If there is one thing you can be sure about, it is that you cannot be sure what your clients’ circumstances will be in the future. In terms of protecting your client, this means that at least annual reviews should be conducted to ensure that the client is suitably covered. But how easy to insurers make it to increase cover on policies that are already in force?
Guaranteed Insurability Options are designed to for just this purpose and enable clients to increase the level of cover under a policy without further underwriting as long as a certain life event has happened. Although all insurers provide GIOs as standard on their contracts, looking at the detail of such options identifies significant variations in the scope and number of features.
There are various different life events for which insurers offer GIOs on personal protection policies. The table below highlights the GIOs offered on life and ciritical illness term policies and which insurers offer each one;
All insurers enable clients to increase the sum assured on multiple occasions, however limits do apply to how much it can be increased by. These limits are based on the lesser of a fixed monetary amount and a percentage of the original sum assured when the policy was first taken out. In percentage terms Aviva, Old Mutual and Zurich have the highest limit which is 100% of the original sum assured. All other insurers allow an increase of up to 50% except Guardian who allow up to a 25% with the total of all increases combined being no more than 50% of the original sum assured.
In terms of the maximum monetary amount that the sum assured can be increased by there seems a wide variance across insurers.
Unfortunately, guaranteed insurability options will not be offered to all clients taking out protection. Most insurers do not offer them to lives where a rating has been applied and whilst other insurers do the more severely rated cases are often excluded. Of all the insurers it is only AIG, Guardian, LV= and Old Mutual Wealth that allow such increases to rated cases.
The types of events that are required before a Guaranteed Insurability Option can be exercised are clearly significant. As such many consumers may not have the time or ability to inform their insurer straight away let alone pull together the necessary documentation an insurer may require. It is therefore beneficial for the insurer allowing a longer timeframe between the life event happening and the guaranteed insurability option being used.
The reliance on a specific life event happening means that GIOs are not always going to be an option when looking to increase a client’s cover. Where a life event has happened however, the ability to increase the sum assured without any further underwriting should be appealing, especially if the client’s health has deteriorated since the inception of the policy.
Ongoing servicing of clients is important, more so now as the regulator starts to look upon the protection market and advice services more thoroughly. Ensuring that your clients protection provisions remain suitable should be a key part of this. Whilst GIOs may not always provide the right answer for the client in many events it can save the client time, effort and stress when increasing cover.
Overall Old Mutual Wealth are particularly strong when it comes to the amount that cover can be increased by. Guardian seem to offer more options with regard to the life events and a far longer time frame in which to effect the guaranteed insurability option.