Friends Life Protection Account Key features of Life Cover

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1 Protection Friends Life Protection Account Key features of Life Cover Why is this document important? The Financial Services Authority is the independent financial services regulator. It requires us, Friends Life Company Ltd, to give you this important information to help you to decide whether the Friends Life Protection Account s Life Cover is right for you. You must read this document carefully so that you understand what you are buying and keep it safe for future reference. The purpose of this document is to help you make an informed decision. This document introduces you to the key features, benefits and risks of Life Cover. Where relevant information is contained in other documents these will be signposted at the appropriate point. Full terms and conditions can be found in your Account pack. This will be sent to you when your cover starts. If you would like a sample Account pack, please ask your financial adviser. You need to be comfortable that you understand the benefits and risks before deciding to take the cover out. You should also speak to a financial adviser before making any decisions about this cover. What other documents should I read? It s important you read this document with: Your Quotation summary The Key features of the Friends Life Protection Account Our leaflet, There is such a thing as Free Cover You should contact your financial adviser if you need copies of these or any of the other documents mentioned in this document.

2 Life Cover Its aims, your commitment and risk factors What is Life Cover? Life Cover is insurance that pays out a one-off lump sum if on or before the cover end date a person covered dies or meets our definition of a terminal illness. A terminal illness is an advanced rapidly progressing incurable illness that, in the opinion of an attending Consultant and our Chief Medical Officer, means the person covered is expected to die within 12 months of diagnosis and before the relevant cover end date. Should I consider taking out Life Cover? You should consider taking out Life Cover if you: want cover for a fixed period of between one and 40 years, providing that cover ends on or before your 85th birthday, live in the UK, and are aged between 18 and 83* when cover starts. * Please see page 6 for the age limits for the Life Cover 5 Year Renewable. Its aims To pay out a one-off lump sum if on or before the cover end date, a person covered: dies, or is diagnosed as suffering from what we define as a terminal illness. The cover will then end. This applies whether one or two persons are covered. If the cover is written in trust, we will pay the benefit to the nominated trustees. Your commitment You must: provide full and true answers to the best of your knowledge when applying. If you do not the insurance may not protect you in the event of a claim, tell us about any changes to health, family history, occupation, travel or pursuits that occur between completing the application and your cover start date. Please contact your financial adviser or phone us on We are open 8am to 6pm, Monday to Friday, make regular payments to us when they are due, give full and true answers in the event of a claim (this also applies to your personal representative), make sure you are aware of and understand any exclusions and restrictions that may apply. These can be found in your Account pack. 2

3 Risks Acceptance of your application is not automatic. When you apply we assess the risk of providing you with the cover you have applied for based on your health, family history, occupation, travel and pursuits. This is known as underwriting. If we are unable to offer you cover on our standard terms, we will contact you to explain the terms we can offer or the reasons why we cannot cover you. If you fail to meet the commitments described in Your commitment it may result in a claim not being paid. If you ask us to increase the amount or extend the term of your cover after it starts, we may need up-to-date underwriting information. If this information has changed since you applied and increases our risk of providing cover to you we may: not allow the change to happen, limit the change, increase the payment to us, or add an exclusion. The amount of cover chosen is not guaranteed to repay an outstanding mortgage or loan in the event of a claim, even where cover has been taken out for this purpose. For more information, please read the Types of Cover section on page 5. Over time, the effect of inflation could reduce the value of your amount of cover. In other words, what your amount of cover could pay for in the future may be less than it could pay for today. Regular reviews with an authorised and regulated financial adviser can help you to ensure that your cover continues to meet your needs. 3

