Life cover can be arranged on a fixed term, rolling term or whole of life basis. Critical illness (...
Life cover can be arranged on a fixed term, rolling term or whole of life basis.
Critical illness (CI) can be arranged on either an accelerated death benefit basis or on a stand-alone basis. This cover can be on a fixed term or rolling term.
The following optional benefits are available at extra cost: total permanent disability (TPD) benefit; premium protection benefit; cover reinstatement option;
The following optional benefits are available at no cost: continuing cover option; inflation proofing; guaranteed insurability options (GIOs); instalment option for claim payments.
Underwriting process
Underwriting, if required, may include requests for medical or GP report.
Minimum and maximum ages
Minimum acceptable age attained at commencement is 16 and the maximum age at outset is 65 attained. The minimum term is 10 years. There is no maximum age for rolling term contract.
Minimum and maximum benefits
The minimum sum assured is £1,000. The maximum sum assured for personal protection CI cover is £1,000,000.
Minimum and maximum premiums
The minimum monthly premium is £25 and the minimum annual premium is £250. Single premiums are not accepted under the plan.
Guaranteed premium rates
This rolling term contract gives guaranteed insurance for life with premiums guaranteed for 10 years at a time. Just before the end of the term, Skandia offers the customer the option to renew the insurance (roll the term) for a further 10 years.
Automatic sum assured indexation available
The sum assured can increase in line with the retail price index (RPI), if required. Skandia Protect offers two inflation options to all policyholders. When the policyholder takes out the policy, they can choose to use the inflation option automatically or on request. The 'automatic inflation option' works by routinely increasing the sum assured each year. Under the 'inflation option on request', Skandia will offer to increase the sum assured each year.
Issue basis
The policy can be arranged on a single life basis. The policy can be arranged on a joint life, first claim basis. A rolling term policy cannot be arranged on a joint life, second claim basis. There is no option to insure three or more lives on a single policy within a plan. Cover for more than three lives assured can only be achieved for key employee protection by using several policies within a plan, with a different key individual insured on each policy.
Partnership protection plan available
When a Skandia Protect policy is taken out for business assurance, the policyholders do not have to be the same for each policy.
Waiver of premium available
Premium Protection Benefit can be added to the contract at any time before age 65, subject to underwriting.
Default waiver definition of disability
For lives assured with mainly office-based professional or clerical occupations, Skandia will offer the 'own occupation' version. For lives assured in a manual occupation or a role in a non-clerical workplace, Skandia will usually offer the 'activities of daily work' version.
CI buy-back
Available after 12 months. The maximum age for CI buy-back is below age 61.
Option to vary term after start date other than by insurability
The rolling term contract can be extended every 10 years with no underwriting.
Plan permits variations to sum assured other than GIOs
The sum assured can be decreased at any time without underwriting.
GIOs
There are a number of guaranteed increase options available without any medical underwriting. If the life assured marries, or undertakes a civil partnership, they may increase the sum assured within six months of the marriage or civil partnership.
On the birth or legal adoption of a child by a life assured, the sum assured can be increased by £50,000 per single event. Where the life assured has increased his or her existing mortgage from a usual lending source, the policyholder may request, within six months of that mortgage raise, an increase in the sum assured without underwriting.
GIOs on promotion or salary increase
The option is available before the life assured reaches age 56 and is the lower of five times the increase in annual basic earned income, or 25% of the then current sum assured.
GIOs on an increase in Inheritance Tax (IHT) liability
The sum assured can be increased, without underwriting, by the lowest of the increase in the proportion of the IHT liability covered since the previous policy review date, or the greater of 10% of the sum assured or an amount equal to inflation over the previous year as measured by the RPI. In the case of change to IHT rates or tax bands, the increase will reflect the effect of the legislative change on the proportion of the liability covered immediately before the change. There is no overall limit by which the sum assured can be increased under this option. The maximum overall increase is the lower of £100,000, or 100% of the original sum assured.
GIOs on increase in business liabilities
There are three business increase options available, covering increases in business value, business loans and value of key individuals.
Business assurance increase option
With effect from the next policy review date, the sum assured can be increased, without further medical evidence, by an amount equal to the lowest of the increase in the value of the life assured's interest in the business, or the greater of 10% of the sum assured and inflation since the option date, as measured by the RPI.
