Mike is 52 years old and would like to purchase life cover. He underwent angioplasty two years ago and has since given up smoking and lost weight - he is now within his recommended body mass index and has had no further health problems. Only one of Mike's arteries was affected and the narrowing of his artery was considered mild. Mike is married, with one son and would like to purchase life cover of £100,000. What options are available?
This is a case where detailed experience of different providers' underwriting approaches is essential. We would certainly pass this case through our special risks desk to ensure Mike obtains the best terms possible.
A medical report will definitely be required from his GP to confirm the current situation. Before this is requested we would recommend Mike visits his GP to ensure up-to-date blood pressure and height/weight data is present on his medical records. This should prevent the underwriters from having to request a medical screening to obtain such data, which would obviously cause delays.
While Mike has certainly helped his case by quitting smoking and losing weight, the best he can hope for is a 100% rating. The rating would be higher if it was a main artery or even a decline, hence Mike needs to be made aware of this from the outset to manage his expectations. Critical illness and waiver of premium would definitely not be available.
We could not recommend a specific provider until all the medical evidence has been received, however on a standard basis £100,000 of level cover to age 65 years it would currently cost £33.40 per month – Mike should expect to pay at least £65 per month.
As an alternative I would encourage Mike to consider family income benefit of £1,000 per month indexed to age 65. This would pay a guaranteed tax-free income for the remainder of the term and is a cheaper option, Mike should expect to pay upwards of £50 per month for this type of cover.
Roger Edwards, Bright Grey
Given Mike's recent health scare it is very important that he makes sure he has adequate life assurance to provide for his wife and son.
An underwriting loading is almost inevitable given his recent illness. The underwriters will want to get further information about Mike's condition and find out more about the angioplasty operation that he had so that they can make a decision on what loading to apply to the premium. He has been fit since the operation two years ago and so he could probably expect to have to pay a loading of over 150% – had he been free of health problems for longer than two years the loading might have been lower.
Using the Bright Grey protection plan, the basic premium for £100,000 life cover for a 13-year term, up to his retirement age of 65, would be £37.58. The underwriting loading would increase the premium to £90.04. Mike should also consider whether he might need more cover in the future and could therefore take the plan out on an increasing basis. He could choose to increase the cover by RPI or by up to 10%. This would not increase the initial premium and Mike would have the choice to decline up to four increases before losing the facility.
The underwriting loading does increase the premium quite a bit so if Mike has concerns about affordability, an alternative would be to take the life assurance as family income benefit – which would pay an income of £7,700 over the balance of the term – approximately £100,000 over 13 years. The base premium for this would be £20.13 and this would increase to £46.42 as a result of the underwriting loading.
Nick Kirwan, Abbey for Intermediaries
Someone in Mike's position will realise the importance of life cover. But despite his improved health, his history of coronary artery disease means he is now a higher insurance risk than he was.
He should have no problems in taking out life cover but, as it is likely to be at a higher premium, it's wise to see an IFA who can advise on which insurers are likely to offer the most favourable terms.
It's not clear what other insurance policies Mike or his wife already have, but if he has mortgage protection or any other life or health insurance policies taken out before his coronary artery disease, then he really should make sure he keeps these in force.
If he cancels them or tries to rebroke them he'll probably find that they will no longer be available on the same terms. If they have an existing menu plan, adding the new life cover to this could save money.
Mike should take extra care if he decides to take out other types of insurance containing pre-existing conditions (PEC) exclusions – for example, the medical expenses cover included in travel insurance, some private medical insurance (PMI) as well as accident and sickness policies.
He should be aware that a PEC exclusion is likely to mean that he won't be covered for anything directly or indirectly related to his previous coronary artery disease. Better to be aware of this up-front and, if possible, choose a fully underwritten policy instead.
