British Seniors has launched a new over 50s whole of life plan with what it calls a Lifetime Payback Guarantee as standard. This ensures that customers never receive less than the total premiums they have paid in and British Seniors says it is the first company to offer this.
Initially the plan just covers accidental death only. If death arises during this period from any other cause, premiums paid are simply returned in full. Then, after 24 months, death from all causes is covered. Customers can change benefits in future without incurring additional administration charges.
The Lifetime Payback Guarantee means that once the premiums paid in equal the plan’s sum insured, effectively the sum insured goes up in line with each additional premium paid. That compares to traditional over 50s plans that include a Catch 22 situation whereby once premiums paid exceed the sum insured, effectively the plan’s value for money gets worse with each new premium paid. However, if the customer stops paying premiums, the plan simply lapses with no value. In some cases that threshold period can be just a few years into the policy’s life.
The plan offers a sum insured on death from £2,000 to £20,000 and premiums start at £6.47 a month for someone age 50 with a £2,000 sum insured. The plan is available to people aged 50-79 at outset and includes guaranteed acceptance with no medical underwriting or risk of ratings or exclusions. British Seniors also says it has a UK based call centre.
Comment: We have long criticised the Catch 22 situation that applies on guaranteed acceptance plans. Typically, for those who die from non-accidental causes within the first two years (one year for some polices) premiums are usually returned and, for those who die from any cause from then until the point at which premiums paid in exceeds the sum insured, the plans can provide good value and, just as importantly, peace of mind.
However for those who ‘live too long’ this can be a very expensive way of buying life insurance and, if they live to a very ripe old age, they may have paid in perhaps three or four times what their beneficiaries will get out. Some plans have an age (say 85 or 90) at which premiums stop – which we welcome – but that can still be after more is paid in than will be paid out.
British Seniors is to be commended therefore for doing something about this issue. Its solution doesn’t take account of inflation (less of a worry than it was a generation ago anyway), and its premiums will be more expensive per pound of sum insured than some other insurers’ over 50s plans. But it does offer a better alternative than what most of the market currently offers and we expect other insurers to copy this, or at least come up with their own solutions to helping people avoid the Catch 22 that is so potentially so damaging to trust in insurers.
Some may scoff at this type of cover, but it does appeal to people who simply want their funeral costs to be covered and perhaps to leave something to their loved ones and who are prepared to pay to achieve that simply and without the risk of insurer rejection (ratings and declinatures).
Plus points: Avoids the Catch 22 situation of getting ever poorer value or losing everything by stopping paying premiums; Applies automatically; Transparent; All the usual virtues of guaranteed acceptance policies – whole of life cover, guaranteed acceptance and fixed premiums.
Not so plus points: Allowing for inflation, value still gets worse over time and in real terms more can still be paid in than is paid out; Premiums will be more expensive.
Rating (max 10): Innovation: 8. Overall: 7. Silver
Tags: WL; British Seniors