The “new kind of life insurance” is a family income benefit with a difference. You can only buy it between the ages of 18 and 45 and only if you have children. It is a death-only policy which pays out a restricted benefit of up to £1,000 a month per life insured until the applicant’s youngest child reaches the age of 21 and there is no underwriting at the application stage.
There are, however, circumstances where on death during the first five years of the policy, a claim will not be paid. In short, these are war, suicide, alcohol or drug abuse and pre-existing conditions of which the applicant was aware (or at least aware of the symptoms) and had not fully recovered from at least two years prior to their application.
The benefits extolled of this “different” approach are speed, simplicity and the unobtrusiveness when compared with standard Fib. When tested, the product is nearly always more expensive than L&G’s own fully underwritten Fib although it is fair to say that L&G’s literature is very clear on the risk the customer is accepting for a simple buying process.
A purist might say that the restrictions are too high a price for the simplicity introduced. Nonetheless, I see this as an honest attempt to try and solve the problem of people not buying family life protection but I do not think this product is the solution. The real answer lies in stimulating protection advisers to do a “proper job” and if they did, they probably would not use this product. Instead, they would use its fully underwritten cheaper cousin.
Richard Verdin is sales and marketing director at Direct Life & Pensions.