Your guide to protecting yourself and your loved ones with Aviva
Protect what matters most What s the most precious thing in the world to you? There s really only one answer to that the people who are closest to you. You can become very attached to your possessions, there s no doubt about that, but, ultimately, nothing is more valuable to you than the people you love. Their health, their safety, their well-being: these are the things that really matter. So it s strange to think that while nearly everyone insures their possessions, far fewer take steps to make sure their loved ones are financially protected from the harsher aspects of life. Not only that, many people never stop to think how they d maintain their own quality of life if they were unable to work. None of us like to contemplate the less pleasant things that life can throw at us but the possibility remains that illness, injury and even death could happen to any of us at any time. It s a bleak, miserable thing to consider, but not thinking about it doesn t lessen your chances of the worst happening. It simply means that if it does, neither you nor your loved ones will be as well-prepared as you could be.
How can you help protect yourself and your loved ones? While you can t guarantee that nothing untoward will ever happen to you, you can take steps to help protect yourself and your loved ones from financial hardship if it does. Aviva offers a number of protection products, which may meet different needs. We want to tell you exactly what they are without clouding the details with jargon. If you re not sure whether a product is suitable your financial adviser will be happy to help you with any questions. You should also read the Key Features of a product for full information before buying it. 3
So, when it comes to protection, what makes sense for me? Term Assurance Term Assurance is a life insurance plan that runs for a fixed period of time and pays out a fixed cash lump sum if you die during the plan term. When you take out the plan, you specify the amount of cover you want and the length of time you want to be covered for (subject to limits which depend on your circumstances). This type of plan is not an investment product and there will be no cash-in value at any time. Does it make sense for me? Yes, if you: want your dependants to receive a lump-sum payment if you die during the term of the plan want cover for a specific period of time want life insurance where the level of cover stays the same during the plan. No, if you: want a plan that will cover you for the rest of your life want a plan where the level of cover decreases throughout the plan term; for example to help cover a repayment mortgage. Mortgage Life Insurance Mortgage Life Insurance (a form of decreasing term assurance) is a life insurance plan that runs for a fixed period of time and pays out a reducing cash lump sum if you die during the plan term. When you take out the plan, you specify the amount of cover you want and the length of time you want to be covered for - usually the term of the mortgage or loan that you are covering. The cash sum decreases over the term of the plan because it s intended to help pay the rest of your repayment mortgage or loan. This also means you don t pay for more cover than you actually need. This type of plan is not an investment product and there will be no cash-in value at any time. Does it make sense for me? Yes, if you: want your dependants to receive a lump-sum payment if you die during the term of the plan want cover for a specific period of time want life insurance to cover a repayment mortgage or loan.
No, if you: want a plan that will cover you for the rest of your life want a plan where the level of cover stays the same throughout the plan; for example, to help cover an interest only mortgage. Guaranteed Whole of Life Guaranteed Whole of Life pays out a guaranteed cash sum when you die. It is often used by people looking to reduce the impact of inheritance tax. There are a range of payment options which may suit you - pay a single premium or make payments on a monthly or annual basis. You can choose to pay increased premiums for a shorter period of time if you wish. Please see the key features for more details. The payout is only guaranteed if you continue paying the permiums. Guaranteed Whole of Life is not an investment plan. It is designed to pay out when you die, not to provide investment returns or capital growth. Any cash-in value will be less than the premiums paid. Does it make sense for me? Yes, if you: want your dependants to receive a lump-sum payment when you die want to cover yourself for the rest of your life. No, if you: only want life cover for a specific period of time.
