The plan is a regular premium protection plan, designed to provide individual protection to cover mo...
The plan is a regular premium protection plan, designed to provide individual protection to cover monthly mortgage payments and, or, living expenses if the policyholder is unable to work due to accident, ill health or unemployment.
The four types of benefit within the plan are:
- Mortgage payment protection insurance (MPPI) excluding unemployment benefit (level cover only).
- MPPI including unemployment benefit (level cover only).
- Living expenses protection excluding unemployment benefit (level or index-linked).
- LEP including unemployment benefit (level or index-linked).
Maximum age attained at entry
65 attained.
Maximum annual benefit available
The maximum combined payment in the event of a successful claim is 50% of gross income at the point of claim, less any of the following payments (before tax) which will continue during a claim period:
- Payment from any other accident, sickness or unemployment insurance.
- 60% of ill health or retirement benefits from any source.
- 60% of any other income (employed/self-employed. Pension earnings excluding income earned before they became incapacitated).
- State pension benefits.
The maximum benefit from the plan is £50,000 a year at outset. This limit also applies to increases in benefits, including guaranteed insurability options (GIO) and does not apply to index-linked benefit increases.
Gross income is defined as the gross income earned from the life assured's normal occupation in the 12 months before incapacity starts, less any expenses which are allowable against Income Tax. State benefits, and earnings from savings and investments, are not taken into account.
Minimum policy term
Five years.
Termination age
There is no explicit maximum term but all benefits must end on the plan anniversary after the life assured's 70th birthday.
Monthly policy fee
The plan includes a single administration fee included within the rates and applies irrespective of the number of benefits in the plan.
Increase/decrease the retirement age after start date (other than GIO)
Yes, at any time. An increase in risk will be subject to underwriting.
Increase/decrease benefit subject to underwriting
Yes, at any time. An increase in risk will be subject to underwriting.
GIO available
The following options will be included automatically on all new plans with no additional underwriting. There are four events when the option can be used:
- Mortgage increase on moving house.
- Marriage/civil partnership registration.
- Birth/adoption of a child.
- Divorce/dissolution of civil partnership.
The following limits apply to the options:
- Any increase will be limited to 50% of the benefit specified in the benefit schedule at the time the option is exercised.
- A maximum increase of £6,000 a plan year applies for each GIO event.
- The maximum age to effect a GIO is age 49 attained.
- The total benefit level must be no more than 50% of gross income, minus any existing ill health/unemployment protection and ongoing employed/self-employed/pension earnings or potential cover subject to an overall maximum of £50,000 a year, plus any index-linked increases. The premium for the increase in cover will be based on the rate which applies at the time for the insured's age, occupation and smoker status. Any special terms which applied to the original cover will apply to the increase. There will be no limit on the number of times someone can exercise GIOs. The terms and conditions applying to the benefit at outset will apply to all GIO increases.
Benefit amount index-linked
Indexation is available as an option. For living expenses protection the benefit may be level or index-linked. Both the benefit level and premium will increase on each anniversary of the start date of the plan in proportion to the increase in the retail prices index for the 12 month period ending three months earlier. Indexation can be suspended for a year on request and reinstated the following year without further medical or occupation underwriting. If indexation is suspended for two consecutive years, future index-linking will be forfeited. For MPP, the benefit is only available on a level cover basis.
Number of indexation refusals
Indexation can be suspended on request at each plan anniversary and reinstated within two years of suspension without further medical or occupation underwriting. If indexation is suspended for more than two consecutive years, it can be reinstated subject to normal alteration rules.
Waiver of premium (WOP) available
Waiver of premium is included automatically for the total premium, including any index-linked increases. Premiums will be waivered while a valid claim is being paid. The WOP deferred period is the same as the deferred period for the IP. The maximum age at entry for waiver of premium is 65 attained. WOP must cease at age 70 attained. The WOP definition is the same as the main plan. Waiver of premium cover is index-linked where index-linked living expenses protection is selected.
Career break available
Yes.
Maximum houseperson's benefit
Where the 'activities of daily living' definition of incapacity applies, the maximum benefit is restricted to £1,500 a month. Where both MPPI and living expenses protection are included and the combined sum assured is greater than £1,500, each cover will be reduced in proportion to bring them down to £1,500 a month.
