Type: Individual critical-illness cover with level term assurance or standalone level term assurance
Minimum premium/cover: No minimum/ £5,000 for term assurance, £10,000 for critical illness cover with term assurance
Maximum cover: No maximum
Conditions covered: Alzheimer’s disease, aorta graft surgery, aplastic anaemia, bacterial meningitis, benign brain tumour, blindness, cancer, cardiomyopathy, coma, coronary artery by-pass grafts, Creutzfeldt-Jakob disease, deafness, encephalitis, heart attack, heart valve replacement or repair, HIV infection, kidney failure, liver failure, loss of hands or feet, loss of independence, loss of speech, lung disease, major organ transplant, mastectomy for ductal carcinoma in situ, motor neurone disease, multiple sclerosis, multiple system atrophy, open heart surgery, paralysis of limbs, Parkinson’s disease, pre-senile dementia, primary pulmonary arterial hypertension, progressive supranuclear palsy, pulmonary artery replacement, stroke, systemic lupus erythematosus, temporary disability, third degree burns, total permanent disability, traumatic head injury
Minimum-maximum ages: 17-59 when cover starts, 69 when cover ends
Minimum term: Three years
Options: Single or joint life, waiver of premium, total permanent disability, total permanent disability with temporary disability, children’s cover automatically included, ability to add or reduce cover, increase or reduce the term, switch to guaranteed level premiums for term assurance
Commission: Subject to negotiation
Tel: 0845 601 0072
This protection product from Ageas, the new name for Fortis, was designed for clients who need cover but find it hard to meet the costs initially, such as people buying their first home. It offers a choice between critical illness cover with level term assurance or standalone level term assurance for a minimum of three years. As the name suggests, premiums start at a lower level but increase annually throughout the term, unless policyholders reduce the sum assured to avoid the increase.
Discussing how this product is useful to IFAs and their clients, Highclere Financial Services partner Alan Lakey says: “Cost isn’t everything, particularly when it comes to critical illness cover. However it is nonetheless true that cost is a factor when consumers decide whether to choose comprehensive protection or some compromise option.”
Lakey observes that the Ageas low start scheme is not a new idea. “Royal & Sun Alliance offered a similar type of plan some twelve years back and it was not entirely successful. But that was then, and with Ageas offering low start for critical illness and/or life cover, it may be that its timing is perfect.”
When Lakey looked at the relative costs of cover for a 35-year old non smoking male, he found that a 25 year plan was initially 48 per cent cheaper than the standard level premium offering. “It wasn’t until the 10th year that the increasing premium surpassed the level version,” he says.
Lakey says Ageas has mounted a full frontal assault on the UK protection market with innovative plans designed around consumer needs rather than the theories of actuaries and pen-pushers and such innovation is refreshing. “When you factor in the superior critical illness cover and the ability to increase or decrease cover, add or subtract lives assured and switch into a level premium version you have a flexible high quality package.”
Turning to the potential drawbacks of the product Lakey says: “Clearly the idea of rising premiums will not appeal to everybody and some may not like the illustration which only shows the premium increases for the first 10 years. Also, the foolish rule that insists on total premiums being illustrated highlights the relatively high total cost that the low start option provides.”
Lakey adds that the Ageas literature is very detailed, which has the negative side-effect of being scarily bulky for many consumers. “There are 18 pages of key facts and 36 pages of product details,” he says.
Considering the main competition, Lakey says: “To my knowledge there are no true low start plans available so, for the time being, Ageas has the field to itself.”
Summing up, Lakey says: “This product should increase the levels of life and critical illness insurance purchased and that must be a good outcome. Providers need to assess what clients will react to and willingly buy otherwise the ever present protection gap will continue to widen.”
Suitability to market: Good
Cover provided: Good
Adviser remuneration: Good