As an employer, protecting your assets is naturally one of the most important responsibilities that you’ll ever face. Given that the employees are the greatest weapon in your arsenal, it’s imperative that the protection is extended to them. Relevant life insurance with significant illness from Aviva is the perfect solution.
Aviva announced the launch of its relevant life insurance with critical illness package in 2017 to completely change the landscape of business insurance and employee protection but has now revamped the plan in another move that is designed to protect employers, employees, and companies as a whole.
The insurance plan is available through the Aviva Life Protection Solutions (ALPS) online platform, and here’s all you need to know about the scheme.
What Is Relevant Life Insurance With Significant Illness?
Relevant life insurance is a type of insurance plan that allows employers to provide coverage to one (or more) of their employees. It offers a death-in-service benefit to the beneficiaries of the insured staff member and provides business owners with the opportunity to offer life insurance to key employees without setting up a group insurance scheme.
How Does Relevant Life Insurance Work?
Relevant insurance is a plan in which the employer makes the monthly premium payments and the protected party’s (the employee) beneficiaries are the ones that will be paid should a claim ever be required. While this may not sound too great for the employer, the insurer’s payout stops them from needing to payout themselves.
Given that the insurance plan covers an individual employee rather than a group, Aviva will need to assess the employee based on their health, age, lifestyle, and job role. Essentially, they need to know how much of a risk they deem the insured individual to be, and will adjust the monthly premiums accordingly.
Another key factor to consider is the amount of coverage that’s required. Of course, covering an employee for £50,000 is going to cost less in monthly premiums than covering them for £500,000. In truth, the amount of coverage required is likely to correlate with their salary, although employers may also take an employee’s mortgage and other items into account.
Relevant life insurance is designed to be paid out as a level cover plan. This essentially means that the lump sum paid to beneficiaries will stay the same throughout the policy. So, if you’ve covered the employee for £100,000, that’s what will be paid whether death occurs in the first year or the last year of the policy. However, you can add two types of increasing coverage to satisfy inflation rates. They are:
Fixed increasing cover – where you choose to increase the payout automatically each year by either 3% per year of 5% per year. This will see premiums climb by 4.5% or 7.5% each year too.
Index-linked increasing cover – where you choose to increase your payouts by up to 10% each year, in line with the Retail Prices Index (RPI). The premiums are increased by 1.5x the payout increase. So, if you increase it by 5%, the premium increases by 7.5%.
In both of the above cases, you can decide to skip the increase in any given year if required. It is also worth noting that premiums are guaranteed, meaning you’ll know exactly how much you’re paying. If you avoid the increasing cover, this will be the same each month throughout the duration of the policy. If you do opt for increasing cover, the rate you’ve chosen is applied. Premium are checked every five years to verify that businesses aren’t overpaying for the coverage.
Thanks to Aviva, it’s now possible to take the coverage to a whole new level by adding what is known as ‘significant injury’ coverage to the program.
What Is The Significant Injury Addition?
All relevant life insurance plans at Aviva protect employees against death and terminal illnesses. However, it is possible to extend the coverage to significant injury. As the name suggests, it is an extension that promises to offer payouts when employees are struck down by substantial injuries. These are usually the type of injuries that render the individual unable to work.
Aviva has set guidelines on which conditions fall under the category of significant injury. As per their policy details, the 28 criteria points are as follows:
- Advanced cancer – of specified severity
- Aplastic anaemia – with bone marrow failure
- Bacterial meningitis – resulting in permanent symptoms
- Benign brain tumour – resulting in permanent symptoms
- Benign spinal cord tumour – resulting in permanent symptoms
- Brain injury due to anoxia or hypoxia – resulting in permanent symptoms
- Creutzfeldt-Jakob disease
- Dementia – resulting in permanent symptoms
- Encephalitis – resulting in permanent symptoms
- Intensive care – resulting in permanent symptoms
- Kidney failure – requiring permanent dialysis
- Liver failure
- Major organ transplant – from another donor where applicable
- Motor neurone disease – resulting in permanent symptoms
- Multiple sclerosis – with persisting symptoms
- Neuromyelitis optica – with persisting symptoms
- Parkinson’s disease – resulting in permanent symptoms
- Parkinson’s plus syndromes – resulting in permanent symptoms
- Psychosis and bipolar affective disorder – of specified severity
- Pulmonary arterial hypertension – of specified cause and severity
- Respiratory failure – of specified severity
- Severe heart condition – of specified severity
- Spinal stroke – resulting in permanent symptoms
- Stroke – resulting in permanent symptoms
- Systemic lupus erythematosus – of specified severity
- Third-degree burns – of specified severity
- Traumatic brain injury – resulting in permanent symptoms
It is additionally possible to add a permanent disability coverage plan, which essentially offers a payout when an individual becomes unable to work or complete three (or more) of their work tasks due to any injury.
