In response to the ongoing pandemic, the life and pensions industry has introduced a number of changes to pension and protection benefits for policyholders.
COVID-19 has also prompted a change to the application process for those seeking life cover, specified illness cover, and income protection.
Ifac, the farming, food, and agribusiness professional services firm, is providing a summary of these new measures and helpful advice to support life assurance and pension policyholders in Ireland.
Martin Glennon (QFA, CFP®), Head of Financial Planning at ifac, answers some questions:
Life Cover and Specified Illness Cover
Will the payment of life cover claims be impacted by COVID-19?
We can reassure you that all life companies have confirmed that your life cover will not be impacted by COVID-19. In the unfortunate circumstance that a person contracts COVID-19 and dies, life policies would payout in line with the life companies' usual claims philosophy.
Do clients need to tell the life companies if they have been diagnosed with, or are awaiting testing for, COVID-19?
Clients with policies already in place do not need to let their provider know. Your policies’ original terms and conditions continue to apply, and nothing changes due to this pandemic.
Applications in process
For applications currently in progress that are pending any requirements, for example, a special terms letter or direct debit mandate, customers need to let the life company know if there has been any change to their health. You must fully disclose anything which may have arisen between the date you applied for cover and the date your policy is issued. This includes any new medical issues, medical investigations, or new symptoms.
New Business Applications
All new applications include additional questions directly related to the virus. Examples of these new questions being asked are as follows:
Have you tested positive for Coronavirus (COVID-19) or are you waiting on a COVID-19 test or test result?
Are you currently experiencing symptoms of a cough, a high temperature, a fever, breathing difficulties, or any other symptoms of Coronavirus (COVID-19)?
Are you self-isolating due to the symptoms of Coronavirus (COVID-19)?
Have you been advised to self-isolate for any other reasons, or had direct contact with someone who has been confirmed or suspected to have Coronavirus (COVID19)?
If you answer yes to any of the above questions, a decision to provide cover will be postponed until the individual has made a full recovery or for a minimum of one month.
Have there been any other changes?
At this stage, one provider (Aviva) has temporarily reduced the maximum age of entry for new applications to age 70.
What if I cannot afford to pay the premiums on my existing protection policy?
Maintaining protection cover is particularly important during this crisis for obvious reasons. The life companies are aware that greater flexibility is required to help people during these challenging times. There has been a range of options introduced. Bear in mind that each provider has adopted its own approach, so you will need to check with your provider to see if any of these new options are available to you.
Re-instating policies that lapse
Generally, clients with life assurance policies have 30 days after their premiums become unpaid, during which they remain on cover. After this period, the policy lapses and you are no longer on cover. In order to reinstate the policy, you must complete a declaration of health (which is subject to full underwriting) and pay the outstanding premiums. Most companies have indicated that they will accept reinstatement of a policy that lapses during the crisis, without the declaration of health for a period of 90-100 days (rather than 30).
New Ireland Assurance is offering a three -month premium waiver to customers who have been granted a payment break on their mortgage. The three-months premiums will not be required to be repaid at a later date. Evidence of approval of the mortgage payment break will be required. This offer also extends to non-unit linked Term Assurance policies that are assigned to a mortgage.
Premium Holiday or Deferral
Some providers are providing a premium deferral facility for protection policies. Royal London will allow you to defer up to three-months premium and Aviva for four-months. During the deferral period, you remain on cover. At the end of the premium deferral period, the premium arrears due can be repaid at that point or spread out over the upcoming 12-month period.
Pension & Savings Plans
Premium Holiday or Deferral
Maintaining pension premiums is an important part of saving for retirement. However, if you have been financially impacted by COVID-19 and are concerned about paying your monthly pension premiums, some providers can offer a premium holiday of up to six months. At the end of the premium holiday period, your premium will recommence at previous levels. If premiums do not recommence, the policy will be made Paid Up.
Minimum Premium Reduction
Some providers have reduced the minimum premium on their pension and savings plans to help clients who want to continue saving but at a lower level.
The COVID-19 pandemic continues to have a huge impact on businesses in Ireland. Many employers have laid-off staff, either on a permanent or temporary basis, while some have had to reduce hours and pay for staff.
Can contributions (employer, employee, and AVC) be stopped under the existing pension plan?
Where the employees have been permanently let go or are no longer being paid, contributions can be stopped.
Where the employees continue to be paid (full or reduced income), only the employer contributions can be temporarily stopped for a period up to the later of, three-months or the next plan renewal date.
Where the employees continue to be paid (full or reduced income), all contributions (employer, employee, and AVC) can be temporarily stopped up to the later of three-months or the next plan renewal date.
In both 2 and 3, where contributions are currently based on a percentage of income, contributions can continue to be paid into the plan based on the reduced income that employees are receiving.
Group Risk – Death in Service
Will employees continue to be covered for Death in Service benefits during this time?
Where the employees have been permanently let go, redundancy cover may apply (if available), where employees’ current level of death in service benefit can continue for up to six months from the date of leaving.
Some Group Risk schemes include a continuation option. This allows the leaving member to set up an individual policy with the current provider, without providing evidence of health (for the same level of benefits or less). Usually, this option must be exercised within 30 days of leaving and one provider has extended this to 60 days.
Where the employees have been temporarily laid off and provided New Ireland will maintain the employees’ current level of death in service benefit for a period of three months from the date employees were laid off. This will apply where the employer has paid or will pay, the death in service premiums for these employees for the three-month period. There is no update from other providers on this option.
Where the employees continue to be paid on a reduced income basis, New Ireland will not apply any corresponding reduction in cover. Provided they receive a request from the employer and agree to do so, they will maintain the employees’ current level of death in service benefits for a period of three months.
If you need any further support, speak to your financial advisor or contact Ifac’s team of specialist advisors who are on-hand to help you plan for your future. Visit www.ifac.ie or call 01-4277400.