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Employee Significant Illness Cover with Relevant Life

Relevant life Insurance with employee significant illness cover

Aviva first launched a relevant life insurance and critical illness cover product in 2016 for customers. Their aim was to provide tax-efficient life cover with critical illness cover that enabled business employees and directors to save money. However, due to confusion around the tax and legal implications, they changed their critical illness cover to an employee significant illness cover instead.

What is now covered?

Instead of a critical illness policy similar to that offered by most UK providers, the significant illness cover now contains fewer illnesses. However, these illnesses have been specifically selected for their level of severity. In particular, you need to be not well enough to work in the same capacity.

Aviva has listed the following conditions for their significant illness cover:

  • Advanced cancer
  • Aplastic anaemia
  • Bacterial meningitis
  • Benign brain tumour
  • Benign spinal cord tumour
  • Brain injury due to anoxia/hypoxia
  • CJD
  • Devic’s disease
  • Encephalitis
  • Intensive care (ten days)
  • Kidney failure
  • Liver failure
  • Major organ transplant
  • Motor neurone disease
  • Multiple Sclerosis
  • Parkinson’s plus syndromes
  • Pneumonectomy
  • Psychosis and bipolar affective disorder
  • Pulmonary arteria hypertension
  • Respiratory failure
  • Severe heart condition
  • Spinal stroke
  • Stroke
  • Systemic lupus erythematosus
  • Third degree burns (20% coverage)
  • Traumatic brain injury
  • Total and permanent disability

Why has the policy changed?

When Aviva first launched their relevant life with critical illness cover there was scepticism from other insurers whether it was actually a tax-efficient policy. Due to the complications and uncertainty surrounding the policy, Aviva then relaunched their product with significant illness cover with the full agreement of HMRC.

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What are the main differences?

Aviva will provide life and employee significant illness cover for customers instead of a typical critical illness policy. They will pay out in the event that the life covered meets the definition of one of their defined employee significant illness conditions or passes away during the policy term.

The employee will need to survive for at least 10 days and the condition needs to be deemed serious enough to result in the retirement or anticipated retirement of the individual.

The main difference with this new employee significant illness change is that it removes any uncertainty surrounding the tax implications of the relevant life policy. It has also removed any partial payments options too. Therefore, the policy only pays out once, much like other life and critical illness policies.

Fewer conditions are covered

Unfortunately for customers, the cover is now narrower than the previous version meaning that fewer conditions are covered. The conditions on the list need to be severe enough to lead to retirement.

Existing customers, however, still get all the benefits they originally signed up for with no discrepancies expected from HMRC. Now, instead, Aviva has agreed that what can be offered with their new policy is a viable tax-efficient option.

This is because the new significant illness cover coincides more clearly with conditions that prevent people from working in their normal capacity. Not all illnesses that could cause this are covered, but it has touched on some serious illnesses that can really affect people’s working lives.

Retirement or anticipated retirement

Aviva demonstrates how a claim can be paid under the relevant life insurance with employee significant illness cover with 3 case studies. Within these, they suggest that retirement doesn’t have to be linear. In fact, they only need to confirm their intention to retire from their current role. For example, they can return to a different role in a different capacity within the same company or for a different company altogether.

In the event of a serious illness for an employee, employers can make “reasonable” adjustments including allowing flexible hours, changing performance targets and changing job descriptions. For the significant illness cover, this means that they have to retire from one job and move to another with a different capacity. Or, retire completely.

The policy is heavily linked to the inability to work.

Can you get relevant life and significant illness cover elsewhere?

Whilst, at the moment, no other insurers provide a similar policy, it could be a possibility in the future. Now the uncertainty has been removed from the policy, other companies may have more confidence in moving forward with a similar product.

This could mean that critical illness cover itself is linked specifically to conditions that can jeopardize the status of an employee’s career. Whether this means that customers will lose out, we’re not sure.

It could also mean that insurers come up with more comprehensive critical illness policies such as Vitality’s serious illness cover. More common illnesses could be covered rather than obscure serious illnesses and partial payments may be included based on severity. This could call for a wider product range for customers. Not only that, a better opportunity for advisors to help customers find the right policy that suits the individual’s needs.

How do I access relevant life and significant illness cover?

The best way to get relevant life with significant illness cover is to compare policies to make sure that it’s right for you. You can use an insurance broker to help find out the best options for you to see if it suits your business requirements.

To get a quote contact us today at Business Cover Expert or fill out a quote form.

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