by Russell Hutchinson
Some advisers say to me that a quarter of their clients are loaded. When I remember to ask I say – so have you been promoting the use of the special events option?
A personal friend asked me about what he should do about cover he and his wife have: while referring him to a financial adviser I reminded him to make a special point of telling the adviser that his wife is in ill-health, and to ask the adviser to look at the special events increase in cover options on their existing policies.
It makes me think that such cover options would be used all the time – but in fact they are rarely used. If you have used on during a recent review with a client, give yourself a pat on the back.
The range of options available is quite large, and the extent of the options varies considerably between life policies. In fact special events options are a major point of difference between life products. Here is a quick run-down on what to look for:
The events:
Obviously there are some quite rare items – death of a spouse is rare, fortunately. On the other hand having the option activate on a salary increase is more valuable, along with a mortgage increase and birth or adoption of a child. But even better are those that allow an option ‘every three years’ or at certain policy anniversaries.
You will need to take into account the conditions. Most allow 90days to exercise the option; some allow 180 or even a year. My feeling is that if you don’t remember within 90 days you don’t get more likely to remember.
Then you have limits on the total number of times and option may be exercised. This can be further constrained by a total maximum percentage increase in cover over the original amount insured and / or a total dollar amount. These vary a lot. Some limit to 50% of the original sum insured, some limit to 100%.
Some companies cut the option at an age limit – some choosing as low as 55. Still other companies will not permit the option to be exercised if the life was loaded by 100% or more. Virtually all do not permit clients to exercise the option if they are eligible to make a claim – and remember, that can apply even with life contracts as a client could be eligible to make a terminal illness claim. The clause prevents ‘death-bed’ increases in cover, quite fairly I think. So if you have clients that can’t buy additional cover get them looking at their special events increase options sooner rather than later.
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