Protection Menu - income protection cover
In addition to a range of life assurance and critical illness (CI) covers, the plan also aims to top-up income if:
- a child is diagnosed with a listed critical illness/total permanent disability, or
- the life assured is unable to work or maintain a houseperson's role due to disability, or
- the life assured becomes unemployed, or
- the life assured takes time of work to care for a sick child resulting in lost earnings.
Underwriting process
Progress from Royal Liver utilises tele-underwriting, offering online submission and 'little t' underwriting, using a combination of in-house underwriters and Otter Risk to collect information. The customer and IFA complete an online application including medical questions. Instant or near instant decisions are given where possible. Further underwriting, if required, employs 'little T' tele-interviewing to collect more relevant information.
Minimum premium
The minimum premium is £7.50 a month (£75 a year). This minimum applies at plan level.
Benefit type
The plan provides a replacement income if the life assured suffers a disability that prevents them from working within the term of the cover.
Age at entry
The minimum age attained at entry is 16. The minimum age attained at entry for unemployment benefit is 18. The maximum age attained at entry for income protection (IP) cover is 59.
Maximum annual benefit
The maximum benefit available is calculated as the lesser of £200,000 or 50% of pre-tax monthly earnings, less any deductions. There is no minimum benefit.
Minimum policy term
Five years
Termination age
The life assured chooses for the cover to end when they think they would no longer need the benefits between age 50 and 65 but no later than the life assured's planned retirement date.
Increase or decrease retirement age after start date, other than guaranteed insurability options (GIOs)
The plan term can be increased or decreased. The term of the plan can be increased, subject to a maximum overall of 40 years and underwriting. An increase in term will be processed by a recalculation of the whole benefit premium based on the then current age, outstanding term and premium rates. The term of the plan can be decreased subject to a minimum remaining term of five years.
Increase or decrease benefit amount after start date
The benefits can be increased or decreased. The sum assured may be increased, subject to underwriting. The premium will only be calculated for the increase in sum assured and will be processed as a new plan for the top-up. Sum assured decreases are permitted at any time and will result in a reduction in the premium. However, the new premium will not be recalculated as a whole.
GIOs available
If the life assured is under age 55, has been accepted on standard rates and was in good health when the cover was originally underwritten, we will include the following GIOs will be included, which will enable the planholder to increase the benefit amount at any time without any further underwriting on the occurrence of the following special events:
- Career change or salary increase option - maximum increase allowable is the increase in salary or 50% of existing benefit to a maximum of £10,000 a year.
- Marriage - maximum increase allowable is 50% of existing benefit to a maximum of £10,000 a year.
- Childbirth/adoption - maximum increase allowable is 50% of existing benefit to a maximum of £10,000 a year.
- Mortgage - purchase of a new property or increase in mortgage loan due to home improvements. The maximum increase allowable at any one time is the lesser of the increase in the annual mortgage repayment amount, 50% of the existing benefit, or £10,000 a year.
Benefit amount index linked
There is an option to escalate the cover. To be selected at outset of main cover, under the inflation protection option. If chosen, the benefit of the main cover will increase in line with the declared value of the retail prices index, up to the maximum allowed under the plan. Premiums will automatically increase on each cover anniversary. The amount of the increase will depend upon the amount of increase in cover; the age of the person covered at the time of the increase; the remaining term of the cover; the rate charged at the date cover started; where premium rates are banded, the amount of the original benefit. The benefit increase will never exceed 10%. Where selected, indexation applies throughout the plan term.
Number of indexation refusal
An increase may be declined no more than three times during the term of the cover. If the planholder declines to proceed with three escalation increases over the lifetime of the cover, then all benefit and premium escalation bases will be removed.
Waiver of premium available
Waiver of premium is included automatically with IP cover.
Waiver of premium deferred period
Early waiver of premium will, in the event of a valid IPclaim, waive all the IP premiums. For example, if the deferred period was 52 weeks, and a claim was validated in week 10, the premiums would then be waived from that point onwards - saving 42 weeks worth of premiums. This product feature is included at no extra cost.
Guaranteed premium rates available
Guaranteed premium rates for the entire term of the cover are available for IP. Premiums do not automatically increase at set intervals.
