Financial Foundations provides a choice of various types of protection that pay cash to the life ass...
Financial Foundations provides a choice of various types of protection that pay cash to the life assured or their dependants.
- Life cover - provides a tax free lump sum if the insured dies or suffer a terminal illness.
- Critical illness (CI) cover - provides a tax free lump sum if one of a range of illnesses is contracted.
- Permanent disability cover - provides a tax free lump sum if one of a range of permanently disabling conditions occurs.
- Elderly care cover - provides a sum upon diagnosis of one of a range of specified illnesses that are more likely in older age.
- Income protection (IP) cover - provides a tax free monthly income if after a specified period an accident or illness prevents work.
- Waiver of premium cover - pays the premiums if the insured is unable to work.
Minimum and maximum age
The minimum age at entry is 17 attained. The maximum age of joining this plan depends on the options chosen.
- Life cover - 79 attained
- Elderly cover - 65 attained (one of the CI options)
- Other CI options - 64 attained
- Permanent disability cover - 64 attained
- IP Cover - 59 attained.
The minimum term is five years.
Minimum and maximum sum assured
Minimum sum assured is £5,000. For life cover, the maximum sum assured is £10,000,000 for level life cover, or £4,000,000 if the indexation option is selected. For CI cover, the maximum sum assured is £2,500,000 for level cover, or £1,000,000 if the indexation option is selected.
Minimum premium
£20 is the minimum monthly premium. £200 is the minimum annual premium. If chosen at outset the minimum single premium is £1,000. For later single premiums the minimum is £500.
Low start version available
The plan can be set up as a low-start plan using the premium-only escalation option.
For a level-benefit plan, the premiums can be set to escalate at a rate between 1% and 20% a year. The duration of the escalation period can be for a chosen number of years or for the lifetime of the plan. Premiums can escalate independently of the sum assured. Where benefits are linked to the retail prices index (RPI), premiums and cover both increase by the same percentage.
Premium escalation
Premium can escalate independently of sum assured. Premium can escalate in line with RPI. Premium can escalate in line with a fixed percentage.
Charges
There is a policy fee of £2.72 a month, which normally increases each year in line with inflation. There is an initial charge which is spread evenly over the first two years. The amount will depend on the age of the life assured and the level of premium.
Number of unit-linked fund links available
There are 22 unitised funds available.
Clients can select up to four funds at any one time.
Switching
Clients can switch at any time. The minimum switch amount is £100 and at least £250 must remain in each fund. The first switch each policy year is free and so are all subsequent switches at present.
Ad hoc premium changes during policy term
Increases in payments are allowed at any time. Premiums can be reduced after the first two years have elapsed. The cost of providing cover will continue to be deducted from the fund value. If the fund value becomes insufficient to cover these costs, then cover will cease.
Increase sum assured subject to underwriting
The policyholder can apply to increase the amount of their insurance protection and add new benefits to the policy. This will normally result in a premium increase. Benefit can be reduced or removed completely.
Waiver of premium available
Waiver of premium cover is available as an optional benefit, automatically included if IP cover is chosen, and housepersons can be covered. A 26 week deferred period on the waiver of premium is available.
Waiver of premium available
Waiver of premium cover is available as an optional benefit, automatically included if IP is chosen, and housepersons can be covered. A 26 week deferred period on the waiver of premium is available. The minimum age at entry is 18 next birthday. The maximum age at entry is 55 next birthday. Benefit expires at age 60 or the IP expiry age if later. Own/suited or ADL's definitions can be used to substantiate a WOP claim. If the policy benefits and premiums are indexed then the waiver of premium will be indexed. The cost of including waiver benefit is 3% of total premium for single plans, 6% for joint plans. Joint waiver cover is available.
Cover bases
Joint life cover is available with independent benefits on each life. Joint life with benefits payable on second death is available with a life only policy. Joint life with independent benefits on each life available with stand-alone CI only. The plan can be used for keyperson protection and partnership/shareholder protection by using the 'life of another' feature.
Benefit basis
This policy provides full life cover although it is also possible to add other menu benefits as selected. A policy may be set up with only CI, or other critical health options and/or IP benefit. Life cover would be an option available to such a plan. The plan is available without life cover.
