For baby boomers in particular, guaranteed insurability plays a prudent part in lifetime protection provision for your clients, writes Debra Hale, Protection Specialist for Zurich.
Special event benefit, otherwise known as a guaranteed insurability option, can be overlooked when considering protection solutions for your clients.
For many of your clients, life can be complicated and things can change in a flash. Life events are often planned and expected, such as marriage or the birth of a child. Most providers allow an increase of life cover in view of these special events.
Many of you will recognise this as guaranteed insurability; this offers a guarantee to the life assured for them to buy additional life cover without having to go through any medical or financial underwriting when they experience any of the qualifying events. There are many qualifying events, such as getting married, having a baby, adopting a child, increasing a mortgage or an inheritance tax (IHT) liability. The cover can be increased before a certain age, up to certain limits.
Whilst guaranteed insurability is a valuable feature, there is a much wider relevance to consider here in terms of the current UK demographic. Some clients may suffer unexpected changes in their lives as they get older, a major illness or health deterioration, for example, and offering them guaranteed insurability can help to reduce risk and alleviate concerns. Obtaining the cover whilst they are younger and healthier can be a godsend when things start to go wrong.
We know we are living longer – a child born in the last 15 years can expect to live to the ripe old age of 93, and alarmingly one in three will live to be centenarians. We’ve come a long way in the last 100 years when life expectancy was a mere 63, imagine that!
Longer life expectancy reflects an improved standard of living and prosperity, but it also creates issues. We need more money to maintain our standard of living into our later years.
There are pressures on long-term care provision; an enormous social problem that sadly most of your clients are going to get caught up in whether they like it or not.
Interestingly, we have more people in the UK over the age of 80 than those under the age of 18.
So with this taken into account the concept of guaranteed insurability on a much broader level plays a prudent part in lifetime protection provision for your clients.
A convertible term policy can give your clients a more affordable term policy to begin with and enables them to convert into a whole of life contract at a later date within or at the end of the policy term.
They will not need to provide any further medical evidence as they do not need to be reassessed by underwriters. So even if their health has changed since they took out the original plan, they can convert on the same underwritten terms as set at the outset.
The premiums will be re-costed at their age on conversion to the new whole of life policy, but they could convert partially during the term and effectively phase in the full conversion over the term of the plan and manage the policy costs along the way.
Most life providers provide special event benefit or guaranteed insurability options, but not all of them offer a conversion option.
The next time you discuss protection provision with any of your clients, perhaps highlight the special event benefit. For your baby boomer clients, in particular, a convertible term policy offering guaranteed insurability for life could be very special indeed.
Zurich Intermediary Group Limited