“One of them was rated due to ill-health so he really appreciates the automatic increase facility.”
3. Terminal illness benefit.
Terminal illness benefit (TIB) is added to life policies to pay claims in full if the insured is typically diagnosed as having fewer than 12 months to live.
The fairness of TIB claims has been much debated recently, due to a clause in which some insurers exclude claims in the final 12 months of the policy.
I’m firmly on the side of TIB being hugely beneficial to some families, without which they would suffer significant financial hardship at the most difficult of times.
But perhaps there is a need for the industry to change the way it approaches TIB claims.
David Hollingworth of advisory firm London and Country commented: “Providers increasingly will pay out on terminal illness benefit in the last 12 months of the policy.
“This is another measure that can only help reduce any adverse media coverage, avoiding cynicism around the product itself and crucially the broader value of protection products.”
4. Buy-back options.
Following a critical illness claim, a person is likely to find it difficult to buy new cover without being severely rated or declined.
Therefore, a buy-back option can be available on combined life and critical illness policies for a defined period, giving people the ability to purchase the life cover element back, or in some cases elements of the CI cover.
The premium charged may differ from the original cover, and there may be some exclusions depending on the claim that has been made, but this is a valuable benefit that allows people to continue cover where they may otherwise find themselves uninsurable.
Taking this area a step further, VitalityLife offers a paid for add-on called the ‘minimum protected account’ where policyholders can choose the amount cover that is reinstated in the event of a claim - between 25 per cent and 100 per cent.
Cover is topped up without further underwriting, no further exclusions and no change to the premium. These options are worth considering because half of all heart attacks are repeat heart attacks.
Likewise 30 to 40 per cent of people who recover from a first stroke will have another one within five years, and the average 10-year cancer survival rate has doubled over the last 30 years.
5. Inflation-linking.
Index or inflation-linking protection means the benefit paid or sum assured increases yearly in line with inflation, ensuring that it remains relevant over the term of the policy.
Tom Conner, director at Drewberry Insurance, believes indexation is important to choose: “Suppose someone took out £1,000 per month worth of income protection cover.
“If this cover wasn’t index linked then the client’s purchasing power will have fallen by over 40 per cent after 30 years if inflation was 2 per cent a year.
