Increasing Life Insurance

A plan designed to protect against inflation financially protecting the life assured and their family. It pays out the amount of cover on death or diagnosis of a terminal illness (if life expectancy is less than 12 months) of the life assured during the term of the plan. The amount of cover increases each year to a maximum of 10%.

Premiums are guaranteed. 

Target market

Family

Where a lump sum is required to help provide financial support to a spouse, partner or dependant in the event of death or becoming terminally ill. 

Mortgage

Where there is an interest only mortgage and the need for a policy that pays out a lump sum in the event of death or terminal illness.

Business

Where a lump sum is required to:

  • Cover the loss of a key person.
  • Purchase the shares owned by a director or partner.
  • Cover an interest only business loan.  

Suitable if customers

  • Want the the option to increase the level of cover over the term of the policy.
  • Need a lump sum in the event of death or terminal illness and have dependants, and are not willing/able to self-insure or do not have funds elsewhere.
  • Have a business need to cover the loss of a key person, to provide finances to purchase shares of a director or partner in the event of their death, or to cover an interest only business loan.
  • Have medical conditions that do not prevent provisions of cover and are happy to be underwritten.         
  • Are UK resident and can afford monthly premiums and annual increases in premium.
  • Want their premiums to be guaranteed (unless they make changes to their policy). 

Unsuitable if customers

  • Do not want the option to increase the level of cover over the term of the policy.
  • Do not require a lump sum in the event of death or terminal illness and have dependants, and are willing to self-insure or have sufficient funds elsewhere.
  • Do not have a business need to cover the loss of a key person, to provide finances to purchase shares of a director or partner in the event of their death, or to cover an interest only business loan.
  • Have health conditions that may result in cover not being issued.
  • Are not UK resident and cannot afford monthly premiums and annual increases in premium.
  • Want their premiums to be guaranteed.

Amount of Cover

  • No minimum sum assured. Driven by minimum premium.
  • No set maximum sum assured - subject to negotiation with re-insurers, except if Critical Illness Cover or Critical Illness Extra are chosen, when maximum amount of cover will be:
    £3 million - if Specific Work Tasks definition is chosen under TPD, or
    £2 million - if Own Occupation definition is chosen under TPD.
  • The amount of cover increases in line with changes in the Retail Prices Index to help protect the cover against inflation.

Term

  • The minimum term allowed is 2 years.
  • The maximum term allowed is 50 years (or 40 years if Critical Illness Cover or Critical Illness Extra are chosen).

Age restrictions

  • The minimum age to take out a policy is 18. It is possible for a life of another policy to be taken out on a 17 year old by an adult with insurable interest. This policy can then be placed in an Absolute trust with the 17 year old as a beneficiary.
  • The minimum age at the end of the policy is 29.
  • The maximum age for buying a policy is 77 (or 67 if Critical Illness Cover or Critical Illness Extra are chosen).
  • The policy must end by their 90th birthday (or 70th birthday if Critical Illness Cover or Critical Illness Extra are chosen).

Premiums

  • Guaranteed
  • Choice of guaranteed or reviewable premiums if Life Insurance with Critical Illness Cover or Critical Illness Extra is chosen.
  • Payable monthly or annually by Direct Debit.

Benefits automatically included at no extra cost

If the policy is mortgage related then the following are also included

Other information

  • For joint life policies, benefit is paid on the first death.
  • Policies can be placed in trust.