Lifecare is AXA Sun Life's non-qualifying whole of life critical illness contract. Originally launch...
Lifecare is AXA Sun Life's non-qualifying whole of life critical illness contract. Originally launched in January 1988 under the AXA Equity and Law brand name, Lifecare took its current form 10 years later when AXA acquired Sun Life in 1998 and replaced Sun Life's flexible whole of life critical illness plan.
However, the Sun Life plan was not scrapped altogether. Stephanie Gold, business development manager at AXA Sun Life, explains: "We took the best features of each plan, combining them into an improved product. So if there was a feature in the Sun Life plan that was not in the AXA plan, we did our best to incorporate it - for example, the flexible indexation feature that was not included in the original AXA plan."
According to Gold, it is the policy's unusual structure that makes it stand out in the market.
"The plan enables customers to have four individual policies within the one plan. As a result, the plan has the potential for four separate payouts," she says. This is therefore a particularly attractive plan for couples looking to purchase joint cover as it enables them to purchase standalone life cover and standalone critical illness cover for each partner.
"It gets around the problem of a spouse being left without cover when the other spouse dies or suffers a critical illness," says Gold.
In recognition that each partner is likely to have different earnings and different protection needs, each policy within the plan operates independently of another.
Gold explains: "Each policy is autonomous. For example, one could be written in trust and each could have different levels of cover. Their only common link must be the same ownership and the same non-qualifying status."
In terms of coverage, the plan is comprehensive and covers 26 conditions using the 20 model definitions prescribed by the ABI. Most recently added to the range are aplastic anaemia, end-stage chronic lung disease and bacterial meningitis. In certain areas the definitions used also improve on those used by the ABI. For example, Gold says: "Under the ABI definition for benign brain tumour it says there must be a permanent deficit to the neurological system and we do not require this. Children's cover is also automatically included in Lifecare for all children from 30 days old to 18 years."
This benefit is included free of charge and the cover provided is the same as adult cover, although permanent total disability and loss of independent existence is excluded. The sum assured is limited to £15,000.
The plan also includes a number of factors designed to make it as flexible as possible. For example, an indexation option can be selected to prevent inflation reducing the real value of the sum assured. The sum assured can increase by 5%, 10% or RPI annually, according to Gold. However, if the cost of increasing the sum assured becomes too expensive, customers can remove the option and replace it when they can afford it.
"Customers do not lose the indexation option if they do not exercise it on a yearly basis," she says.
Added features
However, factors other than inflation may cause either a business or an estate to grow, making current protection levels inadequate. As a result, features have been added to prevent this.
"If the cover was taken to protect an interest in a business and its value increases, or if it was taken out for inheritance tax purposes and the tax liability changes, the sum assured can be increased without further underwriting," says Gold.
Guaranteed insurability is also available for birth or legal adoption. Policyholders can increase their sum assured on the birth of a child or on legal adoption by up to 30% of the previous level as their protection needs increase. The maximum increase is £15,000 per child, subject to an overall maximum of £50,000. Cover is provided through an additional plan and no further underwriting is needed. Redundancy and maternity options are also available.
The redundancy option allows up to six months' contributions to be missed while the maternity option allows contributions to be missed from three months before the birth and up to six months after. Contributions need not be repaid and cover remains intact.
"This enables policyholders to keep their plans in force when they are less able to afford them," says Gold. If the plan is taken out for business purposes there is also a facility to change the name of the life assured.
"If an employee with keyperson insurance leaves the company and is replaced, the name of the life assured can be changed subject to underwriting."
As the plan has an investment element, policyholders can exercise a cash withdrawal facility. The minimum drawdown is £200 and £400 must remain in the fund. If this facility is used AXA Sun Life will then review the new sum assured
"It is important to check the fund is sufficient to support the required level of protection. If too much is taken out, the premium may need to increase or the cover be reduced."
To raise more capital the policy can be cashed in and replaced.
"Policyholders can immediately take out a new policy but the level of cover can only be the original sum assured less the cash value of the plan. It allows customers to get capital and maintain a decent level of cover."
Although this is the only plan of this type on the market, Gold is sure that flexible critical illness will lead the way. "Flexible products will be important with products that can adapt and change throughout the policyholder's life cycle," she says.
