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Know your client’s life and critical illness insurance options

12 July 2020

Over the last few years there have been a marked increase in the number of multi-benefit policies put in place by advisers. All quotation portals now make it far easier to compare multi-benefit prices, but paraplanners need to be aware of exactly what cover they are providing clients. Do you know your Life with accelerated Critical Illness from your Life and Critical Illness?

In this article Adam Higgs, head of Adviser Research at Protection Guru, looks at the differences in cover in terms of what the clients are covered for.

As a paraplanner you have two main options when it comes to recommending life cover and critical illness which are;

Life with Accelerated Critical Illness (alternatively Life OR Critical Illness)

Under this option there is essentially one pot that the client can claim on and once this is paid the policy ends.

Life AND critical illness

With this option the life and critical illness elements are essentially set up as separate plans. Therefore, if the client claims on the critical illness element, the life cover remains in force.

To complicate things more, within quotation portals those that only offer a life with accelerated critical illness plan will return a life AND life with accelerated critical illness option within the quotes.

When comparing these scenarios the amount paid within the different scenarios covered are quite different as can be seen in the below scenario which is based on a single life policy where there is a sum assured of £100,000 for life and £100,000 for critical illness:

Death or terminal Illness

  • Life with accelerated critical illness – £100,000 is paid and all cover ceases.
  • Life AND critical illness – £100,000 is paid from the life cover. For terminal illness claims an additional £100,000 will be paid under the critical illness plan. All cover ceases.
  • Life AND life with accelerated critical illness – £100,000 is paid under the life only plan and a further £100,000 is paid under the life with accelerated critical illness plan. All cover ceases.

The life assured suffers from a critical illness

  • Life with accelerated critical illness – £100,000 would be paid all cover ceases.
  • Life AND critical illness – £100,000 would be paid under the critical illness plan which ceases and the life cover remains intact.
  • Life AND life with accelerated critical illness – £100,000 would be paid under the life with accelerated critical illness plan which ceases. The life only plan remains intact.

In recent times there have been examples of the ombudsman finding against advisers for over insuring their clients. In most cases the reason for upholding the claim is not because the client was over insured but because the adviser had not properly explained why they had over insured the client. Paraplanners should ensure that they are very clear about the type of cover being recommended and ensure that this is made explicitly clear to the client to avoid such situations with the ombudsman.

Adam Higgs is Head of Adviser Research at Protection Guru. An extended version of this analysis, including which insurers offer what, can be found at https://protectionguru.co.uk/2020/06/12/the-difference-between-life-and-ci-and-life-or-ci/

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