Who Is It Aimed At?
Relevant life insurance plans, with or without significant injury, are aimed at both employers and employees alike.
For the employer, it is a cost-effective alternative to traditional group insurance plans while also allowing them to satisfy their human responsibility by giving emotional and financial reassurances to their employees. This naturally brings a host of benefits in regards to recruitment, productivity, and moral.
Moreover, the addition of a relevant life insurance protects the business in those unenviable situations. The financial payouts will be handled by Aviva, which could save the business from a major financial hit. Similarly, it’ll allow the employer to focus on the difficult job of replacing the lost employee.
The ability to provide cover for death and significant injury in one plan makes life far easier during applications and claims. Therefore, it can be considered a focal point in the company’s approach to protection.
From the employee’s perspective, being protected by a relevant life insurance and significant injury plan provides the comfort of knowing that your family will be safe should the worst ever occur. While this isn’t something that we like to think about, it’s a responsibility that nobody can afford to overlook.
Knowing that the appropriate beneficiaries will be paid in full and in a fast time is very reassuring indeed. Policies are also written up in a way that means beneficiaries are paid out without facing inheritance tax.
Who Can Apply?
Employers can apply for relevant life insurance and significant injury cover on behalf of one or more employees within their organisation, with each being covered by a separate plan – although the application process for multiple people is no tougher than a single application.
Both the employer and employee should be UK residents at the time of application while cover is open for employees aged 18 to 73 (life insurance) or 18 to 64 (life insurance and significant injury). Of course, all applicants will need to complete the assessments on lifestyle and job role.
Both life cover and life cover with significant injury protection have to be taken out for a minimum of 12 months, although increasing cover (5 years) and reviewable plans (6 years) have longer durations, while policies end at a person’s 75th birthday.
Policies last for a maximum of 50 years. While they are not suitable for covering sole traders, equity partners of a Partnership or equity members of a Limited Liability Partnership (LLP), it can be an excellent way to protect their employees.
How Does It Differ From The Old Scheme?
Aviva’s addition of critical illness cover made significant changes to policies that were previously restricted to providing individual death in service benefits and terminal illness for an employee. The substantial market change made it easier for advisers to address their clients’ business protection needs in a single application.
The online platform offered a complete online quote, an apply and track facility, with multi-product applications, and an improved protection promise of up to £1m benefit. This was in recognition of the higher average case size for business protection. Aviva also provided business protection advisers will end-to-end support, via a support line and specialist account managers who will provide pro-active assistance, as well as assist with any underwriting, trust, or tax queries. High-value cases will be assigned a dedicated support team. So, there are a number of similarities between the old plan and the new one.
However, there are clear differences between the definitions of the terms significant injury and critical injury. Perhaps the most significant contrast relates to the number of conditions included, as well as the severity levels of each. Aviva’s significant injury policy is a far more comprehensive package, and almost feels like a type of income protection insurance, which is why employers should consider adding this to their premium even if they’ve previously ignored the attraction of critical injury insurance.
What Does The Application Process Look Like?
While getting Aviva coverage is about the benefits for employer and employee, employers also need to think about the application process itself. A longwinded application in which the policy won’t take place for months is never the solution. Aviva’s approach is far better.
Aviva provides coverage from the day that you submit your application thanks to the business protection promise. This is especially useful when the insurer needs more info, as you’ll be protected until either:
- 10 days after the acceptance letter.