Other products or options you may wish to consider 6 Accident, sickness and unemployment This type of plan is designed to provide you with a monthly sum to help cover your mortgage payments if you are unable to work for more than 30 days because you are ill, have suffered an accident, have become unemployed or leave work to become a carer. Critical illness cover You can combine critical illness cover with Term Assurance or Mortgage Life Insurance to provide additional cover. Critical illness cover provides protection against the financial impact of over 30 different types of critical illness. Life and critical illness cover pays out a lump sum if you either die or are diagnosed with a critical illness that meets our plan definition and then survive for at least 14 days. We only cover the critical illnesses we define in our plan and no others. You can take critical illness cover on an integrated or independent basis with reviewable or guaranteed premiums (in some cases). Integrated cover For an extra cost, you can add this option to your Term Assurance or Mortgage Life Insurance plan. For Term Assurance, you must add it at the start of the plan. For Mortgage Life Insurance you can either include critical illness at the start of the plan or you can add or remove critical illness after the first anniversary, subject to conditions. The amount of critical illness cover will be the same as the life cover. Your plan will end if we pay a critical illness claim. Independent cover For an extra cost, you can add this option at the start of your Mortgage Life Insurance plan or you can add or remove critical illness after the first anniversary, subject to conditions. The amount of critical illness cover can be more or less than the amount of life cover, subject to limits. You choose the amount of cover and it remains level throughout the term of the plan. Your life cover is not affected if we pay out a critical illness claim, so the plan will continue. If you add both integrated and independent critical illness cover to your Mortgage Life Insurance plan, they must both have the same type of premiums, whether that is guaranteed or reviewable. This is not an investment product and there is no cash-in value at any time. We automatically include children s critical illness cover when a life insured is covered for critical illness under the plan. The amount payable under children s critical illness cover is the lower of, either 20,000 or 50% of the amount of critical illness cover a life insured has under the plan. What are guaranteed and reviewable premiums? Guaranteed premiums this means premiums will stay the same throughout the term of the plan. Reviewable premiums this means that premiums are very likely to change over the term of the plan. We ll review premiums every five years and will not change the premiums in between reviews. Please talk to your financial adviser for further information. Income Protection Unlike a life insurance plan, Income Protection provides you with a monthly income should illness or accidental injury prevent you from working. It is different to mortgage payment protection as it can help to cover all of your outgoings, rather than just your mortgage. Mortgage Payment Protection For an extra cost, you can choose to add Mortgage Payment Protection to your Mortgage Life Insurance plan. Mortgage Payment Protection helps you cover your mortgage payments if you suffer a loss of earnings because you are unable to work due to illness or accidental injury. It helps to allow you to keep up to date with your repayments when otherwise you may have fallen behind. We review the Mortgage Payment Protection premiums before the fifth anniversary of you choosing to include the option in your plan. After that, we review the premiums every year. Premium Protection For an extra cost, you can choose to add Premium Protection to your Term Assurance or Mortgage Life Insurance plan. It means that we will pay your life insurance premiums for you if you re totally disabled by illness or injury. It will allow you to keep your life cover in place when otherwise you may have needed to stop payments and cancel the cover.
Putting your protection under trust A trust is a way of arranging for your loved ones to benefit from your plan by appointing trustees to ensure that your wishes are carried out. Most people who buy life insurance don t put it under trust. This can prove to be a mistake. If your life insurance plan isn t written under a suitable trust, as much as 40% of it could be swallowed by inheritance tax, leaving the very people you bought the product for in the first place with less money than you planned and a bill to pay. Trusts are fairly simple to set up too. Most companies offer trusts and you can put your protection product under trust without any extra cost. If you think your family could benefit from putting your protection product under trust, please talk to your financial adviser. They will be more than happy to help you choose which trust is most suitable for you. You may even be able to put any existing policies you may have under trust. By writing your protection product in trust, your family could benefit in a number of ways. First and foremost, by naming trustees, they won t have to wait a long time to receive the money, provided there is at least one surviving trustee at the time a claim arises. If a plan is written under trust, most life insurance companies only then need the death certificate, and the remaining trustees to sign a form, to fulfil the claim. If you don t put your plan in trust, the plan payout will form part of your estate. Probate documents then have to be obtained before the assets in your estate can be given to your beneficiaries which takes time. Putting your plan in trust can speed up the process of getting the money to your loved ones by taking it out of your estate. Secondly, any assets held in trust will usually not be part of your estate and won t normally be subject to inheritance tax. The cash sum could even be used to help pay any inheritance tax bill triggered by the estate. Please note: The law relating to tax may change. 7
