Aviva has launched a new simplified income protection plan to help customers cover their monthly outgoings, such as mortgage or rent and bills, if they cannot work due to illness or injury. Living Costs Protection is a long-term insurance contract and its key features include:
* At the outset, customers select a fixed benefit of between £500 and £1,500 a month.
* A maximum claim payment period of 12 months per claim.
* Deferred periods of 4, 8, 13 and 26 weeks are available.
* Waiver of premium, with a 13 week deferred period.
* Includes back to work benefit and maternity, parental or adoption leave cover.
* The policy term can be from five years to 52 years
* There is no limit to the number of claims a customer can make.
* When a claim is made, there is no financial assessment, and no deductions are applied. The customer simply receives their selected benefit amount once the claim has been accepted.
Depending on underwriting, the plan includes a Life Change Benefit. This is a guaranteed insurability option that can be exercised if the customer’s mortgage or (if they move home, rent) increases. This must be at least six months after the policy starts and not within its last five years or when the customer is over 54.
Two optional benefits are also available:
* Fracture Cover pays a cash lump sum on a tiered basis depending on which bone is broken or dislocated or ligament torn or tendon ruptured.
* Global Treatment pays up to £1m if the customer or their child needs medical treatment outside the UK for a serious illness. The treatment must be recommended by Best Doctors and only applies in the first three years of the policy’s life, after which it is renewable up to age 71. The maximum lifetime benefit is £2m.
Living Costs Protection can provide an alternative solution to customers with fluctuating incomes such as the self-employed and contractors, where the income-based benefit calculation required for traditional income protection at both point of sale and claim can be complex. In addition, it can provide a more affordable option for those in higher risk occupations.
What They Say
Head of protection distribution Mark Cracknell said: “Our new Living Costs Protection extends our existing income protection proposition, to give customers more choice. It is designed to make it easier for advisers to have a conversation with their clients about income protection. Our ultimate intention is to help more people get vital protection in place, by providing a further solution for advisers to offer their clients through our ALPS platform.”
What We Say
"Recent research from Aviva shows that nearly half (45%) of UK families with dependent children could only survive financially for a month or less before their savings would run out, and that nearly one in four families (24%) have no savings whatsoever to fall back on. Each year, a million people in the UK suffer a prolonged absence from work due to sickness, which can result in financial hardship. Despite this, only 8% of UK families hold some form of income protection cover.
"Aviva says this demonstrates just how much the average family would struggle if their income suddenly stopped - and it’s right. So why don’t more people buy IP cover?
"That’s an endless debate but one simple fact is that many people perceive IP to be too complex, uncertain and too expensive. Aviva has tackled these issues in this plan. A short maximum benefit period (just 12 months) minimises harsh underwriting, as does limiting cove r to between £500 and £1,500 a month.
"Even the guaranteed insurability is simplified – just housing costs only – and the plan does without many of the knobs and whistles included in more comprehensive plans. It does though include optional fracture cover and Global Treatment, both of which further enhance the plan’s appeal.
"As everyday income protection, the plan won’t suit all clients but it may appeal to many – and encourage more advisers to start an income protection discussion with clients too."