Old Mutual Wealth Rolling Term
Old Mutual Wealth’s (OMW’s) rolling term policy offers renewable guaranteed premium term insurance that can effectively turn into whole life cover over time. OMW offers three types of funding option on its Protect product – Rolling Term, fixed term and whole life. This review focuses on Rolling Term.
Customers take out a ten year term policy, with guaranteed premiums. At the end of each ten year period they can renew for a further ten years, with future premium rates guaranteed too.
Compared to renewable term insurance, Rolling Term offers two key advantages:
All premium rates are guaranteed. This also applies to future premiums and two or three (depending on age) ten year renewal rates are illustrated at outset.
The default, if the policy is renewed every ten years, is that it effectively becomes whole life cover over time.
At outset, premiums should undercut those on a guaranteed premium whole life policy but, over time, will exceed them. To illustrate this, OMW has a useful online tool comparing both approaches and identifying the cutover point after which Rolling Term cumulative premiums will be higher. As an alternative, whole life is available too, making it the customer’s choice upfront of which funding route to adopt.
Also available is critical illness cover - making this one of the few whole life critical illness cover routes over time). RedArc’s assistance service is also available to customers.
Guaranteed increase options are included and can be used, underwriting free, up to age 90. The sum insured (and the premium) can also be decreased at any time, also reducing the increase in premium at each ten year point. The option to increase can be declined any number of times without being taken away.
Comment: Fixed term (level, increasing or decreasing) is ubiquitous in the protection insurance space but, go back to the 1980s, and renewable convertible term was very popular too, offering a halfway house between fixed term and whole life. Such plans fell out of favour later but OMW has brought back the good things RCT offered and resolved some of its drawbacks too.
Rolling Term avoids having to make a conscious decision to convert to whole life cover and customers can see in advance today’s premium saving and compare that with what will happen to their premium at future ten yearly renewals. Given that today’s protection needs probably will change over time, that is a useful option to have and should mean lower premiums today.
The downside is that premium increases in old age will be substantial. OMW gives the example of someone aged 50 now, who would start at a premium of £94.50pm for £500K cover. At age 60 their premium will rise to £275.30, to £897.30 at age 70 and at £3,007.50 at age 80.
Is that increase at age 80 too much? It’s certainly a steep rise, but it also reflects the risk. If, for example, a plan was set up to pay for IHT, the customer’s beneficiaries could even part-fund the plan if they can afford to do so at some later renewal.
Rolling Term looks to be a good option both for individuals and for business protection too, and the model sits well with the uncertainties of business.
This plan won’t suit all clients but means your term insurance won’t necessarily run out before you do. That’s a good option to have.
Plus points: Lower initial cost than WL; Effectively becomes WL over time; WL CI cover; Useful option for businesses as well as individuals; Premiums guaranteed now and at future renewals.
Not so plus points: Future premium projections for max 30 years only; Big premium increases at old ages; More expensive than WL if you live long enough.
Website: http://www.oldmutualwealth.com
Rating (max 10): Innovation: 8.5. Overall: 9. Platinum
Tags: Term; Old Mutual Wealth