When addressing a client's protection needs, most products deal in the term space. But with people potentially outliving these contracts, Owain Thomas looks to whole of life for rejuvenation.
“That is actually a pretty good each-way bet as an investment contract because for a £100,000 policy, it could end up costing about £11,000 over the term of the contract – and it’s a pretty reasonable bet that you’re going to die during that time,” he added.
But just to complicate matters, the nation’s rapidly increasing life expectancy rate means about a quarter of 16-year-olds are now expected to see their 100th birthday.
This prompts another awkward but necessary question for product providers and designers to answer: How long should people pay for their WOL policies?
“I think people have it in their head that they are going to die by 70 or 80. But if you take one of these out, are you just going to be paying in forever?” said James.
“It is very complicated for companies to cap the maximum age they expect people to be paying it, though. On the one hand you have a demographic which says the market should explode. But on the other, there are all the economic factors which say it’s not going to,” he concluded.
With such a paradoxical market, where does this leave a typical adviser? Garry Webb, branch manager at Roxburgh Financial Management, has no doubt that it is still a key one to be active in.
“It’s pretty much untapped as a lot of clients tend to stick to term assurance, so we view it as quite an integral part of our business,” he said.
“The population is ageing and traditional term plans are becoming out of step with life expectancy and medical advances.
“It’s also more common for couples to have children at older ages and hence not uncommon for retired couples to have ‘dependant’ children, so WOL plan solutions would seem the way forward in these situations,” he added.
With that being the case, it would suggest there may be room for a breed of products to address these diagnosed needs of the population that do not cross the £325,000 IHT threshold.
Webb believes these products are starting to arrive. He noted the PruProtect model, which includes one of the cheapest WOL propositions available, has proved particularly popular with clients wishing to activate the provider’s redundancy cover that comes with other protection policies.
“You need to take extra cover to be eligible for that and WOL tends to be the solution because it is very cheap and people view it as either for burial costs or a lump sum to give their family,” he said.
“It is a very useful add-on and I don’t think people realise how cheap it can be, particularly if they are at a young age now when fixing premiums as they should do.
“It’s a shame other providers don’t do the same sort of thing,” he concluded.
Maybe, just maybe, this market, which has been much maligned for some time, is preparing to flicker into life once again.
Only time will tell. Or in this case, a whole lifetime.
