Universal Cover is an accident, sickness and unemployment (ASU) policy for people with mortgages to cover mortgage and living costs.
The policy is an annually renewable general insurance policy that pays out if the insured is unable to work because of accident, sickness or unemployment for more than 30 days. It then backdates benefits to the first day off work (so is a back to day one plan). The plan’s main features are:
* The first three months cover is free.
* There is no initial exclusion period.
* The plan pays out on being unable to work due to sickness, accident, unemployment or becoming a carer.
* The premium rate £4.00 a month for each £100 monthly benefit.
* The maximum benefit is the lower of 60% of monthly income or £2,000 a month.
* Benefit lasts for a maximum of 12 months.
* The plan is available to UK workers (who must work for a minimum of 16 hours a week) aged 18-64.
* Premium rates and policy terms can be reviewed at any time, subject to 90 days’ notice.
* The plan lasts to age 65 or on earlier retirement but the insurer reserves the right to cancel cover before then at 90 days’ notice (as do many similar policies).
* Many conditions that are normally regarded as chronic, or require a consultant’s verification are covered (e.g. backache, stress) and just require a GP’s confirmation.
* Underwriting is through a rolling moratorium. This has a shorter period than most and looks back one year and requires the customer to be free of treatment for a continuous period of 12 months going forward. This is therefore more generous than the more conventional 5/2/2 year rolling moratorium.
* The plan includes back to work assistance.
* Although customers must have a mortgage (or mortgage offer) at outset the plan can continue even if they no longer have a mortgage.
* Contract workers are covered for unemployment insurance but the usual rules for the self-employed and business owners mean that this element is likely to be of less value to them.
What They Say
Director Simon Lance Burgess said: “Universal Cover provides unemployment, disability and carer cover for new and remortgage borrowers but, unlike traditional mortgage payment protection insurance, Universal Cover is like income protection and can pay up to 60% of gross monthly earnings or £2,000, whichever is the lower.”
What We Say
ASU and payment protection insurance (PPI) products are regarded as toxic by many people, including many intermediaries. However, the main problem with PPI was that it was often sold to the wrong people and sold very badly (e.g. some customers were not even aware they had been sold it or didn’t think they had any choice about taking out cover).
There were other issues with ASU too, in our view, and it is interesting to see how this plan deals with those. Some of the main ones were:
* Using a 5/2/2 moratorium meant many people would never be covered for a particular condition if they needed regular treatment or even a check-up. This plan still has that but the time periods are much reduced – so potentially benefiting many more people.
* Conditions such as stress and backache often required an unequivocal consultant confirmation for a claim to be paid. This plan avoids that – a GP signoff looks to be sufficient.
* MPPI policies were only available to those who had a mortgage (renters typically paid a lot more for cover). This plan is also only available to mortgagors ( a bigger issue now as fewer younger people have been able to buy a home since 2008) but if they are no longer borrowers, the cover can still continue
* If used to protect a mortgage, there was a mismatch between the (typically) 25 year term of the mortgage and the annually renewable nature of the insurance. At next renewal (or often earlier) the insurer could tear up the existing term, charge a higher (or lower) premium and even discontinue cover altogether. That still applies with this plan – terms can be changed at 90 days’ notice.
* The maximum benefit period was often only 12 or 24 months – not enough time for lifestyle changes to be made easily if need be. For this plan it is just 12 months.
So, this plan does not overcome all the drawbacks of the old style PPI plans – although it does offer improvements in a number of areas, and rather more than many lenders do. Is that enough though? Intermediaries are rightly very cautious about ASU plans and we are not convinced that this plan does enough to overcome all of their concerns. Post the PPI scandal, new ASU/PPI plans will need to offer consumers a much better deal than the old plans did, if significant sales success is to be achieved.
When this review was completed (October 31st 2013), the website was due to be up and running shortly.