CI cover as a % of the life cover
For the critical health options, the policyholder decides whether they require prepayment or stand-alone benefits. If they choose prepayment benefits, cover is in the form of an advance payment of part or all of the life cover on their policy. Following a claim the amount of life cover reduces by the amount of benefit paid. If they choose stand-alone benefits, the benefit is kept completely separate from any others they may have chosen and the amount of life cover is unaffected by any claim under this option.
If they have chosen a stand-alone critical health benefit, the claim amount will be paid when they survive for 14 days after their diagnosis.
Guaranteed insurability option (GIO)
A benefit increase option is provided without further medical underwriting as long as the acceptance of the plan was on normal terms.
GIO on marriage/civil partnership
Increases must not exceed, in total, the lower of 50% of the total of the amount of death benefit and any critical health benefit then in force, less the amount of such benefits that are affected under options in any other policy with Lincoln, or £100,000.
GIO on childbirth or adoption
Increases under this section must not exceed, in total, the lower of 25% of the total of the amount of death benefit and any critical health benefit then in force, less the amount of such benefits that are affected under options in any other policy with Lincoln, or £50,000.
GIO on moving house/increase in mortgage
Increases under this section must not exceed, in total, the lower of 50% of the total of the amount of death benefit and any critical health benefit then in force, less the amount of such benefits that are affected under options in any other policy with Lincoln, or £100,000.
GIO on increase in business liabilities
Not available
GIO on an increase in inheritance tax liability
If there is an increase in the policyholder's prospective IHT liability, increases can be made to the amount of death benefit and to the amount payable under the critical health benefit, not exceeding, in total, the lower of 25% of the total of the amount of death benefit and any critical health benefit then in force, less the amount of such benefits that are affected under options in any other policy with Lincoln, or £100,000.
Number of years before the first premium review
The first premium review is at 10 years, where the proposer is under the age of 65 next birthday at entry, five years for those aged 65 to 70 attained and one year for older ages. For policies with more than one life insured, the age next birthday of eldest life is used. Subsequent review periods are not guaranteed.
Permanent health insurance option
IP is available under this plan. See table.
Divorce/dissolution option
Where a married or civil partnership couple share a joint policy and they divorce, or there is a formal dissolution of their civil partnership then, providing both lives are under age 65, a new policy may be set up for each life insured, without the need for further medical underwriting.
Cover continuation option
This option applies if there are two lives assured with life cover arranged on a 'joint life, first death' basis. Following a valid life cover claim or, if applicable, a valid prepayment critical health cover claim (other than for angioplasty) then, providing the life insured who is not the subject of the claim is under age 65, a new policy may be set up for this individual.
Premium holiday option
Premiums can be suspended, but to maintain the cover in place there must be an adequate value in the benefit fund. Once the fund has eroded to nil, the cover will cease.
Number of CI conditions
All 23 Association of British Insurers defined conditions are covered. Other conditions covered: angioplasty, aplastic anaemia, bacterial meningitis, cardiomyopathy, liver failure, loss of independence and pre-senile dementia.
Children's benefit
Free cover is provided for children (aged 30 days to 21 years - those over 18 must be in full time education) of the life insured up to the lower of £15,000, or 50% of the parent's cover.
Analyst's comment
Marketed as a 'flexible policy for protection and preservation', Lincoln's Financial Foundations is a multi-benefit whole of life product. It incorporates cover for a good range of critical illnesses, permanent disability, elderly care, IP and waiver of premium in addition to life cover.
Financial Foundations offers maximum flexibility. It has a full range of unit-linked funds. Premiums and benefits can be altered during the course of the policy subject to underwriting and guaranteed insurability options allow cover to be increased on the occurrence of life changing events like marriage or childbirth with no further underwriting. The Inheritance Tax (IHT) increase option enables benefits to keep pace with the increase in IHT liability. Benefits and premiums can increase in line with RPI or, for a level benefit, premiums may start low and increase by a fixed percentage between 1% and 20%. This addresses the affordability issues faced by many clients.
In March 2008 Lincoln launched its tele-interviewing underwriting service, which helps IFAs place the business on the books more quickly and reduces the risk to the insurer and the IFA resulting from non-disclosure.
The number of whole of life products remaining on the market is relatively few, most providers preferring to base their protection propositions on level term assurance. Financial Foundations has the clear advantage of paying out on death whenever that may occur. This makes it an essential product for IHT planning as well as a flexible solution to the majority of clients' protection needs.
Ben Heffer, Principal consultant, life and protection, Defaqto.
