These are basically standard unit linked whole life policies with lots of bolt on extras. The idea is that policy holders pay in what they like when they like and chose from a whole range of benefits. Premiums are used to buy units and then units are cancelled as required to pay for the benefit level selected.
The range of benefits can include.
- Death benefit,
- Annual indexation option to automatically adjust the death benefit in line with inflation.
- Guaranteed insurability options.
- Waiver of contribution benefit during disability.
- Regular income option.
- Suspension of premium facility,
- Income protection benefits,
- Sum insured payable on disability,
- Hospital income benefits,
- Accidental death benefits,
- Option to add a further life insured subject to a specific event such as marriage,
- Critical illness cover.
Benefits can be added later as well as being selected at the outset. Because of the range of benefits on offer these policies generally do not meet the Inland Revenue tax qualifying rules. However these policies do give the policyholder greater flexibility with regard to premium payments. Most allow for a monthly premium that can be increased or decreased.
Contingent life insurance policies
These policies only pay in the event of death if another contingent condition has also occurred or not occurred as the case may be. For example the policy may only pay out if life insured A dies whilst person B is still alive. The premiums would need to reflect the combination of the two risks. This is only an example and other types of contingency can be involved.
Bolt on options
May insurers offer the policyholders the ability to add on certain benefit options to their policies. These all come at an additional premium charge and some may only be available to standard rated lives. Below are a few of the more common options available.
Waiver of premium options
Under this option if the policy holder can not attend to his/her normal occupation due to accident or illness then the life office will continue to pay the premium over that period so that the benefit of the life policy can continue to operate. This option usually has a differed period before it is triggered.
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Disability Benefit