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News Review: Protection


Is it time to question joint-life policies? by


Kevin Carr chief


executive of the Protection Review and MD of Kevin Carr Consulting


When it comes to couples buying protection most poli- cies sold are on a ‘joint-life’ basis, where both lives are covered under one policy. But might they be better off with a policy each instead? many experts now believe


the industry should rethink its position on joint-life cov- er for products such as life cover and critical illness and move towards using two sin- gle life plans as the default option. Firstly, buying joint cover


can be poor value for mon- ey compared to buying two single life plans, which of- ten costs just a few percent more, for potentially double the cover – a joint life plan


only pays out once, where as two singles could pay out twice should the worst hap- pen. With two single life plans,


should one life claim or pass away the surviving partner is still insured, which is not the case with a joint-life plan. if the surviving life still needs cover they will be older and possibly their health could have changed, making it much more expen- sive to replace the cover, and in extreme cases it might not be possible to get new cover at all.


Looking at non-disclosure


issues there are occasions when one life doesn’t want the other to know something about their medical his- tory, which could cause the couple to shy away from tak- ing any protection at all, and data protection issues can also arise if sensitive infor- mation is sent to both lives


ABI set to replace ‘TPD’ with ‘ILCD’


The Association of British Insurers is looking to drop Total and Permanent Disability from Critical Illness products and replace the benefit with “Irreversible Life Changing Disability” under its latest statement of best practice. In the past claims were made under TPD


for reasons such as stress, depression and even broken legs, which are rarely, if ever, permanent. While a relatively small number of claims are made under TPD (3-4% of all CI claims), around half the claims are declined, which for many simply isn’t sustainable in a TCF world. Many agree that a change needs


to be made to improve both adviser and consumer understanding of the benefit. This new wording should add much needed


clarity, which should improve customer understanding at both the point of sale and the point of claim. It probably won’t impact either way on sales, but the number of declined claims should fall, which is good for all concerned.


Once the consultation is over, at the end of June, the ABI expects the new term to be implemented within a year, but it wants firms to start using the term as quickly as possible.


instead of privately to the relevant individual. Furthermore joint-life


cover can limit flexibility and choice and often both lives are typically required to have the same covers and problems could arise in the future should the couple separate as not every policy has a separation option. Lastly, writing joint life policies complicates the trust situation and can lead to a ‘gift with reservation’ situation where the benefit is given back to the original owner, creating an inheri- tance tax issue, when single life policies can be written in trust without this risk. in short, while the cost of


joint life cover is typically fractionally cheaper than the cost of two single plans, the difference may not rep- resent good value for money for many reasons.


News in brief


• Aviva has provided over £50m in free cover to new parents via its free life cover for new parent’s initiative


• PruProtect has launched two new Private Medical Insurance benefits which include discounts of up to 25%


• Which? has endorsed Income Protection (IP) as the superior alternative to PPI


• The Financial Ombudsman service received almost 50,000 complaints about PPI last year - representing over 30% of all complaints


• NHS hospital waiting lists across the UK went up by more than 75,000 last year


• The UK life protection gap has increased to £2.4trn according to reinsurer Swiss Re


• Fortis Life UK protection products are now available across the whole of the IFA market, extending its reach to over 24,000 IFAs


• Scottish Provident announced a major repricing of life cover while confirming payouts on 97% of life claims in 2009


• Legal & General’s new critical illness product covers four new illnesses including mastectomy which pays the lower of £25,000 or 25% of the sum assured


12 mortgage introducer JULY 2010


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