Reviewable premium rates
Not available.
Terminal illness benefit available within the policy
Terminal illness is described by progress from Royal Liver as "an advanced or rapidly progressing incurable illness where, in the opinion of an attending consultant and Royal Liver's chief medical officer, the life expectancy is no greater than 12 months". This benefit may not be exercised in the last 12 months of the plan.
Houseperson's cover available
A 'houseperson' is a definition that progress from Royal Liver applies to someone who does not work, but still requires protection to cover a mortgage or other bills. In this instance, the maximum benefit that progress from Royal Liver will provide is £20,000 a year. There is a choice of deferred periods available: 13, 26 and 52 weeks. This benefit can be chosen at outset or it will automatically apply if a career or unemployment break is taken. The definition of incapacity will be assessed upon the life assured's permanent inability (if necessary with the use of artificial aids or appliances, but without help from another person) to carry out three or more of the 'activities of daily working'.
Carers' benefit
The plan will pay a lump sum equal to four times the life assured's monthly IP benefit.
Proportionate benefit available
Yes. If the life assured is incapacitated and suffers a loss of earnings, but returns to work in a different occupation than pre-claim on reduced earnings.
Rehabilitation benefit available
Yes. If the life assured is incapacitated and suffers a loss of earnings, but returns to their own occupation on a part-time basis on reduced earnings, then progress from Royal Liver will pay a proportion of the full benefit from the end of the deferred period, or at a later date if full benefit is already in payment.
Relapse benefit available
Yes. If another claim arises for the same reasons as the initial incapacity within 12 months of the life assured returning to work, then a deferred period will not apply.
Total permanent disability benefit available
Total permanent disability cover is not automatically included with IP. However, lifestyle support benefit is included with IP. If the life assured fails three out of the nine 'activities of daily working' at the end of the deferred period, then a one-off lump sum benefit of three times the monthly IP benefit becomes payable at that time.
Disability counsellors available
Yes
Cover operates worldwide
Worldwide cover is available, within certain limits. However, the life assured must be UK resident at outset of the plan.
Maximum % of income insurable
There is one salary tier. The maximum benefit available is the lower of 50% of the annual income of the relevant life assured at the date of the claim; and £200,000 less the sum of other continuing income, pensions arising from the disability, and other insurance payments. No deductions are made for state benefits or any regular income from savings or investments.
Dividend income included
Dividend income is included within the income calculation. The dividend income must stop being paid as a result of the incapacity when a life assured commences a claim.
Standard definition of disability
There are three different definitions of incapacity that progress from Royal Liver uses to assess an IP claim. The definitions are dependent on the life assured's occupation: 'own occupation' for occupation classes one and two; 'own and suited' for occupation class three; 'activities of daily working' for occupation class four or houseperson.
Deferred period
There is a choice of deferred periods available for occupation classes one to three: four, eight, 13, 26 and 52 weeks. For occupation class four and houseperson's the deferred period list is restricted to 13, 26 and 52 weeks.
ANALYST'S COMMENT
Following the significant improvements to the critical illness element of the Protection Menu in October 2008, progress has now enhanced the income protection (IP) element too.
Benefit levels have been improved and there are now no standard exclusions. The maximum benefit limit has been increased from £150k to £200k a year and the limits for the guaranteed insurability options (GIOs) have been increased from £8,000 to £10,000 a year. The houseperson's benefit has been increased from £15,000 to £20,000 a year.
Progress is one of only five providers whose IP plan incorporates a carers' benefit. Most pay an income if the insured has to give up work to care for a sick dependant. In the case of progress, a lump sum benefit equal to four times the monthly IP benefit is paid if a child suffers a defined critical illness or becomes totally and permanently disabled. The survival period for claims is now only 14 days, reduced from 28 days. A deferred period no longer applies in respect of terminal illness claims.
Progress has gone some way to addressing the thorny issue of financial underwriting with its decision to improve the definition of income for company directors; the maximum earnings/dividends can now be based on earnings from one year, rather than the average of three years.
With these enhancements and the proven online processing, those IFAs lucky enough to have an agency agreement with progress should be able to serve the majority of their clients' protection needs.
- Ben Heffer, Principal consultant, life and protection, Defaqto.
