Real Life Cover provides the following benefits: - A lump sum if the policyholder dies or is diagno...
Real Life Cover provides the following benefits:
- A lump sum if the policyholder dies or is diagnosed with a terminal illness
- A lump sum if they are diagnosed with cancer, heart attack and stroke
- A lump sum if they have to leave work to provide full-time care for their child or partner
- A monthly benefit if they are incapacitated by illness, injury or disability
- Money to pay for services that could improve their health and help them return to work
- Waiver of premium.
Minimum and maximum ages
The minimum age at outset is 17 years attained and the maximum age at outset is 50. The minimum policy term is five years. The plan must end when the life assured reaches age 70 (69 attained). The maximum term for life cover and living cover is 53 years.
Minimum and maximum sum assured
Minimum sum assured determined by minimum premium. Maximum sum assured for life cover is £250,000 and £250,000 for living cover.
Critical illness (CI) cover as a % of life cover
12% of the living fund. If there is less than 12% of the sum assured left in the fund, whatever is left is paid.
Minimum premium
The minimum premium is £5 a month.
Guaranteed premium rates
Yes
Sum assured indexation
The sum assured can increase by 5% (simple) each year. If the plan is set up with an increasing sum assured, the amount paid will increase each year to pay for the extra cover.
Single life plan available
The plan can only be arranged on a single life basis for those permanently resident in the UK.
Life of another
The plan cannot be written on a life of another basis. It is issued on an 'own life, own benefit' basis, but could be placed under trust if required.
Waiver of premium
Waiver of premium applies automatically. There is a choice of eight or 26 week deferred periods. If income protection (IP) stops paying a monthly benefit because there is no money left in the living fund, premiums will continue to be waived while the policyholder remains incapacitated from the same cause.
Default waiver definition of disability
The default waiver of premium definition is own occupation. Own or suited and activities of daily working tasks definitions are also available.
IP benefit
A full IP benefit is available. IP payments would be taken from the living fund and claims can be paid until the claimant's 80th birthday. When the policyholder takes out their Real Life Cover Plan they choose a deferred period of eight or 26 weeks.
If they are in paid work when they first become incapacitated, each month Fortis pays the lower of: 1% of the current sum assured; or 50% of pre-tax monthly income before became incapacitated, less any income from the employer, from self-employment, from other insurance benefits or from pension arrangements other than state pensions.
If the policyholder is not in paid work when they first become incapacitated, each month Fortis pays: 1% of the current sum assured up to a maximum monthly benefit of £1,667.
Any income they receive from state benefits will not affect what Fortis pays.
Fortis will stop benefit payments when the earliest of the following happens: the policyholder no longer meets the definition of incapacitated that applied when they first claimed; or they reach age 80; their living fund runs out; they die; or return to work.
Accident sickness and unemployment cover
Optional unemployment cover is provided by Fortis Insurance. Unemployment cover is not a draw-down benefit and the payment of benefit does not affect the living fund. Fortis will pay a maximum benefit of £2,500 a month for optional unemployment and extended carer's cover, regardless of the size of the sum assured.
Plan offers the option to buy-back CI after a claim
Traditional CI buy-back is not available, however, more than one payment can be made from the living fund in relation to the critical illnesses covered. This means that a total of 36% of the living fund could be paid out in respect of the separate critical illnesses, provided that the living fund had not been exhausted.
Plan permits variations to sum assured other than by guaranteed insurability options (GIO)
Policyholders can reduce their sum assured at any time by as much as they want, as long as they are not paying below the minimum premium at the time of the reduction. If they later want to increase the sum assured, the amount will be based on the new, lower sum assured. An additional new policy is written in the case of an increased sum assured, while reduced sums assured would be dealt with by endorsement.
GIO
There are three GIOs available. The policyholder can take out an additional plan with the same end date as their current plan. They can do this up to 13 weeks after any of the following events: their marriage/civil partnership; the birth or legal adoption of a child; an increase to the amount of their mortgage to buy a new house or to pay for home improvements. Both life and CI cover will increase if a GIO is utilised.
