Protection policies should be written in trust to avoid probate, but where it’ s a CT policy, it will be the trustees as legal owners, who exercise the option. Any( WOL) policies issued as a result of exercising the option will be subject to the same trust provisions. Therefore, careful consideration should be given, particularly for IHT planning, regarding whether to place the CT policy in trust. This is important because it means you cannot convert from a JLFE CT policy in trust, to a JLSE WOL policy in trust.
If a customer’ s circumstances change and they no longer need or can afford the option, it can be removed to reduce premiums( but cannot be re-added).
Opportunities There are numerous customer scenarios where a CT policy could be used, such as:
• family cover: to replace life cover in retirement and meet funeral costs;
• life cover in retirement: to fund for a shortfall in spouses’ pension or LTC costs;
• buy-to-let landlord interest-only mortgage cover: to potential IHT liability;
• paying off equity release or lifetime / RIO mortgages.
The biggest opportunity, is using a CT policy as an alternative to higher WOL premiums for IHT planning, either where cost is an issue to customers, or where they may not need the full cover indefinitely( maybe because they are looking to gift away assets to reduce their IHT liability). So, maybe always requesting a CT quote alongside WOL, gives you and the customer a fallback option – they get the cover and flexibility they need at a more affordable cost and you get the business.
Summary I believe that a CT policy is a solution for the current climate, offering customers the best of both worlds – as it future-proofs a low-cost temporary term plan, and offers a cost-effective alternative to higher WOL premiums – together with guaranteed insurability in the future.
IF A CUSTOMER’ S CIRCUMSTANCES CHANGE AND THEY NO LONGER NEED OR CAN AFFORD THE OPTION, IT CAN BE REMOVED TO REDUCE PREMIUMS( BUT CANNOT BE RE-ADDED).
As an industry, not only must we support customers through the current difficult times, but as an adviser, you must also continue to look forward for customers to avoid foreseeable harm, by helping them and their families plan for the future. Fully exploring and discussing the conversion option can help.
Andy Woollon is a Technical Protection Specialist & Presenter at Zurich UK Life
Zurich Assurance Ltd, authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and
Wales under company number 02456671. Registered office: Unity Place, 1 Carfax Close, Swindon SN1 1AP
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