Ageas Protect Term Life Insurance
Leading protection insurer Ageas Protect has launched this new term life plan through the Transact platform. In August, Ageas announced the sale of Ageas Protect to AIG, which is expected to complete later this year. Transact was established in 1999 and now has over £16bn of funds under direction. The plan is currently only available through Transact for an initial user group of 30 adviser firms, with a full rollout planned for 2015.
The product is a life insurance contract designed for investors who want to leave a specific sum of money to beneficiaries rather than particular investments, whose value will go up and down depending on the market. In this case, the customer chooses a sum insured which automatically takes account of selected platform assets.
For example, a customer may want to leave say £700,000 to his or her beneficiaries. If their chosen platform assets are currently valued at £500,000, the sum insured they need to buy is £200,000. When added to their investments’ value, that adds up to £700,000.
If their platform assets then grow to be worth £600,000, the customer only needs to buy £100,000 of cover. Conversely, it their assets fall in value to £400,000 they need to buy £300,000 of cover.
Cover is arranged through an online portal developed by Integrated Protection Solutions Ltd (IPS), which is accessed through Transact Online (TOL). The IPS portal has been developed with Swiss Re and uses simple health and lifestyle questions to assess the customer’s life expectancy. Ageas Protect says it expects the majority of customers will be offered immediate cover without any medical referral.
Customers must be aged 18-69 at outset and cover lasts to age 75 (the minimum term is five years). The minimum sum insured is £20K and the maximum is £5m. Premium rates are guaranteed and are based on actual age, with cover calculated daily and premiums payable monthly. Clients can choose which investments to link to the plan. Only single life cover is available. Cover can be increased annually up to 10% a year, subject to a maximum overall increase of 50% (or £250K if lower). The plan also includes access to the Best Doctors service.
Comment: Platforms enable investors to assemble many of their investments under one umbrella. That makes administering and valuing them much easier than holding each one individually, while moving money around is also a lot simpler and more efficient. Against that is the extra cost and the fact that only some investments can be held by the platform.
Even so, platforms have become very popular, especially with larger investors and providers continue to develop their services. The idea of a life insurance link is relatively new. It enables customers to leave a set sum to beneficiaries, rather than a sum that is actually dependent on how the markets move.
The clever bit is that the platform values qualifying investments daily, with the customer buying life cover only for the gap between what they want to leave and what their investments are worth that day. To keep things simple, the premium is calculated monthly by adding up each day’s cover requirement and charging a premium based on the customer’s then age. If investments rise consistently, it can be a very effective way to buy cover. However the cost does effectively rise if prices fall, especially if that happens at older ages.
The concept is also only available where the investments can easily and rapidly be valued – so using this concept around the value of your house of fine art collection is not (yet) possible. That said, if the concept appeals, then this is an excellent way to buy cover – although it does run out at age 75, when surely a lot of investors would want both whole of life cover and IHT benefits too.
Plus points: Can be a much more efficient way of buying life cover because you only buy the ‘gap’ insurance you need (the difference between what your investment is worth and your target sum to leave); Underwriting is simple with most customers expected to be accepted without need for further medical evidence; The big advantage of this type of cover is that a fixed sum can be left to beneficiaries, regardless of how well the investment performs.
Not so plus points: The plan is only available to a small number of Transact user firms initially; Non-platform investment vales cannot be taken account of easily; The cost of buying cover goes up when markets are down because a greater sum insured is necessary; Trusts arrangements can be complex; Single life cover only; Whole of life cover is not available.
Website: http://www.transact.com.
Rating (max 10): Innovation: 8. Overall: 8. Gold
Tags: Ageas Protect; Transact; Term