Product description: Personal Income Protection is part of a menu plan. • The life assured can cho...
Product description: Personal Income Protection is part of a menu plan.
• The life assured can choose any number of the benefits within the same policy.
• The same benefit can be chosen more than once.
• If more than one main benefit is chosen, the premium will include a discount.
Minimum acceptable monthly premium: £10
Minimum acceptable age attained at entry: 18
Maximum age attained at entry: 59
Maximum annual benefit available: £130,000 a year
Minimum policy term: Five years
Option for benefits to be paid for a limited period: No
Guaranteed insurability options (GIOs) available: Yes
Maximum age to exercise GIO: The GIOs will cease to be exercisable by the policyholder when the life assured, or if there is more than one, the elder of the lives assured, is 55.
Guaranteed insurability on marriage: When the life assured marries, the benefit amount may be increased.
This option may be exercised on more than one occasion but the total aggregate increase in the benefit amount as a result of exercising this option, and any other GIO, shall be restricted to the lowest of 50% of the benefit amount excluding any part of the benefit amount that has arisen from the previous exercise of any GIO), 50% of the benefit amount at the benefit start date, £150,000 or £10,000 a year for income protection (IP).
Guaranteed insurability on childbirth or adoption: In the case of the birth of a child of the life assured or their adoption of a child, the benefit amount may be increased.
This option may be exercised on more than one occasion but the total aggregate increase in the benefit amount as a result of exercising this option, and any other GIO, shall be restricted to the lowest of 50% of the benefit amount (excluding any part of the benefit amount that has arisen from the previous exercise of any GIO) as at the date of receipt by Scottish Equitable Protect of the application to exercise this option, 50% of the benefit amount at the benefit start date or £10,000 a year for IP subject to the maximum benefit amounts.
Guaranteed insurability on promotion or salary increase:
In a case where the life assured changes his employer, or is promoted by his existing employer, and as a direct result of such change in employer or promotion the life assured receives an increase of at least 10% a year to their basic salary, this option may be exercised.
The benefit amount may be increased by no more than four times the increase in basic salary described. This option may be exercised on more than one occasion but the total aggregate increase in the benefit amount as a result of exercising this option, and any other GIO, shall be restricted to the lowest of 50% of the benefit amount (excluding any part of the benefit amount that has arisen from the previous exercise of any GIO) or £10,000 a year for IP.
Where an option is exercised on more than one occasion the percentage increases in benefit amount on each occasion shall be added together. When the combined percentages reach 50%, no further exercise of this option is permitted.
Guaranteed insurability on increase in business liabilities:Available under business version.
Benefit amount index linked: If you choose life protection, critical illness (CI) protection, life with CI protection or IP, you can select the indexation option.
This option will help protect the benefit amount against the effects of inflation. Benefit and premium will increase each year in line with the increase in the Retail Price Index (RPI), subject to a maximum of 10%.
The increase in the RPI over the 12-month period from the latest rate published three months before the benefit anniversary will be calculated.
Plan available without indexation: Available if required.
Number of indexation refusal: If the policyholder waives the application of the provisions of this condition to escalate the benefit amount at any time, thereafter these provisions will not apply unless the policyholder has made application to recommence and Scottish Equitable Protect has accepted such application in writing after obtaining such financial information from the policyholder and evidence of good health of the life assured as Scottish Equitable Protect may require.
Age used when costing indexation increases: The indexation costing basis is based on age at outset.
Guaranteed premium rates available: Yes
Reviewable premium rates: Available as an option
Career break available: Yes
Houseperson cover available: A maximum benefit amount of £1,250 will apply to housepersons and activities of daily work definition will apply.
Deferred period applicable to housepersons benefit: The minimum deferred period that applies to housepersons benefit is 13 weeks.
Relapse benefit available: Linked claims benefit - where there is a recurrence of incapacity from the same or a related cause, it will be deemed to be a continuation of the incapacity and no deferred period shall be applicable thereto unless an intervening period of six months has elapsed.
Hospitalisation benefit available: No
Maximum percentage of income insurable: When choosing the amount of benefit, policyholders should remember that the maximum provided is 55% of total income based on pre-incapacity earnings, subject to a maximum benefit amount of £130,000 a year. This is because tax and National Insurance are deducted from normal earnings but not from the benefits paid out. By total income, we mean income that will be lost in the event of incapacity, so this could include:
• Gross salary
• Dividends
• Omission (as part of normal remuneration)
• Overtime (as long as you can prove that this has formed part of your normal remuneration over the last three years)
• P11D benefits which will be lost in the event of incapacity.
If policyholders are employed, their pre-incapacity earned income is their gross taxable earnings (including those listed above) averaged over the 12 months before they became incapacitated.
If they are self-employed, their pre-incapacity earned income is their net profit from their occupation, averaged over the last three years before they became incapacitated, as assessed for income tax and as shown on an agreed notice of assessment provided by the Inland Revenue.
Benefits will be paid on a calendar month basis only. They will be payable monthly in arrears from the end of the deferred period. A pro rata benefit payment will be made for part months at the end of a claim.
P11D benefits included in benefit calculation: P11D benefits are included as income.
State benefits deducted from benefit amount: No
Other insurances deducted from benefit amount: Yes, benefits from other income protection policies will be deducted.
Pension income deducted from the benefit amount: No, except if the pension commenced as a result of ill health early retirement and was not being received prior to commencement of the policy.
Notification of a change in occupation required: No
Analyst's comment
Multi-benefit plans have become the flavour of the month as the protection industry looks to encourage a holistic approach to protection planning. A potential spin-off is an increase in the take-up of income protection (IP) insurance, a much underused but invaluable piece of the protection jigsaw.
Scottish Equitable Protect has been one of the pioneers in this market, offering a menu of benefits under packages designed for mortgage, family or business protection.
Within its menu of benefits, IP can be arranged on either a guaranteed or five-yearly reviewable premium basis with cover available to a choice of ages up to 65.
Cover can be tailored to fit a range of client needs. Deferred periods of 4, 8, 13, 26 and 52 weeks are available together with the facility to arrange layers of benefits to slot in with employer sick-pay arrangements or other insurances. An own occupation definition is offered with alternative suited occupation- and activity-based definitions applied to higher risk occupations and housepersons benefit.
Cover can be adapted to match changing needs through a range of guaranteed insurability options, with ad hoc changes permitted subject to evidence of insurability. Indexation of benefits, based on the Retail Price Index, is available.
The maximum benefit is 55% of pre-disability income. However, as with a majority of IP plans, there is no contingency to refund overpaid premiums when benefits are restricted.
For a multi-benefit plan to be a real success each individual component must be competitive in its own distinct market and the IP element of the Scottish Equitable Protect proposition certainly does this.
Nick Telfer, head of life and protection, Defaqto
