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Immediate cover vs Free Cover – What are the differences and who offers what?

Immediate cover vs Free Cover – What are the differences and who offers what?

In reading this article you will understand

  • What Immediate Cover and Free Cover are and how they differ
  • Which providers offer each type of cover and the restrictions that apply
  • The advantages and disadvantages of Immediate Cover and Free Cover

The death of anyone in the workplace will affect a business, but when it is the loss of the owner or someone who is regarded as a key person or a shareholder the impact will be massive. Business protection helps to protect businesses from the financial impact of the death of people that are crucial to a business. It is important to get that person covered as quickly as possible, as death and illness do not put themselves on hold while applications for protection policies are going through.

In this insight we look at the ways that insurers can protect business owners or key persons during the application process through immediate cover and free cover, which are very different.

Immediate Cover

Immediate cover is where insurers underwrite a policy based on information in the application form and put it into force while they await further medical evidence. Free cover differs in that it is a type of temporary cover that fills the gap before a policy is in force and is not underwritten or paid for by businesses.

Note: Legal and General have currently suspended their Immediate Cover facility during the Covid pandemic. It is under constant review to be reintroduced but is not currently available.

Royal London offer a maximum sum assured of £3.5m and have no maximum age for immediate cover. The cover will be provided for six months to clients with a maximum rating of 100% giving a deccent chunk of time in order to obtain medical evidence and fully underwrite the policy. If the premium decreases once the medical evidence is obtained and underwritten they refund the difference in premiums. If the premium goes up after the full underwriting is complete, they will ask for the difference in premiums to paid. Finally, they have a comprehensive approach to exclusions, only excluding self-inflicted injury or suicide as our chart shows.

Free Cover

Most, but not all providers listed in our data provide free cover during underwriting as our chart shows.

But in the case of LV= and Scottish Widows, the free cover provided is limited to accidental death only

Zurich offer a maximum sum assured of £2m which is considerably higher than the next highest, AIG, who offer £1.5m. Royal London and Vitality have a maximum of £1, but Aviva and LV are some way below this. Scottish Widows offer the lowest maximum sum assured at £250,000.

All insurers require a completed application form for free cover to start, but they differ in relation to the requirement for completed direct debit mandates. While most do require a direct debit before the cover can commence, Aviva do not.

Maximum period that free cover during underwriting will be provided for
Maximum age that free cover during underwriting will be provided to
60 days
90 days
No maximum
60 days
Royal London
90 days
Scottish Widows
90 days
Vitality Life
90 days
90 days

Our table also shows that more insurers will provide free cover for a maximum of 90 days than 60 days, which is great news for clients as it is taking longer than usual to provide medical evidence due to Covid-19. There is greater variation when it comes to the maximum ages to which free cover will be provided. VitalityLife has the lowest maximum at age 49 while at the other end of the scale Aviva have no maximum age.

Free cover tends to have more exclusions than immediate cover because it is not medically underwritten. This is evident within our table, although on the whole, insurers have not been onerous in applying these. For example, only three insurers out of the seven listed – AIG, Royal London and Scottish Widows exclude hazardous pursuits.

Advisers may find it useful to remind themselves of the benefits and drawbacks of immediate cover and free cover when choosing keyperson life cover. The strengths of immediate cover lie in the fact that it has been underwritten, so the insurer has a more accurate view of the risk they are taking on in providing cover, resulting in fewer exclusions and the ability to cover larger sums assured.

The downside is that if immediate cover has been provided then subsequently declined when medical evidence has been provided, this could bring an adverse reaction from the client. However, this is unlikely to be a huge problem as it is only likely to happen if the client has not disclosed a condition in the application form.

The benefits of free cover are completely different to those of immediate cover. There is no cost – which is not the case with immediate cover – and cover is provided as soon as the application is submitted. However, cover is only available for a short period, sums assured are smaller than for immediate cover and there are age limits.

Overall, Royal London should be commended for offering immediate cover and free cover, which most insurers do not. Zurich’s free cover is worthy of a mention because the maximum level of cover offered is more generous than most at £2m, their offering is not restricted to accidental death and provides cover for a maximum of 90 days, which is at the upper end of the market and only has one exclusion.

Things to reflect on for CPD:

  • Identify your top three learning points from this article. How can you apply your learning to your client conversations for business protection?
  • How can you relate the learning to your own process for business protection meetings. How could / should you change your conversations to better explain these options?
  • Further required reading: The article above cover Immediate and Free cover for business protection.  Read this related article covering free cover for personal protection and consider the differences yourself or in discussion with your peers.

About The Author


As well as writing for Protection Guru, Amanda Newman Smith is the feature writer at adviser trade publication Money Marketing. She started her career at a local newspaper in London and has been writing about protection products since 2000. In her previous role at Money Marketing she specialised in analysis of new financial products, including those in the protection market. Having recently become interested in antiques, Amanda spends her free time with her husband and their three children, hunting for unloved pieces to restore to their former glory.

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