Legal & General ‘Lifetsyle’ Redundancy Cover Reviewed
Loosing your job is a scary thought for most employees so protecting your income through redundancy cover is an excellent idea. This is even more important if you have taken on a large credit commitment such as a mortgage or loan.
In recent years taking out unemployment cover has been an expensive exercise and those who chose to do it have hefty premiums. Why, well jobs were being lost left right and centre and the intensity of claims pushed the prices sky high.
About eighteen months ago a new product was launched by Legal and General to address this issue. Aimed at employees who have been with their employer for at least 6 months it can protect a monthly income of up to £5,000 for a 12 month period.
It has quickly captured market share and now boasts about 70% of the total short term income protection market.
The cheapest premiums for the product are available via Specialist Insurance Brokers such as Niche Advice.
Examples of cost for redundancy cover only
Based on a single applicant in the W1 postcode. 60 day deferral period. Prices current as at 4th November 2013.
|Example 1||Example 2|
|Income||£30,000 pa||£40,000 pa|
|Job||IT Consultant||Local Council Adminsitrator|
|Started with current employer||Jan 2012||Jan 2010|
|Monthly income benefit||£1625 pcm||£2,166 pcm|
This is to give an indication of price, all quotations are client specific.
Good points about the product
This is a very competitively priced redundancy cover product. Even if the insurer is aware of redundancy in the sector they rarely prevent new applications being accepted. For example, in the Armed forces many jobs are to be lost in March next year but as the terms have not been determined they will still take on a new policy.
The policy is open to those with or without a credit commitment whereas most short term income protection policies are limited to applicants who have just taken out a mortgage.
The maximum pay-out is a generous 65% of gross income up to £5,000 maximum per month.
There are various waiting period excesses to reduce the premium still further.
The policy is subject to a 10% renewal cap on premium increases.
Applicants that have an existing unemployment cover with another insurer can transfer to this one without having to wait the standard 60 days before a claim can be made.
Accident and sickness protection can be added onto the product at relatively little extra cost. There is no requirement to attend a medical and family history does not play a part in the decision making process. If you have had an illness in the 12 months prior to application. This is normally excluded for the first 12 months of the policy but can then usually be covered also. This is very generous feature and can capture a large sector of the population that are excluded from similar market products. For example, those with diabetes.
The accident and sickness cover is also available to all occupations including deep sea divers, scaffolders etc . The definition of the cover is ‘own occupation’ which is beneficial as you need to be able to perform the exact same job and if you can’t the payment of the cover continues.
The product has the best Defaqto rating for quality which is 5 Stars.
Bad points about the product
The premiums are higher if the product is accessed directly or through the comparison sites.
The benefit is paid out for a maximum of 12 months.
Applications for protection above £3,000 per month is subject to a slower process.
The product is postcode specific so areas with a high historic unemployment level are disadvantaged.
The policy is set up on an annual renewable basis so there is the possibility that the insurer will refuse future cover, particularly if you have been a serial claimant.
As with most redundancy policies the target market is employees without any shares in their business. Sole traders or Partnerships can apply but they will physically need to register that they have ceased trading and be on job seekers allowance (i.e. signed on) before a claim would be settled. This is therefore of little practical use as in my experience once clients have decided to become self employed they rarely give up even if the market hardens. Limited company directors with a share holding cannot apply.
The views reflected herein are personal to Richard Stokes, and are not necessarily shared by Niche Advice Limited. The rates quotes are to give an indication of price, all quotations are client specific.
Author: Richard Stokes
Richard Stokes is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on on Mortgage and Insurance products.