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Product matters

Advisers working with blue-collar workers should sit up and take note of a new kid on the income protection block. Holloway Friendly Society has taken an innovative look at this too often underestimated product.

Unlike more traditional products, its plan has day-one cover, no female or smoker loadings and, most significantly, no occupational loadings. Combine this with the own-occupation definition of disability and you get a product that has unique appeal.

One of the main problems with traditional products is that the final premium is often much higher than the original quote. By eliminating the occupation classes, this product becomes easily and accurately quotable.

Premiums are banded according to age and chosen deferment period (nil, four, 13, 26 or 52 weeks) and will increase during the term of the contract as the client gets older. Maximum cover is £700 a week and an indexation option is available.

Following 12 months of a claim, the payout is reduced by 50 per cent. There is an investment element to the contract whereby the client could potentially receive a lump sum at retirement.

Given that most claims are for less than 12 months, the policy of reducing the payout can be understood, However, offering a lump sum at retirement can lead to confusion. Investment contracts do not mix well with protection and lead to misinterpretation by clients and advisers. Moreover, as the product is regulated, it makes it impossible for non-regulated advisers to offer this protection.

Clients in low-risk occupations will find better value elsewhere but for others this product is appealing.

Jason King is a director at Life Policies Direct

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