07 Mar Guaranteed Term Life: An alternative life protection solution to meet the needs of two growing and under covered market segments
Andrew Briant explains how a growing number of people in the UK will not qualify for standard term life cover, and what their alternatives might be.
The data is daunting. In 2016 it was estimated that 13 million people in the United Kingdom have been diagnosed, at one time during their life, with either cancer, diabetes or one form of a cardiovascular or respiratory related condition.[1]
Additionally, according to the Office for National Statistics as of 2015, 26.8% of the UK population are now between the ages of 45 and 65.
Implicit in these statistics is that a very significant proportion of the UK population will not qualify for standard term life cover thereby posing a conundrum for many protection focused advisors.
Adding an additional layer of complexity are the long term socio-economic impacts of the global financial crisis, low interest rates, and an increasing trend in later stage divorces are having on the middle aged and pre-retirement groups’ overall financial wellbeing and risk profiles.
This sentiment was echoed by Charles John Donley the founder of Assura Protect, a firm founded by financial engineers and actuaries dedicated to delivering technology enabled insurance solutions.
“The stand out data points in our advisor partners’ term life books were that over 20% of potential clients did not qualify, if at all, for standard premiums and 80% of those who declined to take out cover cited premium affordability or that the available covers would not meet their needs as their primary reasons.
We identified that this primarily applied to two distinct customer demographics – the Medically Impaired and Over 50’s. Both share similar attributes and tended to adversely select guaranteed acceptance products like Accident Policies, Funeral Plans and whole of life Over 50’s plans when proposed with limited options. Overall Assura viewed these at best band aid solutions offering a limited amount of cover and were the catalysts for Assura to find and originate better suited alternatives. After considered due diligence we found that Guaranteed Term Life would offer the best balance of cover, pricing and policy moratorium flexibility and fairness for these demographics.”
Guaranteed Term Life (GTL) policies, like most Accident Policies and whole of Life Over 50’s plans, are guaranteed acceptance which do not require GP reports or do not ask any medical questions during the application process. The primary benefits of GTL policies are significantly higher sum assureds comparatively, with full coverage starting from day 1, and affordable non-loaded premiums. Advisors and potential policy holders should be aware that cover, like traditional underwritten term life, GTL cover is for a fixed period and pre-existing conditions, while not impacting acceptance, will face certain moratoriums and exclusions.
“Guaranteed Term Life is designed to offer a balanced and fair client proposition. It is a about providing a 50-year-old piece of mind into retirement with meaningful protection levels and a viable alternative to heavily premium loadings or affordability driven “no cover” options for those with pre-existing medical conditions” added Donley.
Assura Protect, in conjunction with underwriters Compass Underwriting, one of the UK’s leading independent Accident & Health underwriting agencies, and AM Trust offers policy holders up to £100,000 term life cover with an optional £50,000 of critical illness protection, on a guaranteed acceptance basis for people aged 18 – 61, with renewals eligible up to age 68.
Concluding Donley explained, “If a policy holder does have a pre-existing condition it does not negate coverage eligibility or impact pricing in any way. Simply, that condition will not be covered until a two-year moratorium period of being symptom and treatment free had been completed. We think that is a flexible and fair trade off for affordability, meaningful sum assureds and cover from day one”.
[1] Compiled from aggregated data from Macmillian, Diabetes UK and British Heart Foundation.