Aviva has removed critical illness cover from its relevant life insurance product, which was criticised by competitors for not being compliant with tax rules.
Aviva launched its relevant life policy with critical illness cover in January 2016 – the first provider to do so.
Relevant life insurance is a tax-efficient life insurance policy that allows companies to offer a death-in-service benefit to employees.
The products faced criticism from other insurers, including Legal & General and Royal London, which disputed if they were allowable within tax rules when critical illness was bundled in.
However, in a statement today Aviva confirms it has removed critical illness from the relevant life insurance product.
Aviva says there has been “continued confusion” in the market about relevant life insurance with critical illness cover, which has led to a “level of uncertainty” in the adviser community.
It has changed the relevant life insurance product to offer an “employee significant illness cover”. That will continue to provide cover for advanced cancer, serious heart attack and stroke, in the event they lead to retirement of the person covered by the policy.
Aviva says HMRC has agreed the new product qualifies as a relevant life insurance policy and is compliant with current legislation and tax rules.
It says the changes don’t affect advisers or their clients who have an existing relevant life insurance policy with critical illness cover or who have a policy application coming out of binding quotations in place by 11 March 2018.
The provider has confirmed it will always pay a valid claim against the existing policies.