Type: Individual income protection plan
Minimum benefit/minimum premium: £2,730 a year/£2.10 a month
Maximum benefit: 60% of earnings subject to a £40, 950 maximum at the start of the contract
Minimum-maximum ages: 16-59
Minimum term: Five years
Deferred period: One day, one, four, eight 13, 26 or 52 weeks
Definition of disability: Own occupation, own/own suited and houseperson
Options: Level or reducing benefit, index-linking, premium waiver after 28 days of claim, career break premium holidays, investment option, accident protection, terminal illness option
Commission: Indemnity terms – 144% of first month’s premium multiplied by 12, non-indemnity terms – 161.2% of first month’s premium multiplied by 12, renewal 3%
Tel: 0845 603 8085
Income protection specialist Cirencester Friendly Society’s income assured plan is an individual income protection plan available on a pure protection basis or with an investment element.
Independent Personal Financial Management director Luke Gibbon regards this product is an income protection plan that is different from others on the market.
“Unlike other providers, Cirencester offers day one cover, as long as the policyholder has been unable to work for three days. It also has the option of a one-week deferred period. Obviously there is a cost to providing that cover, but it could be useful in certain circumstances,” he says.
Highlighting other positive features Gibbon notes is a premium waiver automatically included after the later of 28 days or the chosen deferred period.
“Many contracts have different costs for men and women, smokers, non-smokers and also for different categories of employment but Cirencester does not. This is arguably a double-edged sword in that it could make it cheaper for some policyholders, but more expensive for others,” he says.
Another feature that he believes is unique is that the policy includes indexation based on the change of the retail prices index without limitation during a claim. He points out that most providers will put a limit on the increases during a claim. “Cirencester also offers a terminal illness benefit that will pay a lump sum equal to six months’ benefit,” says Gibbon.
Looking at the issue of costs in more detail, Gibbon notes that premiums will automatically increase from age 30 onwards in five-year year periods. “ I carried out a comparison based on a male non-smoker aged 35 at outset. The cost for Cirencester was initially £14.74 a month. The cheapest reviewable plan was £24.67 and the cheapest guaranteed premium plan was £31.51. If the Cirencester plan was kept until age 65, the average premium would be £36.48.”
This shows that although it is cheap initially, the plan will not necessarily be the cheapest in the long term. “However it is likely to benefit policyholders who do not keep the policy full term,” adds Gibbon.
There are some aspects Gibbon does not like about the plan. “There is a limit to the maximum cover of £40,000. Whilst I understand this is reviewed periodically, an advisor would need to take this into account if a client was likely to require higher cover either at the outset or during the term.”
He also notes that the policy has a number of exclusions including attempted suicide, alcohol or drug abuse, pregnancy and self inflicted injury. While these exclusions are not untypical, he prefers to arrange contracts with very limited exclusions.
“If a client was temporarily unemployed and made a claim, Cirencester would not meet that claim whereas other companies tend to pay up to the house persons benefit rate,” says Gibbon.
According to Gibbon, initial commission is normally lower due to the cheaper premium at outset. He notes that Cirencester does pay initial commissions on RPI increases and any requested increases, but do not pay commission on the automatic increases on change of age band. “There could also be a problem with name awareness,” he says.
For Gibbon, the obvious competitors are other insurers offering income replacement plans. He mentions Standard Life, Unum, Bupa, Norwich Union and Liverpool Victoria could compete. “However I do feel that Cirencester offers a different product that is worthwhile considering, particularly for smokers and clients in a higher rated occupation.”
Suitability to market: Good
Premium rates: Good
Adviser remuneration: Average