With the population of the UK now having higher life expectancies and the increase of the state pension age to 68, possibly with a further increase in the future, it is much more likely that an increased number of people will continue to work past the traditional retirement age of 65, possibly even into their 70s, even if only working part-time.
As well as this longer working life, many people are switching jobs and even changing careers a number of times throughout their lives, so it is becoming more and more important for providers of relevant life cover to adapt their plans to these employment trends and make their relevant life cover truly pertinent for the needs of people today.
What Is Relevant Life Cover and How Does It Work?
Relevant life cover is a financial product that allows small to medium-sized businesses to offer death-in-service benefits to their employees, without needing to set up a group life insurance plan which can be far more costly.
As with standard life insurance cover, relevant life cover provides a pay-out in a lump sum to an individual employee’s beneficiaries, should they die during their time working at the business or within the term of the policy. This lump sum will generally be a multiple of the employee’s annual salary, anywhere between two and twelve times the amount.
An insurance provider will calculate a premium for the employer to pay based on an individual employee’s health, age, and lifestyle. The size of the premium is likely to vary by insurance provider as they will focus on these aspects slightly differently from one another and are likely to assess risk in different ways.
Exactly how much the insurance provider will pay-out depends on the exact type of relevant life cover the business has taken out. Some will offer a set pay-out amount, known as level policies, and some will be linked to market inflation.
Relevant life cover does not require any payment of income tax or inheritance tax, and the premiums paid can be declared as a business expense, so it is beneficial to businesses to take advantage of this type of life insurance.
So, how are providers making relevant life cover more suitable?
Continuation Options for Individuals
As mentioned above, the days of joining a company at 16 or 21 and retiring with them 40-50 years later have gone. Nowadays, almost everyone moves from employer and employer, and complete career overhauls aren’t uncommon.
Many young professionals now believe that staying in any one position for more than 5 years without any upward momentum is actually detrimental to their long term career prospects, and so clearly the traditional model of relevant life cover being tied to one employer is no longer suitable.
To better suit both employers and employees, providers are offering better continuation options to individuals to allow them to simply move their policy to their new employer. If this isn’t an option, most providers have also made it easy to covert their cover into a personal protection plan, so they don’t have to lose the reassurance their relevant life cover provided them with.
Extended Maximum Age
The maximum age in which continuation options can be utilised varies by life insurance provider, so this is an important thing for businesses to consider when choosing their relevant life cover policy for their staff.
The majority of life insurance providers allow continuation options to be utilised up to the age of 74, but this is not always the case. For example, Legal & General set their continuation option maximum age at 73, and Scottish Widows set their maximum age at 70.
If a business wants to give its staff members as much flexibility as possible, bearing the ever increasing retirement age in mind, they should choose a life insurance provider with a higher maximum age for continuation options and, ideally, one that has shown it is forward-thinking about the changing landscape of employment and the age of employees.
This is especially pertinent for those businesses and industries where upper level management and the most experienced members of the team are older or likely to continue working in the field, if only part time, well into what was once considered retirement age and maximum life expectancy. It’s important to note that the age of retirement is going up in part because there is a bigger desire for people to continue to be “useful” and use their time meaningfully.
Allowing Continuation Without Reassessment
A large number of insurance providers that offer relevant life cover policies now allow individual clients moving to a new position with a different employer with the same premiums, but this is on the condition that the terms and sum assured remain the same (even if they moved for a higher salary, for example).
You will, however, find some insurance providers, namely Royal London, Aegon, Zurich, and VitalityLife, who will allow an end client to move to a new employer with the same premiums, with no added conditions, which is obviously an attractive prospect for those with relevant life cover.
With many continuation options, there does not typically need to be any new medical or financial checks undertaken, so even if an employee’s health has started to deteriorate since their existing plan was started their premiums will not be changed for their new employer.
If the term or sum assured stays the same or is lowered, most insurance providers will not need to carry out new underwriting, however, if either of these is increased fresh medical underwriting may be required.
Fast Amendments to Existing Policies
In a world where many changes to existing insurance policies can be made with a simple phone call or even logging in to an online client portal, some relevant life cover policies can seem stuck in the dark ages.
However, many are now making it much easier for individuals to not only move their policy with them wherever they go, but make amendments easily without having to essentially start the whole assessment process over again – which can take significant time if a medical assessment is required. If a client is ambitious and moving up quickly, this may happen with relative frequency, even as little as every 1-3 years.
Now, many relevant life cover providers now are allowing clients who choose a continuation option and wish to change to make amendments to that existing policy, are allowing them to do so easily over the phone. It’s likely more providers will be able to do this in the future, but currently a handful of major insurance providers (specifically Legal & General, Aviva, Zurich, and Scottish Widows), will require an end client to apply for a completely new plan and therefore a need for full underwriting to take place.
To find out more about life insurance, or if you want to find the relevant life insurance provider that is right for your business and your employees, don’t hesitate to call us on 0161 537 0555 to chat to one of our friendly team members and we will find the right insurance policy for you.