- The start of your policy.
- The date of the application deference.
- The date of a withdrawn application.
- 90 days after the application is made.
When a claim is made during the free business cover period, the maximum payout is £1,000,000 and is paid out upon death unless the application is deemed to be inaccurate or the death came from a pre-existing condition or suicide.
As for the application process itself, the online portal is easy to use and provide clear guidance at every stage. It doesn’t take long, assuming that the employee is equipped with all the necessary information. Aviva’s underwriters and other experts will need to check details and complete the full policy, which can take some time. However, in most cases, applicants are told whether they’ll be approved in very quick time. As mentioned above, it is possible to track the progress too.
A quick application supported by a free interim coverage while the details are being processed is great. However, it’s important to know that you’ve picked the right insurance firm too. The fact that Aviva was the first to take this type of business insurance to another level shows an unmatched commitment to business clients, which is a great starting point.
However, there are many other reasons to like Aviva’s plans. The extensive list includes but is not limited to:
- Great control over term lengths on all applications.
- The possibility to cover employees for low premiums.
- They understand your business needs and potential changes.
- The maximum payouts can be set to seven figures per employee.
Furthermore, Aviva is a company with over 33 million customers and is the UK’s largest general insurer. It was founded in the year 2000, while its pre-merger history can be dated back centuries. The company is regulated by the Financial Conduct Authority and Prudential Regulation Authority while policies are issued under English law. When added to the excellent and clear customer care procedures, no employer need worry about the credentials of the company- or indeed their coverage.
What Else Do You Need To Know About Relevant Life Insurance?
While the main incentives for choosing relevant life insurance with significant injury coverage should stem from human and business responsibilities, employers should know that there are several tax benefits to be gained from the scheme.
Due to the fact that premiums are paid by the company, they can – under the right conditions – be claimed as a business expense. Employers should also know that it’s possible to make changes to the policy, such as increasing the coverage when an employee’s situation changes. This can cover things like:
- Marriage or civil partnerships
- Divorce or separation
- Having a child
- Getting a bigger mortgage
- Pay rises (of 20% or more)
In these situations, the coverage can be increased by up to £200,000 or the original amount of coverage (whichever figure is less) or the amount that the employee’s mortgage has increased by.
Employers can also take advantage of the chance to transfer the policy to a new employee should the original employee leave the company for another role or due to retirement. Aviva will allow you to adjust the coverage levels so that they are tailored to the new employee too.
Finally, Aviva is protected by the Financial Services Compensation Scheme. So, if the company were to become insolvent, employers and employees would still be covered for payouts.
Aviva’s relevant life insurance and significant insurance plans are aimed to help businesses protect their employees by ensuring that their lives and income are protected. In the event of a death or significant injury, the beneficiaries will be paid out in a tax-free lump sum.
Employers have the option to set the term length between 12 months and 50 years (under the right conditions) while also choosing the payout. There is a flat rate payout, although employers can increase their payouts (for an extra premium) on an annual basis to reflect inflation. It is possible to review the plan and even switch it over to a new employee once the original user leaves the company.
It is one of the most comprehensive business insurance packages in relation to employee protection on the market, allowing employers and employees to gain greater coverage and increased emotional assurance without the stress and hassle of completing multiple applications.
Here at mykeymaninsurance, we found that the introduction of critical insurance to the Aviva relevant life insurance plan was a massive step in the right direction as many clients had previously asked to add it. The revamped model gives employers the opportunity to provide an even greater level of coverage to their employees and their beneficiaries. Better still, the addition of significant illness isn’t compulsory, which gives you maximum control.
Anyone looking for a quote for relevant life with significant illness can fill in our quote form here or give us a call on 020 7112 8844
Jody is the Managing Director and founder of My Key Finance Ltd. He has over 16 years experience as a protection adviser and is an authority within the UK business protection market. Jody has written articles for Business Matters Business Directory, and been featured in Forbes. As editor and Author of our blog Jody is hoping to educate and advise people with more in depth details and information on the various subject relating to the protection market.