AIG Life’s new plan is a whole of life product with a built-in care component. Available for sums insured up to £400,000, 75% of that can be set up as care cover. That element is paid out if the customer is diagnosed with a medical condition which means they are permanently unable to complete three or more everyday tasks. Those tasks are set out by AIG in the terms and conditions. This element is also payable if the customer has severe cognitive impairment.
If the care element is not paid, the full sum insured becomes payable on death or diagnosis of a terminal illness. Otherwise only the balance is payable then.
The plan is available on a single life or joint life (first or second death) event and is available from age 17 to 84 at outset. Waiver of premium (26 week deferred period) is available up to age 54 at entry, and expires at age 69. A number of guaranteed insurability options are available (up to age 70) but indexation is not available.
Also included is access to the Best Doctors second opinion medical service as well as to AIG’s Claims Support Fund. Plans can be put into trust online without the need for a wet signature.
What They Say
Head of marketing and propositions, Steve Casey, said: "Our consumer research found half of those questioned believe we are facing an elderly care crisis. Yet 25% of people said they would probably have to sell their homes to pay for life-long care if they needed it and 11% don’t know how they would fund the cost at all.
"AIG Care Cover with Whole of Life Insurance has been designed to give customers peace of mind that there’s a plan in place to help with these costs if they should be unfortunate enough, at any age, to need life-long care, and to provide a life insurance legacy for loved ones if they don’t."
What We Say
"Long-term care funding is a mess, affects hundreds of thousands of people a year, yet is largely ignored by most of us until or unless it affects us personally. We also tend to think it only applies to ‘old’ people but, as AIG’s literature illustrates, younger people may need LTC too. Moreover, even if we do recognise the risk, we tend to do nothing until a need arises, when the insurance industry has a range of mainly annuity based solutions available.
"But, things are changing. From 2020 more Government help is promised. That includes a lifetime cap on costs, so opening up the opportunity to fund for the care gap using insurance and, more specifically, whole of life insurance that generates a cash lump sum rather than regular payment.
"Now, AIG Life has joined VitalityLife is offering such a solution and, just as critical illness insurance did before it, this new style of cover could be ideal to help fund the cost if care is needed. Bear in mind that care is likely to affect one in three of us and that alone makes it a contingency worth insuring against.
"We like the Claims Support Fund. This is actually a discretionary benefit but AIG points out that it has paid a range of claims – from hospital car parking, to wigs during chemotherapy and grab rails installed at home, to flying the sister of a critical illness claimant back to the UK so that she could donate bone marrow. Discretionary claims can be hard to rate objectively, but AIGs track record should give comfort that it takes the ‘right’ attitude to such claims.
"However, experience of LTCI in the 90s found that many people had a clear need for care but they failed to fail the right number of what were then called activities of daily living [ADLs]. The thresholds were too rigid. The solution to that could be a lower benefit for perhaps failing two rather than three tasks, or instead using a different definition – perhaps along the lines of the national eligibility threshold in the Care Act 2014’s regulations. The downside to that however is likely to be an increase in premiums and probably in underwriting too – both of which could be unacceptably harsh.
"That said, we support the development of this market and look forward to future developments as has happened with critical illness insurance."