LO7 Critical Illness Insurance
Critical illness policy types and market developments, insured definitions and exclusions, amount and term, taxation and trusts, group cover, underwriting and claims.
How to prepare for R05
Match the annual edition to your sitting, quantify the event-driven shortfall, distinguish policy structures and tax, then test ownership, affordability and suitability.
Core concepts
Concept 1
Critical illness cover normally pays a lump sum when the insured meets a covered-condition definition and policy requirements, subject to exclusions and survival provisions.
Exam cue: Read the exact covered-condition definition, severity threshold, exclusion and survival requirement.
Concept 2
Standalone, accelerated, additional and group structures differ in how a critical illness payment affects other benefits and ownership.
Exam cue: Check whether a payment reduces or extinguishes linked life cover.
Concept 3
Need, term, amount, definitions, medical underwriting, premium basis, tax and trust structure determine suitability and claim expectations.
Exam cue: Match capital need and term to the event, then assess ownership, trust and group-policy consequences.
Risk pitfalls and guardrails
Assuming any diagnosis with the same everyday name meets the insured definition.
Guardrail: Do not mix capital, income, treatment, care and debt benefits, or assume State, employer and policy resources have identical amount, timing and certainty.
Treating accelerated and additional cover as having identical effects on life assurance.
Guardrail: Do not mix capital, income, treatment, care and debt benefits, or assume State, employer and policy resources have identical amount, timing and certainty.
Confusing critical illness lump sums with continuing income protection benefits.
Guardrail: Do not mix capital, income, treatment, care and debt benefits, or assume State, employer and policy resources have identical amount, timing and certainty.
Memory anchors
DESS
Definition, exclusion, severity and survival determine a critical illness claim.
Exact Wording
The contractual condition definition, not its everyday label, controls.
Accelerated Effect
An accelerated payment reduces the linked life benefit.
Need–Term–Amount
Tie the lump sum and duration to a quantified capital need.
Trust and Tax
Ownership and trust route can affect control, payment and estate treatment.
Underwrite to Claim
Disclosure and underwriting at outset shape cover and later claim review.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
What normally triggers a critical illness claim?
How is CI benefit normally paid?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
What is Pass Harbor?
Completely free exam prep for 247 UK exams.
- Practice questions
- Flashcards
- Study guides
- Mock exams
- No registration
- No paywall
- Start instantly
“No more expensive exam prep. Quality study tools should be accessible to everyone.”