Income Protection

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For advisers only. Not for use with customers.
Income Protection
Increasable Insurance Option
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Income Protection Options

• To ensure against increases in peoples future
  Income, Friends Provident offers the following
  Increasing Cover Income Protection Benefit
  policies up to 10

Increasing (5) Income Protection
Increasing (RPI) Income Protection
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Increasable Insurance Option

• However, for applicants who want the choice of
  whether or not they want to increase their cover,
  and to choose by how much, there is another
  option available.
• Applicants can choose to bolt on the
  Increasable Insurance Option.

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Increasable Insurance Option

• The Increasable Insurance Option can be added to
  Level Cover Plans or Increasing Cover plans.

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Increasable Insurance Option

• By adding Increasable Insurance Option, the
  policyholder can choose to increase his/her cover
  at policy anniversary stages during the term of
  the policy.
• This is particularly useful for people who want
  the choice of whether they want to increase their
  cover.
• It is also useful for applicants who anticipate
  that their earnings will rise significantly in
  the first few years, because they can also add
  the Increasable Insurance Option to Increasing
  Cover plans.

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Increasable Insurance Option - Mechanics

• The minimum increase in premium when using the
  Increasable Insurance Option is 5 per month
• If the Increasable Insurance Option is chosen,
  the minimum term of the plan is 13 years
• The total increase of benefit, using the
  Increasable Insurance Option can be up to 30 of
  the total original sum assured
• New plans effected, using the Increasable
  Insurance Option, will not contain this option
• The Increasable Insurance Option is not available
  if a policyholder is using the Career Break
  option.

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Increasable Insurance Option - Mechanics

• When the Increasable Insurance Option, the terms
  and conditions will be those applying at the time
  the new policy is effected.
• The cost of the new plan will be based on the age
  of the insured at the time of using the option.

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Increasable Insurance Option

• Case Study - Tony

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Increasable Insurance Option Case Study

• Tony works as a Self Employed Recruitment
  Consultant and takes out a Friends Provident
  Income Protection policy.
• Tony has only been in business for 18 months and
  as such, his income is erratic at the moment.
• Tonys IFA explains the various policy options to
  him.

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Increasable Insurance Option Case Study

• Tony is concerned that if he takes out a level
  policy, when his income increases over the next
  few years, it might not give him the cover he
  will need.
• But he doesnt want to take out an increasing
  policy because this will automatically increase
  his cover and premium by either 5 or on the same
  basis as the Retail Prices Index.

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Increasable Insurance Option Case Study

• The cost of a Level Income Protection policy is
  quoted as 20.50 a month.
• The Increasable Insurance Option can be added
  to the policy for an additional 20 of the
  premium.
• This means that the total cost of the policy,
  including the Increasable Insurance Option is
  24.60 a month.

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Increasable Insurance Option Case Study

• Tony decides to take out a Level Cover Income
  Protection policy, and include the Increasable
  Insurance Option.
• Adding the Increasable Insurance Option will cost
  Tony a little bit more than a Level Policy, but
  he has now secured Guaranteed Insurability for
  the future.

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Increasable Insurance Option Case Study

• Tonys income at the start of the policy is
  20,000, so he takes out the maximum available
  Income Protection cover
• 250 a week (13,000 a year)

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Increasable Insurance Option Case Study

• Because the original Sum Assured is 250 per
  week, this means, at each 3 year anniversary, he
  can increase his cover by up to 30 of the
  original sum assured in other words 75 a week.

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Increasable Insurance Option Case Study

• On the 3rd anniversary of taking out the policy,
  Friends Provident write to Tony, informing him of
  his option to increase his cover by up to 30 -
  should he wish to.

Year 3
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Increasable Insurance Option Case Study

• Tonys income is now 23,000 a year, so he needs
  cover for the additional 3,000 a year.
• Maximum benefits for 23,000 are 284 a week, so
  Tony requires an additional 34 a week cover.

Year 3
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Increasable Insurance Option Case Study

• On the 6th anniversary of taking out the policy,
  Friends Provident write to Tony again decides to
  take his option to increase his cover by up to
  30 of the original sum assured - should he wish
  to.

284 a week
250 a week
Start of policy
Year 3
Year 6
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Increasable Insurance Option Case Study

• Tonys income is now 29,000, so he needs cover
  for 6,000 of his income which is not covered.
• Maximum benefits for 29,000 are 353 a week, so
  Tony requires an additional 69 a week cover.

284 a week
250 a week
Start of policy
Year 3
Year 6
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Increasable Insurance Option Case Study

• And this will continue until the 18th year
  anniversary of the policy.

353 a week
284 a week
250 a week
Start of policy
Year 3
Year 6
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Increasable Insurance Option Case Study

• On the 18th year anniversary, Tonys income is
  40,000. He can use his Increasable Insurance
  Option for the last time.
• Maximum benefits for 40,000 are 461 a week, so
  Tony requires an additional 67 a week cover.

394 pw
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Increasable Insurance Option Case Study

• From the 18th year anniversary, the Increasable
  Insurance Option expires and the policy continues
  for the remaining term on a Level basis

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Increasable Insurance Option Case Study

• The benefit to Tony is that his health might have
  deteriorated during his life time.
• But Friends Provident will not re-underwrite Tony
  each time he chooses to increase his cover.
• The Increasable Insurance Option has given Tony
  the ability to make significant changes to his
  benefit cover when it suited him.

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Increasable Insurance Option Key Messages

• Some Life Offices dont offer Increasable
  Insurance Options.
• Friends Provident only charge 20 of the initial
  premium to include this valuable option.
• Some Life Offices who include increasable options
  will only allow the policy holder to exercise the
  option a limited number of times sometimes only
  once.
• And with most Life Offices, Guaranteed
  Insurability options tend to only be allowable on
  special events Mortgage Increase, Marriage,
  Salary increases, childbirth and with certain
  limitations.
• Friends Provident believe in protecting peoples
  standard of living, so along with higher benefit
  levels available and choices of Level, Increasing
  Cover and Increasable Insurance Options,
  customers are able to achieve this.