Deferred period applicable to houseperson's benefit
One, two, three and six months.
Carer's benefit
If the client stops work to become a carer, they can make a claim if they are receiving Carer's Allowance. The client must spend at least 35 hours a week caring for a person who is receiving Attendance Allowance, or Disability Living Allowance (at the middle or highest rate for personal care) or Consultant Attendance Allowance (at or above the normal maximum rate with an Industrial Injuries Disablement Benefit, or basic (full day) rate with a War Disablement Pension.
Relapse benefit available
If, once LV= has started to pay benefits for a valid claim, the insured returns to their normal occupation, but then has to stop work within the next six months and makes a further claim for benefits, LV= will start to pay benefits straight away and will not apply the deferred period provided that:
- The insured does not go back to work against the advice of their doctor.
- The insured is claiming benefit for the same cause as the original claim.
- The insured is still working in the same occupation at the time the further period of incapacity starts.
- The insured tells LV= within two weeks of the date they stop work again.
Disability counsellors used
The Red Arc free Extra Care service would be offered depending upon the nature of the client's claim.
Health and wellbeing services
Roadtohealth's Heallthy Steps is a free online service advising on lifestyle, health and fitness.
Maximum % of income insurable
Up to 50% of the life assured's gross annual earned income from their main occupation can be insured. Income from savings and investments should not be included. The maximum combined payment from the plan in the event of a successful claim is 50% of gross income at the point of claim, less any other claims being paid from existing ill health/unemployment protection at the time, and/or employed/self-employed/pension earnings which will continue during a claim period.
Number of exclusions applying to the plan
None applicable to the IP benefit. Exclusions applicable to unemployment benefit are:
- The life assured becomes unemployed within 60 days of when cover starts or there is evidence the life assured should have been aware of future unemployment when their cover starts (including when unemployment is due to life assured becoming a carer).
- Unemployment is voluntary.
- The life assured resigns, retires or takes early retirement.
- Unemployment is a regular recurrent feature of the insured's occupation.
- The insured is employed on a temporary basis.
- The insured is required under their contract of employment ordinarily to work outside the UK.
- The life assured or any member of their family is a director or majority shareholder of the company that makes them unemployed.
- The insured refuses any reasonable offer of alternative employment by the employer.
- The insured has reached the earlier of State retirement age, or the normal or agreed retirement age for their occupation.
- The insured becomes unemployed as a result of; their imprisonment; misconduct, fraud or dishonesty; involvement in strike action or a labour dispute; riot or war; radiation; contamination or the radioactive effect of any nuclear fuel or its components or any premium is unpaid when unemployment occurs.
If the insured is unemployed because they have become a carer, they will not be covered if:
- The sickness, disease, condition, or injury of the person being cared for existed before unemployment cover started.
- LV= believes the Community Care Assessment does not confirm the person being cared for requires a carer.
Analyst's comment
Compared with other IP policies, the Mortgage and Lifestyle Protection Plan achieves a comfortable position above the average product but some way behind the best. However, it is primarily designed to bring a quality proposition to the much maligned mortgage payment protection market and compared with existing ASU policies, it wins hands down.
Unlike traditional ASU policies, Mortgage and Lifestyle Protection is a long-term contract, the benefits are paid until the claimant retires or goes back to work. Similarly, the premiums and policy terms and conditions are guaranteed throughout the life of the plan. The plan incorporates options to cover both mortgage payments and living expenses.
The inclusion of GIOs sets the plan apart in the MPPI arena and while the age and benefit limits are less generous than many IP products, it compares favourably in this arena.
The plan will be sold initially through mortgage brokers and intermediaries. The quick and simple application process incorporating tele-underwriting will favour mortgage brokers who feel they have little time to sell insurance. Tele-underwriting in itself will reduce the incidence of non-disclosure.
Few doubt the need for MPP but many commentators deplore the use of short-term contracts to cover a long-term liability and policies have received much criticism. LV='s offering provides something really new and fresh and should go a long way to restoring confidence.
Ben Heffer, Principal consultant, life and protection, Defaqto.