Business loan option
If the policy has been effected by a business as additional security to cover a loan taken by the business, the policyholder may request at any time before the next review date an increase in the sum assured, without further medical evidence by the lower of an amount equal to the increase in the loan, or £250,000.
Keyman cover increase option
The customer may choose to increase the sum assured from the next review date, without further medical evidence, by the lowest of an amount equal to five times the increase in annual basic earned income of the life assured, or 25% of the then current sum assured, or £50,000.
Other GIOs offered
A GIO is available upon retirement before the age of 66 to replace the cover lost under an occupational pension scheme. The maximum sum assured available is the lower of the life cover lost upon retiring from an occupational pension scheme, or £100,000.
Joint life separation
A GIO is available when two lives assured divorce, dissolve or annul a civil partnership, allow-ing two new single life policies to be effected.
Accidental death benefit
Skandia provides serious accident benefit on a policy including CI cover, up to a maximum of £50,000.
Sum assured in instalments
The customer can choose whether Skandia pays the life cover as a single cash sum or in instalments. Under the instalment option, Skandia pays 25% of the sum assured each year for four years, without interest. For personal protection, a customer can choose the instalment option at any time.
Free cover during underwriting
Free cover does not apply if the application is for stand-alone CI cover. If applying for CI with life cover, the maximum free cover period is six weeks from the date the application form is signed.
Health and wellbeing services
Health and wellbeing services are offered. 'Roadtohealth' is an online service that is free of charge to Skandia Protect policyholders. It allows them to assess their current state of health and will suggest ways in which they could improve it. This confidential service will be provided by a third party.
Severity-based CI
There are a number of conditions that make a severity-based payment.
- Angioplasty
- Keyhole coronary artery bypass surgery
- Less extensive third burns
- Loss of either one hand or one foot
- Loss of, or the loss of use of, one eye
- Low grade prostate cancer
- Permanent pacemaker insertion
- Significant visual impairment
For a valid claim in respect of the above, Skandia will pay the lower of 20% of the sum assured, or £10,000.
Survival period for CI claims
The survival period for a claim on a stand-alone CI cover policy is 14 days.
Children's benefit
Children, including legally adopted children and stepchildren from a legally recognised marriage or registered civil partnership, are covered for up to £25,000. Life cover, mastectomy benefit, low grade prostate cancer benefit and serious accident benefit are not covered for children, nor are pre-existing conditions.
Child maximum benefit
Skandia will pay the lower of 50% of the sum assured or £25,000.
Minimum age for children's benefit
30 days
Child maximum age
Cover ceases when a child reaches the age of 18.
Pre-existing conditions excluded
Pre-existing conditions are not excluded in re-lation to the main plan benefits but a pre-existing conditions exclusion applies to a child's CI claim.
Analyst's comment
Skandia has recently improved its protection proposition. Critical illness (CI) cover is now available to age 65 at outset and to a maximum age of 75 at the end of a fixed term. Three more critical illness conditions have been included: aplastic anaemia, creutzfeldt-jakob disease (CJD) and liver failure. Two definitions are now more generous than the Association of British Insurers standard, namely, heart valve replacement and coma.
Unfortunately, the addition of critical illnesses that are rare and add little real value has been a feature of product development in recent years and although Skandia cannot be blamed for simply bringing itself into line with other providers, these additions are unlikely to result in many more claims.
68% of products in the market cover liver failure and although it is the fifth biggest killer in the UK, alcohol abuse is its most common cause and this is specifically excluded by insurers. 88% of products cover CJD, but the condition is rare, and variant CJD cases are widely believed to have peaked. 73% of products cover aplastic anaemia, however, the incidence rate is only 0.2 per 100,000 a year. Interestingly, although Skandia did not cover aplastic anaemia previously, if as a result of the disease a bone marrow transplant was required, the claim would have been paid.
Where Skandia have made real progress is in the area of engagement. Seven severity-based critical illnesses are now included, which pay a reduced benefit for less severe cases that may nevertheless give rise to some financial hardship; and the provision of the renowned 'roadtohealth' service will provide policyholders with an excellent way to adopt a healthy lifestyle and track their progress.
- Ben Heffer, Principal consultant, life and protection, Defaqto.
