VitalityLife Short Term Income Protection
VitalityLife is the new name for what was PruProtect and to mark the occasion it launched no less than three new plans on 19 November.
This plan is an option on its existing income protection (IP) plan and it offers a maximum benefit term of 24 months in order to keep premiums as low as possible. Written on an own occupation disability definition basis, the benefit level is also guaranteed upfront, negating the need for separate financial underwriting when a claim is made.
The plan pays up to 50% of income verified at application stage (with a maximum benefit of £10,000 a month), has no standard exclusions and includes a Recovery Benefit, which pays up to £1,000 towards specialist care and support and pays a cash bonus on returning to full time work. The plan is available from age 17 to 60 at outset and can last up to age 70. Minimum term is five years. The deferred period can be from seven days to 12 months.
The plan also includes access to the Vitality incentive and reward scheme. This enables customers to build up points for positive lifestyle choices, coupled with discounts for a range of items including gym membership.
Comment: Short term IP (as compared to annually or monthly renewable sickness and accident cover) offers certainty of benefits (they cannot be changed by the insurer if, for example, its claims experience worsens) and (arguably) covers the most important period of not being able to work. If you accept that after two years if you still cannot work you will need to make some key lifestyle decisions, then this type of cover offers most of the advantage of full cost IP but at a much lower cost and with easier (in theory) underwriting – as the risk to the insurer is much lower.
The plan does not include optional unemployment cover – as ASU policies do – but that may be bought separately and, in any event, IP insurers argue that such cover is not popular with customers as it costs more and so is rarely bought. Otherwise it is hard to make a case for ASU cover rather than this type of plan, especially given Vitality and the other features VitalityLife has built into this plan.
Is it as good as full cost IP? No – but then it operates at a different price point, and that will often be the key factor for hard-pressed customers and their advisers. Perhaps the ideal would be to start with this type of cover, then convert at some point to full long term IP, then moving back to a shorter benefit term as retirement approaches.
Plus points: Simple IP alternative to ASU; Permanent cover (the insurer cannot change the terms); Cheaper than full IP; Choice of deferred periods; Recovery Benefit; Guaranteed benefit level; No automatic exclusions; Vitality benefits.
Not so plus points: No unemployment insurance option; Limited benefit term (but longer terms are available at extra cost); Cover must cease by age 70.
Website: http://www.pruprotect.co.uk.
Rating (max 10): Innovation: 7. Overall: 8. Silver
Tags: VitalityLife; IP