Type: Individual income protection
Minimum benefit/minimum premium: £250 a month/£10 a month
Maximum benefit: Primary cover – up to 50% of earnings subject to a £90,000 maximum a year, recovery benefit up to £1,000, back to work benefit 25% of monthly benefit in first month, 10% in second month, comprehensive cover – up to 60% of earnings on first £30,000 a year, thereafter 50% of earnings subject to a £150,000 maximum a year, recovery benefit up to £2,000, back to work benefit 50% of monthly benefit in first month, 25% in second month
Minimum-maximum ages: 17-60
Minimum term: Five years
Deferred period: One, three, six or 12 months, seven days for self-employed clients
Definition of disability: Own occupation
Options: Guaranteed or reviewable rates, premium reductions through Vitality health and wellbeing programme with Lite Reward discounts. permanent disability uplift of 10% on comprehensive cover, premium waiver, guaranteed insurability options, indexation, houseperson’s cover, career break, rehabilitation and proportionate benefit, unemployment cover
Commission: Subject to negotiation, enhancement of up to 15% through Vitality programme
PruProtect’s income protection plan provides a choice of primary cover and comprehensive cover. Policyholders are encouraged to lead a healthy lifestyle through the Vitality programme, which offers discounts on gym and leisure facilities. Vitality awards points for activities such as a health screen or fitness plans. Everyone starts at the bronze level and can move up through silver, gold and platinum bands, which will reduce the following year’s premiums and enhance adviser commission.
IPFM director Luke Gibbon believes this individual income protection plan has a number of attractive points.
“The plan offers cover with a deferred period of one, three, six and twelve months, but also has a seven-day option for the self-employed, which is often not available. On the seven day and one month options, the benefit payments will be made retrospectively from day one, assuming certain criteria are met,” says Gibbon.
The plan allows evidence of income to be made in advance, which will not be required again should a claim be made. “Further evidence may be required if the benefit is increased but this does not apply where automatic index increases take place. This option helps to remove any doubt of the benefits that will be paid, as in the past proof of income has tended to be requested at the point of claim,” adds Gibbon.
Gibbon highlights the benefit payable on return to work, which is designed to encourage people to return to work. “This is 25 per cent of the monthly benefit for primary cover after one month and 50 per cent for comprehensive cover. It falls to 10 per cent after two months for primary cover and 25 per cent for comprehensive cover,” he says.
Looking at the premium rates, Gibbon says: “We have obtained quotations from the PruProtect site and compared them with quotations from other companies via The Exchange. We have found the premiums to be competitive when looking at primary cover. The commission has tended to be slightly higher as well, all of which can only be attractive.”
Gibbon looks at the main benefits of comprehensive cover. “You can opt for the claim escalation rate to be 2 per cent above the change in the Retail Prices Index, subject to a minimum of 2 per cent and a maximum of 12 per cent a year.
“The maximum monthly benefit is greater than primary cover, but this only affects policy holders earning more than £180,000 a year. You may cover 60 per cent of your income up to £30,000 a year and 50 per cent thereafter, or 50 per cent of income under primary cover. Of course there is an additional premium for comprehensive cover.”
Looking at the less attractive features of the plan Gibbon says: “One aspect to be careful about is that certain occupations will attract a special definition. Under this definition, which may only apply to higher-risk categories, the benefit payable could reduce by 50 per cent after 12 months. It is important that the client is aware of this.”
Gibbon will also be interested to see how long the comprehensive option remains. “It clearly offers additional benefits but at a cost. If the take up of this option is low, it may be better to keep it simple and stick with just primary cover, particularly as the general public are reluctant to take this type of cover at all,” he says.
He adds that quotations cannot be obtained via The Exchange and possibly other comparative systems. “This is obviously a drawback but I am informed this will be rectified,” he says.
He concludes that competition will come from other income replacement policies offered by such companies as Norwich Union, LV= and Friends Provident.
Suitability to market: Good
Premium rates: Good
Adviser remuneration: Good