Protection product for cash-strapped consumers launched
An insurance product claiming to offer protection against almost any eventuality modern life can throw at you has been launched into the market.
Coined by the creators as something that is better than Payment Protection Insurance (PPI) yet cheaper than the more comprehensive options, Real Life Cover combines seven protection products including life insurance, income protection, as well as cover for heart attack, stroke and cancer – the top three most common critical illnesses.
The product, launched by independent financial adviser LifeSearch and European insurer Fortis, will also give policyholders a lump sum of 3% of their current sum assured to pay for things like physiotherapy or counselling to help them recover from an illness or disability.
If someone becomes unable to work because they are caring for their child or partner they would also receive 12% of the current sum assured.
In addition, unemployment cover could be added. This is priced by age - so it will become more expensive as you get older - but it will cost around 1.5% of the monthly amount you would receive should you loose your job.
For instance, a £1,000 per month payout would add another £15 to your monthly premiums.
According to LifeSearch and Fortis, Real Life Cover offers an affordable alternative for people who can’t afford more comprehensive cover. For example, a 25 year old non-smoking man, in a low-risk occupation, who wants to buy £100,000 of protection until the age of 60, would pay £15 per month.
Policyholders can make as many claims as they need to as long as there is still money left in their fund and their life cover will remain unaffected regardless whether someone has ‘used up’ their funds.
Kevin Carr, protection specialist at LifeSearch, says that while buying separate products in the protection range offers better protection, the new policy could offer a solution for cash-strapped consumers.
“Real Life Cover isn't better than buying a perfect portfolio of protection products, but many people are put off from doing that because of price and complexity," he adds. "This product covers all the real needs within one comprehensive, competitive and relatively simple policy. Overall it is much better than buying PPI, and for many people will cost less.”
The product has been well received by some financial advisers. Peter Chadborn, principal of IFA CBK Colchester, says: "This product is truly innovative and will provide a simple solution for many people. It is very difficult to combine comprehensive cover in a simplistic way but this product appears to have achieved this.
"I think the carers cover and recuperation cover are excellent additions."
However, he adds that people should avoid trying the compare the cost of this policy with critical illness insurance, because the latter offers far broader cover. In addition, he recommends financially secure customers consider more comprehensive products.
Fortis, which only just entered into the life insurance sector, has also launched another protection product called YourLife Plan, which is a more comprehensive version of the Real Life Cover plan.
Moneywise offers a free Compare and Buy service for home, car and medical insurance.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.
Critical illness insurance
This cover pays out a tax-free lump sum if you become seriously ill. All policies should cover seven core conditions: cancer, coronary artery bypass, heart attack, kidney failure, major organ transplant, multiple sclerosis and stroke. You must normally survive at least one month after becoming critically ill, before the policy will pay out. Payouts are determined by premiums and premiums are determined by the severity of your illness, the less severe the lower the premiums.