Aegon Whole of Life
Aegon’s new whole of life plan is aimed primarily at older people who have an Inheritance Tax liability on their death and want life insurance to cover that. However, whilst such policies should probably be written in trust, not all of them are (indeed, most of them are not Aegon reckons). Aegon’s solution is to make its discretionary trust an integral part of the application process, even if the application is online.
The customer is required to sign two copies of the trust form of authority and to make an oral declaration of trust to their financial adviser (which can be either in person or by phone). This declaration must be made DURING the online application process. Once the plan is accepted, Aegon sends the customer a confirmation pack to confirm the trust details and they then sign and return a confirmation form. For those who don’t apply online, a more traditional paper application route is also available.
Once set up, the customer is the sole trustee, so an additional trustee or trustees should be appointed as soon as possible (again, something that doesn’t always happen).
The plan itself is a whole of life policy, available on one or two lives (when the sum insured is payable on first or second death). The sum insured is also payable on terminal illness. The age range at outset is 18 to 84 and applicants must be UK resident. Free cover is offered during the underwriting process and this is also covered by the trust.
The sum insured can be level or increase annually in line with the Retail Prices Index (RPI) up to a 10% a year. Waiver of premium is available with a 26 week deferred period and there is a choice of three incapacity definitions (own occupation, suited occupation and activities of daily work). WOP benefit lasts to age 67.
Guaranteed insurability is available on birth/adoption; marriage/civil partnership; change of home/home improvement; career change/promotion, or divorce. In some cases if a couple divorce, each can continue cover with no new medical underwriting, subject to their health when they start the policy. Business guaranteed insurability options are also available. Part of the sum insured can be converted later into a gift inter vivos policy (decreasing term insurance).
Comment: Aegon’s new whole of life plan is very straightforward and designed primarily for slightly older people who will have an IHT liability on their death. Aegon has recognised that too few such policies (just 10% of all life policies in Aegon’s estimation) are written in trust, so it has done something about that. Now, an IFA can submit an application online and get the client’s simple verbal instructions (backed up by a wet signature) to put the policy in trust. It’s both clever and very simple – although it can still fail if the paperwork is not signed, so advisers do need to ensure they follow the rules to the letter.
One minor criticism – although Aegon refers to sums insured, it talks of lives assured. The old separation between insurance and assurance today serves no useful purpose and for some while, we have tried to just use ‘insurance’. We commend the industry to do likewise in order to avoid customers becoming confused.
Plus points: A simple whole of live plan; Simple integrated discretionary trust to support writing plans in trust; Free underwriting cover that is also in trust; Useful range of plan benefits.
Not so plus points: Trust rules must be followed very carefully; Six month WOP deferred period.
Website: http://www.aegon.co.uk.
Rating (max 10): Innovation: 8.5. Overall: 8. Gold
Tags: Aegon; WL