Unpacking Real Life Cover, pt.II
Article published on 5th August 2008
Fortis Life and Lifesearch insist that their Real Life Cover (as discussed in our last article) offers a 'balanced and realistic' amount of cover in each of its areas of concern.
Basically there are two quantities of money available to claimants:
- the 'life fund', which offers a lump sum to be paid out upon the death of a policy holder or upon the diagnosis of a terminal and incurable illness,
- the 'living fund', which remains the same, irrespective of the claims policy holders might make from the living fund.
For as long as there are monies within the living fund, policy holders can make as many income protection claims as necessary within for up to 8 years. Policy holders may also make one claim for each of the critical illnesses covered by the policy, so strokes, heart attacks, and cancers.
Policy holders may also make one claim for a carer's allowance if they need to stop working to become registered as a carer for a partner or child.
The policy would pay out monthly amounts of:
- 1% of the sum assured for income protection,
- 3% lump sum for recuperation if a policy holder needs to pay for physiotherapy or counselling so that he or she may to return to work,
- 12% for critical illness claims or for claims from policy holders who need to give up work to become a registered carer.
So a £100,000 policy would give someone who develops cancer (say) a maximum payout of £12,000 on critical illness cover, leaving £88,000 in the fund.
For those who contract or develop a serious long-term illness/condition, claims on income protection can last for up to 7 years, 4 months, at £1,000 a month. This would eventually exhaust the living fund, but the value of the life fund, which is also £100,000, would remain unchanged.
A healthy 40-year-old male non-smoker would be charged £37.19 a month for £100,000 worth of Real Life Cover for 25 years.
This can be compared with the £56.75 a month needed to purchase a combined £100,000 life and critical illness policy with Axa, which would pay out once, upon the first diagnosis of a critical illness or death.
Real Life Cover premiums are guaranteed for the full term of the policy.
However the more expensive insurance policy from AXA will still pay out the full amount of £100,000 in the event of a critical illness claim, while Real Life Cover will pay out only 12 per cent (or £12,000) of it.
Source:
http://www.guardian.co.uk/money/2008/jul/13/lifeinsurance.reallifecover
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