Zurich Later-life flexible option
The later life market (where such benefits are added to a whole of life protection plan) is becoming established, with Zurich becoming the third major insurer to join in. It has done so with its Later-life flexible option which can be added at outset (only) to its existing whole life Adaptable Life Plan.
The option is available below age 65 at outset and is provided at no extra cost. The option can only be exercised after age 70 and only if the life insured is diagnosed by a medical specialist as failing three of six everyday activities (these are: washing; dressing; getting in and out of bed; moving around your home; eating and drinking prepared meals and drinks, and using the bathroom unaided), or experiencing a permanent reduction in mental capacity and needing supervision and the assistance of another person.
If the option is exercised, 70% of the plan’s sum insured is paid out and the plan then ceases. In other words the remaining 30% of the sum insured is then lost.
The Adaptable Life Plan is available on a single or joint life (first or second death) basis to those aged 16 to 83 at outset (or 69 on first death cases). The maximum life cover with the option is £400,000.
Choosing the option may not be appropriate if the customer primarily want to fund for IHT bill on their death, although paying care fees can reduce the estate considerably, so that is not an automatic reason not to buy.
Comment: The later life market is now starting to grow, with Zurich being the third major insurer to enter the new market. This plan differs in that the option to have this benefit is only exercised once care is actually needed.
As few young people think about needing care themselves later and as the majority of people won’t actually need long term care in later life anyway, that’s quite a plus.
The downside is losing 30% of the sum insured on exercising the option. That means it’s not worth exercising if death is expected soon (when taking a loan against the full sum insured may be a better option or buying insurance against the risk of a very early death). That makes advice at point of claim both important and more complex and potentially risky but both issues are manageable for a good IFA.
One common factor with these new plans is no specific long term care help service is available. To be fair though, Zurich does offer a pretty comprehensive mainly online 24/7 care service and refers customers to Grace Consulting and Mysupportbroker, both of which specialise in later life support, albeit at a cost. As the plan provides a cash lump sum, the customer (or their family) can then decide to use some of the benefit to pay such fees and some may value the service being completely independent of the insurer too.
Underlying the benefit is Zurich’s well-established Adaptable Life Plan and technically, this add-on is quite straightforward. Zurich’s claims definitions are broadly industry standard. As with similar plans and indeed the LTCI plans developed in the 90s, claimants who need care (especially through frailty) could slip through the claims net because they don’t quite reach the claim threshold. But Zurich has a long-established track record of fairness on its claims so that should be less of an issue.
In summary, the plan won’t be ideal for everyone but, to those who want whole life cover and to keep their options open, choosing this option at outset (you can’t add it later) looks to make sense. There could be issues if IHT planning is key and the trusts issue could be more complex but overall this is a welcome addition. One minor but positive point – in its literature Zurich asks customers for their feedback about the plan and how it was recommended to them. That’s good – most insurers could usefully listen to their customers more.
Plus points: A no cost add-on where the decision to buy this type of benefit is only taken when the need arises; Simple to add; Offers greater flexibility in later life; Zurich has a good track record on claims; Add-on to a proven established WL plan .
Not so plus points: Available only if under 65 at outset; Option cannot be exercised below age 70; Care need when exercising the option if early death is likely; Potential issues around IHT planning and trusts; No built-in specialist care advice service.
Website: http://www.zurich.co.uk.
Rating (max 10): Innovation: 9. Overall: 7.5. Silver
Tags: LTCI; Zurich