Investment Life Cover is a five year term insurance for Zurich’s retail platform customers. The policy simply pays out on death the difference between what someone has invested onto Zurich’s retail platform (less any withdrawals made since then) and its value on their death.
So, if someone invested £100,000 and its value had fallen to £90,000 when they died, the plan would pay out £10,000 (assuming they had taken nothing out in the meantime). If instead the investment was worth say £110,000 on their death, there would be no payout at all.
The plan is funded by an additional 0.1% annual charge on the eligible investment amount but this sum is being waived in 2014, so effectively cover is free this year.
Moreover, there is no underwriting or medical evidence required to set the plan up. Is it a good deal? Short term, almost certainly for particular clients who have a Zurich platform, but care is needed in monitoring the future need for this option.
What They Say
Director and head of retail David White, said: “This latest innovation drives at the heart of our ambition to help advisers and their customers manage risk. We know making any investment can be a significant undertaking and we hope offering this uncomplicated solution will help those that require the additional cover. Advisers have told us that ILC is exactly what they want – a product that is simple, easy to understand and easy to apply for. Today’s announcement is the start of a whole suite of investment-linked protection solutions which will be market-leading and demonstrate our commitment to protecting people’s futures”.
What We Say
"Perhaps the most exciting element of this product is that it is the first of a number of initiatives that could see basic life cover develop in a different direction in future.
"That is yet to be certain (new ideas have come and gone before but some are good enough to make a sustained difference to the market overall), so what does this plan offer? On the face of it, not very much.
"However, it does meet a need. Typically, when a new investment starts, its initial value will drop due to initial charges. That itself can take some time to reverse, so there is an initial need for such cover. Second, someone could die at a time when the value of their investments has fallen, so disadvantaging their beneficiaries. Over time, investors hope and expect their investments to be worth more than they invested but, at least in the early months (or maybe years), there is a vulnerability that this plan can help overcome.
"We have not yet seen all the details of the plan so can only comment in broad terms but, from what we have seen so far, and provided that customers can switch off the cover at some future point (and so not pay the additional 0.1% charge) this looks to an added reason to look at a Zurich platform. Especially as there is no underwriting and no fee in the first year. Bear in mind though that once the investment value goes above what was invested, the life cover effectively falls away until or unless the value drops below the initial investment."