View more on these topics

Heart of the matter

A couple in their early 40s were referred to us by their accountant. The husband was self-employed and had suffered a major heart attack in November 2001, after which he was off work for six months. He returned to work in June 2002 and wanted to insure himself. He had approached two insurers and another IFA without success. Could we help?

The client was a heavy-smoking workaholic until his heart attack. He had seen insurance as dead money and, beyond a joint-life £87,500 mortgage protection policy required by his mortgage lender, he had no life insurance.

Now 42, he was keen to protect his wife and young children in the event that he suffered a further heart attack and died. He had applied directly to several insurers but had been declined.

He had applied for lump-sum life insurance of £100,000 lasting for 13 years until his youngest daughter was 18.

Our first objective was to establish exactly what level of life insurance he and his family needed. The mortgage protection insurance would settle their mortgage but it would not settle their debts as the couple had taken on a small secured loan to support them during his time off work.

Having adopted the “my business is my pension” approach, the client had no pension fund to leave to his family. During his six months off work, his business had foundered so he did not even have that reserve to pass on.

The mortgage would be settled on either of their deaths, so the main priority was to settle the modest loan and create income. Rather than just use policies providing lump sums, the obvious solution to create a tax-efficient income on death was family income benefit.

Having examined the family&#39s outgoings and noted that the monthly mortgage costs would cease, we agreed that the couple needed a lump sum of £12,000 to settle the secured loan and an ongoing net income of £1,500 a month.

While the cover should ideally last for 13 years, I explained that if we had to use Lloyd&#39s underwriters, we might have to restrict the term of the policy to 10 years. Finally, if the client&#39s wife died, he would have to make arrangements to take care of the children, so we agreed that the policy should be taken out on a joint-life, first-death basis between them.

The clients also wanted to insure themselves against critical illness and to provide an income in the event of long-term disability. I explained that this would be almost impossible to place on the basis of what they could afford.

Before approaching any insurers, I obtained full details of the client&#39s medical history following his heart attack from his GP and the hospital treating him, including a summary of the notes, medication, cardiac consultant&#39s letter and cardiac rehabilitation department discharge summary.

Armed with this essential information, I bypassed the usual insurers and approached a number of Lloyd&#39s agencies, including Cassidy Davis, Lutine and Wren, and one specialist impaired life placement company, Pulse. Finally, as I have good experience of its underwriting department and was looking specifically for family income benefit, I approached Scottish Provident, although, with the reorganisation of the Abbey National IFA function, this was not easy.

Following this initial round of enquiries, I received positive responses from Wren and Pulse, although they required more detailed and recent information before they could offer terms. They put forward lump-sum life insurance proposals and Pulse was able to provide indicative terms and premiums.

I then spoke directly to the underwriting manager at Scottish Provident, who had gone through the medical information we had provided. Based on the information supplied by us and subject to a further GP&#39s report, it would be able to offer family income benefit and the lump-sum life insurance required, although the client would be heavily rated. Given his past experience, the client was very happy to proceed on this basis.


Will son of stakeholder change behaviour?

The Sandler review in July 2002 recommended that the Government should develop specifications for a suite of simple, low-cost and risk-controlled stakeholder products.This would improve competition and access to financial services for those on lower incomes. The features of the products would enable the FSA to create a simpler sales regime, shifting the focus of […]

ScotEq helping IFAs give clients a pension MOT

Scottish Equitable is recommending that IFAs give their clients a pension MOT in res-ponse to the negative media coverage of the products.The company is offering IFAs free copies of its literature, Time for Another Look, which guides IFAs through reviewing their clients&#39 retirement savings and outdated arrangements.ScotEq says there are many ways that pensions can […]

Independent view

It is a fact of life that people make mistakes. Given that it is almost impossible to be infallible, it is perhaps of greater importance and a better measure of a company to consider how it rectifies mistakes and complaints.Some business “experts” believe companies should welcome complaints as they provide an ideal opportunity to restore […]

Axe hangs over ScotProv and ScotMut brands

Abbey National is to consult IFAs as part of a review which could spell the end for brands Scottish Mutual and Scottish Provident.But despite earlier speculation, Abbey says it has no plans either to sell or close down the ScotMut or ScotProv businesses and will only rev-amp their product ranges.As part of a back to […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm