Zurich has added a Later-life flexible option to its existing whole life Adaptable Life Plan. The option must be selected at outset (below age 65) but is provided at no extra cost. The option can only be exercised after age 70 if the life insured is diagnosed by a medical specialist as failing three of six everyday activities (washing; dressing; getting in and out of bed; moving around your home; eating and drinking prepared meals and drinks, and using the bathroom unaided), or experiencing a permanent reduction in mental capacity and needing supervision and the assistance of another person.
When the option is exercised, 70% of the plan’s sum insured is paid out and the plan ceases (e.g. the remaining 30% is then lost).
The whole life plan is available on a single or joint life (first or second death) basis to those aged 16 to 83 at outset (69 on first death cases). Maximum life cover with the option is £400,000. The option means that the plan may not be suitable if the customer primarily wants to fund the IHT bill on their death (although paying care fees can reduce the estate considerably, so that also has to be taken into account).
What They Say
Head of retail propositions Peter Hamilton said: “The need to meet the financial impact of long term care is an issue likely to be faced by an increasing number of people. The option on our whole life plan is intended to provide important protection for dependants in the event of death, but also an easy to understand option to access a proportion of that sum assured early in the event of physical or mental incapacity. It gives clients more options at what could be a very difficult time.”
What We Say
"Zurich is the third major protection insurer to enter the new long term care benefit within a whole life plan market (there must be a better name, OK later life appears to be the emerging generic…) and this plan is being rolled out, initially just through selected intermediaries.
"Unlike the other two plans, the option to have this benefit is exercised only once care is needed. That may be quite a plus, as many people appear uninterested in buying cover now for a benefit that’s only likely to affect them decades into the future, if at all. They do have to forego 30% of the plan’s sum insured, so it will be important to get expert advice on their likely life expectancy when they do claim. In a worst case scenario, they could lose out on that 30% and get little benefit if they die shortly after exercising the option. I don’t think that’s a big issue at outset, but it could be for advisers if a client asks whether they should exercise the option later. So it will be important to give good advice then as well as now.
"As with similar plans, apart from Zurich’s pretty comprehensive mainly online 24/7 care service, there is no specific long term care help service available. However, Zurich does refer customers to Grace Consulting and Mysupportbroker, both of which specialise in later life support, albeit at a cost. Even that is not necessarily bad news, as the lump sum insured should be more than enough to comfortably fund such fees, and the service is completely independent of the insurer.
"The benefit itself is available on Zurich’s well-established Adaptable Life Plan so technically, this add-on is quite straightforward. The claims criteria is broadly industry standard, although claimants who need care through frailty could still find they don’t quite reach the claim threshold – here the insurer’s claims philosophy will be important and Zurich has a long-established track record of fairness here.
"Overall, as with other plans of this type, it will not be ideal for everyone (if you want cover primarily for IHT planning it could be best to have two whole life plans for example) but it’s a welcome addition and an important development for those who might otherwise ignore getting closer to the caring years until it’s too late. Importantly though, the option has to be chosen at outset, although it can only be exercised later. If there’s any chance you may want to fund for care fees in later life, we can see few reasons not to do so."