranty and Bank of America, which had purchased mortgage originators countrywide. Under the terms of the settlement, Bank of America made a $1.1 billion payment to assured Guaranty and agreed to cover 80% of up to R6.6 billion of Assured Guaranty’s future paid losses from branches of misrepresentations and warranties on 21 insured RMBS transactions.

While the widespread misrepresentation caused bond insurers to experience considerable losses on insured securities back by residential mortgage loans (including first lien loans, second lien loans and home equity lines of credit), the most severe losses were experienced by those monolines that insured CDOs backed by mezzanine RMBS.

The bond insurers generally insured such CDOs at very high attachment points or collateral levels (with underlying ratings of Triple-A) those bond insurers and rating agencies relied upon historical data that did not prove predictive of residential mortgage loan performance following the 2008 crisis. A nationwide decline in housing pricing was witnessed.

Income Insurance

Income insurance is also known as permanent health insurance. If you are unable to work due to illness or disability, this income insurance is designed to pay you to replace a portion of your lost monthly earnings.

It is your choice regarding how much protection you buy. It is possible to be provided with a tax-free monthly income between 50 and 60% of your usual income. This amount continues to be paid to you until you return to work or retire.

The payout period is usually limited to 5 years. For people who are self-employed, this is considered essential.   A self-employed person would not have sufficient to live on if ill-health or an accident deprived him or her of a monthly income. Should the unforeseen occur,  person who is employed would need to know in what way an employer would provide income insurance for them in the way of sick pay or retirement benefits.

The term “unable to work” varies from policy to policy. It could mean:

You cannot do your job;

A job that you are qualified to do is beyond you;

An inability to do any kind of paid work;

Some policies also make a partial or rehabilitation payment if you are able to return to your old job.  This is in a reduced capacity – for example, part-time.

If you go back to work full time but take a lower paid job, there are policies which will make a proportionate payment to top up your earnings.

WHAT IS NOT COVERED

If you are receiving a full salary, you will not be paid income insurance from a policy. You would have to be off work for at least four weeks (deferred period) before you are paid. You may choose a longer deferred period (up to 52 weeks.)  This therefore will reduce the cost of the insurance premium. If you are employed, your employer may offer you sick pay for a certain period of time. In this case, it may be wise to choose a deferred period of a similar length of time.

If you take part in dangerous sports or other health-threatening activities which you do not disclose at the time of taking out the policy, you will not have cover.

Any form of self-inflicted injury.

Drug and/or alcohol abuse.

Childbirth or pregnancy.

BUYING INCOME PROTECTION INSURANCE

Your age, gender, state of health and your type of work will determine the amount you pay for income insurance.

DECISIONS MADE BY YOU

What amount do you want the policy to pay;

What length of time do you want the policy cover to last;

How long are you prepared to wait before the policy pays out (the deferred period);

Do you want to build increases into the policy cover to cater for inflation.

Insurers differ in their attitudes to risks posed by different jobs therefore policies can vary. As a result of this, it is worthwhile dealing with a broke or independent advisor who specialises in protection insurance. Your particular circumstances should be taken into account on an individual basis.

MAKING A CLAIM

The policy document will inform you when you should tell your insurer that you are ill, and are likely to claim. Your insurer will verify facts with your doctor once your deferred period has ended  Then you should start receiving payments.

Monthly medical certificates will have to be provided by your medical practitioner whilst you are receiving monthly payments.

WHAT YOU SHOULD LOOK FOR IN A GOOD POLICY

Make sure that insurance companies group jobs into classes based on the risk of being able to work. Different classes of work and occupations. For example Class 1 occupations (will have lower premiums) are the lower risk occupations through to Class 4, which are deemed to be higher risk.

Will give you a choice between guaranteed premiums and renewable premiums.

A choice of when the financial underwriting can be done, either when you take out the plan or when you make a claim.

Waiver of premiums should be included automatically.

You should be able to both increase and decrease the benefit amount as your circumstances indicate.

An option to add indexation at any point during the contract.