4 Questions and answers about Life Cover Am I covered while my application is being processed? When you apply for Life Cover we will provide you with an amount of temporary Free Cover. This covers you between sending us your application and your cover start date providing all of the following apply: you are a UK resident, you are aged 59 or under when we receive your application (for joint cover both applicants must be aged 59 or under), you are not applying to other companies for similar cover, and we have received a fully completed application and Direct Debit instruction. The amount of Free Cover we would pay in the event of a claim is the lower of: the amount of Life Cover you have applied for, and 500,000. The terms of the Free Cover vary according to whether or not your application is related to a mortgage. For the purposes of Free Cover, a mortgage related application is one that involves the purchase of a home. We reserve the right to amend or remove the Free Cover at any time and without any prior notice for new applications. For the full terms and conditions that apply to Free Cover you should refer to our leaflet There is such a thing as Free Cover. Please ask your financial adviser or us for a copy if you do not have one. Does Life Cover include anything else? Yes. Life Cover also includes: Replacement Cover If you take out joint cover and a claim is paid the joint cover will end. Replacement Cover lets the non-claiming person continue cover as a single person without the need for further underwriting. To qualify for Replacement Cover the persons covered must: be aged 50 or under and accepted on standard terms at the start of the cover. The non-claiming person must be aged 55 or under when they buy the Replacement Cover and it must be purchased within 3 months of the claim being accepted. The new payments to us will be based on the age and smoker status of the person covered when the Replacement Cover starts. When won t Life Cover pay out? A claim for Life Cover may not be paid if full and true answers were not provided on your application or claim form or if you don t tell us about any changes to health, family history, occupation, travel or pursuits that occur between completing the application and your cover start date. No other general exclusions apply to Life Cover. Any specific exclusions will be detailed in your cover schedule. 4

5 Types of cover What are the different types of cover and how do they work? When you take out Life Cover there are three different types of cover you can choose. The type of cover affects the amount you pay to us and that which would be paid if a claim is made. Level cover the amount that is payable in the event of a claim stays the same for the length of your cover. With level cover, your payments also stay the same, unless you change your Life Cover. This diagram illustrates level cover.* Amount of cover ( ) Term (years) Increasing cover the amount that is payable in the event of a claim increases annually on the cover start date in line with the change in the Retail Prices Index (RPI) subject to a minimum change of 0% and a maximum of 10%. Increasing your amount of Life Cover in this way can help compensate for the effects of inflation described in the Risks section on page 3. Your payment will increase by 1.4 multiplied by the % increase in the amount of Life Cover to pay for the increase. We will write to you in advance with details of your new amount of Life Cover and payment. You can ask us to stop increasing your Life Cover on the anniversary of your Account start date, but if you later decide to start increasing your cover again we would need to collect new underwriting information from you. This diagram illustrates increasing cover for different levels of RPI.* Amount of cover ( ) Decreasing cover the amount that is payable in the event of a claim decreases annually on the cover start date. Decreasing cover is designed to match the amount of an outstanding loan or repayment mortgage over its term, using the fixed interest rate shown on your Quotation summary. If the interest rate on the loan or mortgage ever exceeds the rate shown on the Quotation summary, then the amount payable may not be sufficient to repay the loan or repayment mortgage in full. Your payments are calculated to take account of the reducing amount of Life Cover but remain level so you pay the same throughout, unless you change your Life Cover. This diagram illustrates decreasing cover.* Amount of cover ( ) % RPI 2% RPI 4% RPI Term (years) Term (years) * These diagrams are for illustration purposes only and are based on an initial 100,000 of cover over a 25 year term. The type of cover your financial adviser has recommended for you is shown on your Quotation summary. 5

6 Questions and answers about Life Cover Payment and tax What is the payment basis for Life Cover? The payment basis available with Life Cover is Guaranteed. This means we won t apply any increases or decreases to your payments to us if the cost of providing your account turns out to be more or less than we first estimated, unless you make any changes or select increasing cover. What is the payment basis for Life Cover 5 Year Renewable? The payment basis available with Life Cover 5 Year Renewable is Renewable. This means the length of cover is 5 years, but after each 5 year period you have the option to renew it for a further 5 years without any further underwriting providing the cover ends before your 70th birthday. If you renew the cover, your payments to us will be recalculated based on your age and our terms and conditions at that time. Cover is available to those aged between 18 and 64 at the time the cover starts. Your payment basis is shown on your Quotation summary. How does tax affect my Life Cover? Life Cover is normally paid free of income tax and capital gains tax. On death, if it is paid to your estate it will normally be included in the value of your assets and may be subject to inheritance tax, depending on your personal circumstances. Current UK tax law and HM Revenue and Customs practice means you don t get tax relief on the amount you pay to us. Tax rules and rates can change and their impact depends on your individual circumstances. The information we provide is based on our interpretation of current HM Revenue and Customs practice. 6

7 Please ask your financial adviser if you would like a copy of this document in large text, Braille or audio. PRKFL 23/09/11 (33024) Friends Life, PO Box 1810, Bristol BS99 5SN. Telephone: Friends Life Company Ltd, the provider of this plan, is authorised and regulated by the Financial Services Authority, register No ( A company limited by shares, registered in England No , registered office: Pixham End, Dorking, Surrey, RH4 1QA. As part of our commitment to quality service, telephone calls may be recorded.