Mortgage and business cover plan
Overview: Mortgage and business cover plan pays out a decreasing cash sum if the life assured dies or is diagnosed as having a terminal illness, or one of a range of specified critical illnesses (CIs), whichever happens first before the end of the plan.
Minimum acceptable age at commencement: 19
Maximum age at commencement of insured for accelerated CI: 59. For payment cover the maximum age attained at entry is 64.
Maximum expiry age: The maximum age attained at expiry is 64. For payment cover the maximum age attained at entry is 54.
Maximum term for accelerated CI cover: 25 years
Maximum sum assured where accelerated CI is included: £1,000,000
Critical illness cover as a percentage of life cover: Critical illness cover is an accelerated payment of the death benefit.
Minimum acceptable monthly premium: £6
Plans allowing a choice of interest rate assumptions: The cash sum payable reduces in line with the amount outstanding under a typical repayment mortgage or business loan with an assumed interest rate of 10% pa.
Guaranteed premium rates for accelerated CI: Yes
Plan available on a 'life of another' basis: Yes
Monthly policy fee: The policy fee is implicit within the premiums paid.
Waiver of premium available: Payment cover - if any of the following happen, after 26 weeks Scottish Widows will start making your plan payments ourselves:
An illness or injury prevents you from carrying out your normal job, and you are not doing any other kind of work.
You are not in paid work, but illness or injury confines you to home and means you are unable to carry out normal household tasks.
Scottish Widows will continue making the payments for you until:
you able to return to work or carry out normal household tasks; or
the plan ends, whichever is sooner.
Scottish Widows may include special terms for this cover. If we do, we'll tell you about them when we accept your application. For example, this could mean the illness or injury must stop you from being able to do a job. If you make a claim for this cover and can do any job then we won't make the plan payments.
Does the plan offer an own-occupation definition of disability: Disability means, subject to provision 6.6, either
(a) if the covered life was in gainful employment immediately before the period of disability, he is totally unable due to illness or injury to follow his normal gainful occupation and is not engaging in any other occupation, or
(b) if the covered life was not in gainful employment immediately before the period of disability, he is of necessity confined to his home or to a recognised medical institution and is unable to live without the assistance of a carer on a daily basis.
Depending on occupation of the life or lives assured, the underwriters may apply an alternative definition.
Waiver benefit covers both lives: Yes
Option to buy back life cover after a claim: No
Option to buy back CIC after a claim: No
Plan permits variations to sum assured other than GIOs: Yes: option to decrease the sum assured is available.
Guaranteed insurability option (GIO): Scottish Widows may allow you to increase the amount of cover without requiring details of your health at that time, if you:
increase your mortgage or take out a new mortgage (if your plan is already linked to a mortgage);
get married;
have a child;
legally adopt a child.
If you exercise this option, we will issue you with a quote for a new plan and your payments will increase.
We must receive your request to exercise the option, in a form acceptable to us, at our main administrative office before the expiry date and before the 50th birthday of the life assured if there is only one life assured, or the 46th birthday of the oldest life assured if there is more than one life assured.
Number of years to qualify as a non-smoker: Smokers of any description are classed as smokers: there is no exception for occasional smoking. To change to a non-smoker policy plan holders must not have smoked for 12 months before Scottish Widows will treat them as if they are a non-smoker.
Total number of critical illness conditions covered: 28
Number of core critical conditions as defined by ABI/IFAA: Seven - cancer, coronary artery bypass surgery, heart attack, kidney failure, major organ transplant, multiple sclerosis, stroke.
Number of ABI/IFAA additional conditions covered: 13 - aorta graft surgery, benign brain tumour, blindness, coma, deaf-ness, heart valve replacement or repair, loss of limb, loss of speech, motor neurone disease, paralysis/paraplegia, Parkinson's disease, terminal illness, third-degree burns.
Number of other conditions covered: eight - Aids blood transfusion, Aids occupation, Alzheimer's disease, aplastic anaemia, bacterial meningitis, Creutzfeldt-Jakob disease, progressive supranuclear palsy, total permanent disability (TPD).
Children's benefit: References in this provision to "child" are to any natural or legally adopted child of the life assured who is financially dependent on the life assured.
5.1 Payment event
Subject to provision 5.4, if, before the expiry date
(a) a child contracts a CI as defined in provision 5.3 after age six months and before age 18 years,
(b) the relevant child survives for at least 21 days after diagnosis of the CI by a consultant specialising in the appropriate area of medicine, and
(c) we receive notice of this in accordance with provision 5.4,
then on the day of receipt by us at our main administrative office of such proof as we may require of the critical illness, a cash sum of the amount specified in provision 5.2 will become payable. No more than one cash sum will be payable under this policy in respect of the same child.
Child maximum benefit: The cash sum payable will be the lesser of (a) 50% of the sum assured, and (b) £25,000, less the total value of any benefits payable in respect of a critical illness or other illness of the child under any other policies issued by us.
Number of TPD definitions: Three - own occupation, suited, activities of daily work.
Own occupation definition: A disability resulting from illness, accident, or injury:
a) as a result of which you have been unable, for a period of six consecutive months, to perform the material and substantial duties of your occupation, and
b) which, in the reasonable opinion of our Principal Medical Officer, is permanent, meaning that, even with appropriate medical intervention and rehabilitation, there is no reasonable prospect of you ever being able to perform the material and substantial duties of your occupation. You must have been in gainful employment immediately before the start of the disability.
Suited occupation definition: A disability resulting from illness, accident or injury:
a) as a result of which you have been unable, for a period of six consecutive months, to perform the material and substantial duties of your occupation or to follow any other occupation to which you are suited taking into account your education, training and experience, and
b) which, in the reasonable opinion of our Principal Medical Officer, is permanent, meaning that, even with appropriate medical intervention and rehabilitation, there is no reasonable prospect of you ever being able to perform the material and substantial duties of your occupation, or to follow any other occupation to which you are suited taking into account your education, training and experience. You must have been in gainful employment immediately before the start of the disability.
Number of exclusions applicable to critical illness: Five - criminal acts, drug abuse, medical advice, self inflicted, war risks.
Analyst's comment
Scottish Widows has updated its term assurance range by introducing a guaranteed rate CI term plan covering the market-average 28 conditions. The plan omits a number of the high profile, low incidence 'other' conditions that could distort consumer perception of the scope of the cover.
The plans are available on a level or mortgage/business protection basis with cover available up to a maximum of £1,000,000 - which, in common with the market trend, includes all policies with all providers. Cover can be arranged through to age 64 with a maximum term of 25 years.
The product ticks all the 'must-have' boxes', particularly for mortgage protection. The limits for children's CI and GIO increases are in line with the top of the market, although the age limit of 49 for exercising the GIOs is lower than is available from a number of plans. Own occupation definitions are offered for both waiver of premium and total permanent disability; however, waiver can only be arranged on a six-month deferred period basis.
The major omission is indexation options from the 'level' version of the plan. While this may indicate that Scottish Widows is targeting the mortgage market, this may limit its popularity with those looking for family protection cover.
In a market that has been the subject of so much pessimism, the availability of guaranteed premium rates is sure to appeal to advisers - provided, of course, that the price is right. As many CI providers continue to use 'condition inflation' as a contrivance to market their plans, it is refreshing to see a provider going back to basics by refocusing on the core policy covers.
Nick Telfer, head of life & protection, Defaqto
