AEGON are a company that are well known for being a strong player in the high sum assured and business protection market but a lack of recent upgrades has meant that they have fallen behind other insurers in terms of depth of proposition. In many ways they may have been guilty of prioritising the wealth side of the business, however today they have launched some significant changes to their Income Protection plan that not only show that the protection market is still a key priority but also brings them back into the lower premium end of the market.

Short term income protection policies have become particularly popular in the Income Protection market as a low cost way of providing cover for clients. Unlike full income protection plans the benefit is paid for a limited time period and as such premiums are lower. The benefit periods can range from 1 and 5 years with most insurers offering either a 1 or 2-year benefit period. Up until now AEGON have not played in this market and have only offered a full term solution, however they have now added a 2 year short term option on both personal and business Income Protection plans.

This is particularly positive as 42% of new income protection sales in 2018 were based on a limited benefit term option with over 72% of these on a 2 year benefit term. This clearly opens up a whole new segment of the market for AEGON and importantly provides advisers with more choice when advising clients on a limited budget.

As well as adding a short term option, AEGON are also increasing the maximum benefit available to new applicants. Previously they offered a flat 55% of the clients’ income as the maximum that would be offered, however this will now change to a tiered approach that has previously been deployed by other insurers across the market. The new maximum payment will be:

 

Income (p.a.) Tier
Maximum Benefit as a percentage of Income*
Up to £20,000
65%
£20,001 to £100,000
55%
Over £100,000
45%

*The maximum benefit a client can have overall has also increased from £150,000 to £250,000.

This new tiered approach actually means that the majority of clients will be able to have higher benefits with only those on very high incomes (i.e. over £120,000 p.a.) having the maximum benefit available reduced. Whilst this new approach does not offer the highest benefit in comparison to earned income across the market (LV= & The Exeter have notably high limits) it does provide higher benefit options for most customers.

Death benefits are not something that is particularly new on Income Protection plans but an additional benefit that the family of the client would be very grateful for at a desperate time. Across the market there are number of different ways death or funeral benefit are paid ranging from a fixed amount, a multiple of the monthly benefit, a multiple of the monthly premiums and even a tiered approach based on the number of years the plan has been in force. AEGON’s new fixed death benefit of £5,000 is not the highest in the market but none the less a very welcome addition to the proposition.

 

Product/Insurer
Amount Paid on Death
AEGON
£5,000
AIG
£10,000
Aviva
N/A
Aviva Living Costs
N/A
British Friendly

6 x monthly benefit

(Not a contractual benefit)

Legal & General
12 x monthly premiums
LV=

£5,000 if death is within 4 years of the start of the policy

£10,000 if death is after 4 years of the start of the policy

LV= Personal Sick Pay
N/A
Royal London
12 x monthly premiums plus the plan charge
The Exeter
N/A
Vitality
N/A
Zurich (Core & Select)
The lower of 6 x monthly benefit or £10,000

 

The minimum benefit guarantee is something we covered in recent times (see here) and whilst this remains unchanged, the upgrade brings to light that AEGON have an additional “financial cushion” for clients that are earning less at point of claim than they earned at policy outset. This is not a contractual benefit so could be changed or amended but has been part of their claims philosophy for a little while. In its current guise, the financial cushion means that if at point of claim the maximum that AEGON will pay is less, but still within 10%, of the benefit amount due to a decrease in income, AEGON will still pay the full benefit as long as this is above the minimum benefit guarantee (£1,500p.m.).

Overall the additions to the AEGON Income Protection proposition are not ground breaking however they do make a far more rounded proposition providing advisers with both low cost and full income protection options. The increase in the maximum benefits available are very positive for low to mid income clients, whilst the addition of a death benefit provides welcome additional cover for the family of the life assured. These changes combined with AEGONs strong underwriting of high sum assured applications mean they should be a consideration in far more cases than they might have previously been.

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