L&G’s new ASU (accident, sickness and unemployment) plan has been named Lifestyle Cover, a description that some are now arguing could be a better generic title than ‘income protection’.
The policy is an annually renewable policy available to individuals that, as with conventional long-term income protection (IP), has a maximum benefit linked to the customer’s income rather than to any particular expenditure. That may be an obvious point to those familiar with IP, but many payment protection insurance (PPI) and mortgage PPI (MPPI) customers may not realise that, in principle, ASU can cover much more than just their monthly loan costs.
The maximum monthly benefit is the lower of £3,000 and 65% of gross monthly income. L&G offers deferred periods of 30, 60, 90 or180 days, with all except 180 days also being available for the unemployment element of the plan. Benefit can be standard or back to day one cover.
Clients can choose ASU cover or, at lower cost, accident and sickness only or unemployment only. If they have an existing PPI/MPPI policy, customers can transfer to the new policy, when the unemployment qualifying period will be waived (subject to their meeting L&G’s eligibility criteria).
Otherwise, all pre-existing conditions are excluded during the first 12 months of the policy. Generally, the policy terms and conditions are well set out – which is important in this market (especially given the PPI misselling ‘scandal’), although there are no examples given of what is meant by terms such as pre-existing condition or related condition. However, the need to be under a (NHS hospital) consultant’s care for backache and stress conditions is made clear and L&G also makes clear (in Section 1 of its Policy Booklet) that it may not renew cover at annual renewal or may offer new terms and conditions or charge a different premium. As well as the usual client literature, there is also a useful one page summary for brokers, comparing this plan with a typical long-term IP plan.
As with other ASU plans, the unemployment element of this plan has very strict conditions for people running their own businesses. In effect they have to have been forced to stop trading.
A 30 year old (rates are unisex) could pay £3.90 a month per £100 a month insured benefit (30 days’ deferred, ASU, £700 a month benefit, back to day one cover). Premiums depend on a number of factors, including age, where the customer lives and their occupation.
What They Say
Director for general insurance business, Mark Holweger, said: "We believe Lifestyle Cover gives customers, and their families, valuable peace of mind by helping to meet the challenging and changing demands on financial budgets and homes, when it is needed most."
What We Say
"Since 6 April, it is not now possible to sell payment protection insurance [PPI or MPPI for the mortgage equivalent] at the same time as a loan, so it now makes even more sense to cover wider expenditure, not just monthly loan costs. Hence L&G has dropped its MPPI plan and replaced it with this one.
"The plan offers a relatively high maximum benefit [65% of income] and could be used to dovetail with long-term income protection insurance for example.
"Terminology in this sector of the market is, however, becoming an issue. L&G refers to this plan as 'short-term income protection', a phrase that some others adopt for limited benefit period income protection insurance."