Option to separate joint life plans on divorce
A joint life separation is not required. This plan can be written on a multiple single life basis, with no policy fee, so plans are automatically separated.
Own doctor medical available
Clients can attend their own GP for medical examinations. Paramedical examinations are available.
Period within which a claim must be notified
The claim notification period for IP and optional unemployment and extended carer's cover is within two weeks of stopping work.
Free cover during underwriting
Free accidental death benefit is offered during underwriting and for up to 60 days from the date when acceptance terms are offered, for standard lives only.
Access to support helplines
Client-focused helplines are available. The client can qualify for a support service to pay for services such as counselling. Up to £300 can be paid and this is not a draw-down from the living fund.
Number of CI conditions as defined by the Association of British Insurers
Four: cancer, heart attack, stroke and terminal illness
Cancer
Any malignant tumour positively diagnosed with histological confirmation and characterised by the uncontrolled growth of malignant cells and invasion of tissue, includes leukaemia, lymphoma and sarcoma.
The following are not covered:
- Cancers histologically classified as pre-malignant; non-invasive; cancer in situ; having borderline malignancy; or having low malignant potential.
- All tumours of the prostate unless histologically having a Gleason score greater than six or TNM classification T2N0M0.
- Chronic lymphocytic leukaemia unless progressed to at least Binet Stage A.
- Any skin cancer other than malignant melanoma having invasion beyond the epidermis (outer layer of skin).
Heart attack
Of specified severity
Stroke
Resulting in permanent symptoms
Terminal illness
When life expectancy is no more than 12 months
Basis for inclusion of total permanent disability (TPD)
TPD is automatically available and payments would be made from the living fund. There are three TPD definitions, own, own changing to suited after 12 months, and daily activities.
Other benefits
Other benefits are available, namely child and partner carer's cover and extended carer's cover.
Child and partner carer's cover
Child and partner carer's cover will pay you a lump sum on leaving full-time employment to provide full-time care for child or partner, while receiving State Carer's Allowance or whatever benefit replaces it. The child or partner must meet the definition of incapacitated. The policyholder can only make one claim during the term of their cover. Fortis will pay a lump sum equal to 12% of the current sum assured. This is equivalent to 12 months' of IP benefit. This money comes out of the living fund. If there is less than 12% of the current sum assured left in the fund, Fortis will pay whatever is left.
Extended carer's cover
This cover has the following features:
- A maximum sum assured of 1% of the initial sum assured, up to a maximum monthly benefit of £2,500
- A minimum age at outset of 17
- A maximum age at outset of 55
- A maximum age of 70 when both the cover and benefit payments end.
Optional unemployment and extended carer's cover will pay a monthly benefit on unemployment, or giving up work to care full-time for a parent or parent-in-law who is incapacitated. Optional unemployment and extended carer's cover benefit payments do not come from the living fund.
Exclusions
There are no standard exclusions applied to CI, IP, waiver of premium or TPD.
ANALYST'S COMMENT
Real Life Cover is an innovation in the protection market. Not yet widely available, it has been distributed via key business partners since launch.
Essentially a packaged product, it is designed to meet all the client's main protection needs. There is a life fund that provides life and terminal illness cover and a living fund that provides the lifetime covers. The maximum sum assured is £250,000 written on a level or 5% a year increasing basis.
The critical illness benefit of 12% of the living fund is paid on the diagnosis of cancer, heart attack and stroke. The monthly income protection (IP) benefit of 1% of the fund is paid in the case of incapacity. Up to 3% of the fund is available in the form of recuperation cover to pay for services to help the claimant return to work. Additionally, carer's cover will pay a lump sum of 12% of the fund if the policyholder has to leave employment to care for a child or partner. Unemployment cover and extended carer's cover are available as optional benefits.
Detractors will point out that the plan covers only three critical illnesses and that the IP payment term is limited. However, they will have missed the point. The protection gap is huge and continues to widen and little protection is being written. This all-in product is ideal for marketing to the majority of people and it achieves wider cover than the basic term assurance they might otherwise have bought with their mortgage.
Ben Heffer
Principal consultant, life and protection, Defaqto.