How protection can work Different protection products are suitable for different purposes and one type may be appropriate at one stage of your life while another is more fitting later in life. We ve got a few examples to show you how protection products can work. These scenarios are fictional and are only examples of situations that may arise. Starting out Rebecca and Barry have just bought their first house. They saved hard for the deposit and to buy the fittings and furniture they wanted. They already have life insurance to cover their mortgage, but now want some advice about protecting their mortgage payments. Rebecca and Barry are both young and healthy, but, as they need both their salaries to cover the mortgage payments, they were worried about keeping up their repayments if either of them had an accident or became ill. Their adviser suggested that they both take out an Income Protection policy, so if either of them were unable to work through a long term illness or accidental injury, they would still receive a monthly income to help cover their mortgage payments and essential bills. This gave them peace of mind that they are not going to lose the home they worked so hard for. The young family Steve, 36, is married to Claire, 34. They both worked full time as civil servants until Claire gave birth to their first child, Harry, and has decided not to return to work for a couple of years. Although they have some investments, they don t have life insurance or any other kind of financial protection products as they have never seen the need. With Harry s arrival and Steve now the sole breadwinner for the family, they now realise that they would face financial difficulties if anything happened to either Steve or Claire. They have decided to take out a level term assurance plan and critical illness cover for both Steve and Claire. Should anything happen to Steve, these policies will help provide some financial cushioning so Claire can remain at home to look after Harry. If anything happened to Claire, Steve would be able to fund the cost of childcare or consider giving up work himself. 8
Planning ahead Paul is 47 and works as an accountant. He s married to Helen, a 45-year-old legal secretary. Their eldest child, Laura, has left home, but Tom, 17, and Abigail, 15, are still at school and living with their parents. Both of their younger children want to go to university, an ambition that Paul and Helen fully support, but recognise will be expensive. Paul and Helen have been married for 25 years and, although they have paid off most of their mortgage, they still owe several thousand pounds on it. They also have a number of debts, ranging from car loans to finance for new windows and a conservatory for their house. With the prospect of financing two children through university, Paul and Helen are concerned about the outcome should the worst happen to either of them. If they only had one income, they couldn t afford to maintain their current lifestyle and provide the same level of financial support for their children. To safeguard against this, Paul and Helen took out a life insurance plan to pay out a lump sum if either of them should die during the plan term, and an income protection plan to cover the loss of income if either of them should fall ill. Taking care of the future Ken is 68 and already has a level term assurance plan but it is about to come to an end. He is concerned about inheritance tax and doesn t want the money he leaves for his family to be swallowed by the taxman. He talked to his financial adviser and has decided to take out a Whole of Life plan, which will provide a guaranteed cash sum to his beneficiaries when he dies. He has also put the plan in a trust so the plan won t form part of his estate and won t be subject to inheritance tax. This also means the surviving trustees will receive the payment more quickly and the proceeds may be used to help cover any inheritance tax liability on the rest of the estate. 9
What s the next step? Aviva has a comprehensive range of protection products. We can offer you: Term Assurance (with or without options) Mortgage Life Insurance / Decreasing Term Assurance Guaranteed Whole of Life Income Protection Accident, Sickness and Unemployment plan With the exception of Guaranteed Whole of Life, none of the products listed above have a cash-in value at any time. Our Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneymadeclear.org.uk If you want to learn more about how you can help protect yourself and your family from financial hardship should something unpleasant happen, you should talk to your financial adviser. Its vital that the products you select are right for you and that the level of cover chosen, as well as the term, are suitable for your individual needs. That s where your adviser can help, with expert advice on the level of protection needed to secure you and your loved ones financial future. They can also provide you with copies of the Key Features and the Terms and Conditions for each of our products. If you decide to take out one of our products, your adviser will be able to help you fill in the application form. It is very important to complete the form in as much detail as possible, accurately and honestly. We can only provide cover if we know the full facts about the person we re insuring. If you don t provide all the information we ask for on the application form, we may not be able to pay any claim that is made. Remember, one of the reasons for buying life insurance is to help protect those closest to you. So, to give you the peace of mind you re paying for, please tell us everything. Don t assume that we will contact your doctor to fill in any gaps. We will only take into account the information that we feel is relevant to your application and, in most cases, we ll be able to offer you the kind of cover that s right for you. Whatever happens, we want you to feel comfortable with the choices you make. Your loved ones are the most important thing help protect them. 10
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Income Protection is administered by Aviva Health UK Limited and underwritten by Aviva Life & Pensions UK Limited. Aviva Life Services UK Limited. Registered in England No 2403746. 2 Rougier Street, York. YO90 1UU. Aviva Life Services UK Limited is authorised and regulated by the Financial Services Authority. FSA Registration No 145452. Member of the Association of British Insurers. www.aviva.co.uk PT 15 044 09/2011 Aviva plc