Overview of Prudential's Life Insurance Cover Under the PruProtect (now VitalityLife) Plan

This article will primarily concentrate on the PruProtect (now Vitality Life) line of protection products by Prudential Life and mainly its life insurance offerings. PruProtect offers comprehensive protection. A potential client can choose one or more of the following core benefits:

• Life Cover
• Serious Illness Cover
• Income Protection Cover

Prudential Life also offers the Vitality Program. This is a rewards and discounts program that encourages Persons Insured to get involved in health and fitness activities for points that can be used to enjoy discounts to premiums and partner rewards.

PruProtect works by providing Persons Insured with a plan account. This plan determines the coverage amount to be paid for the core benefits:

• Level. The sum assured stays the same throughout the life of the plan. There can be changes depending on claims made for particular benefits.
• Indexed. The sum assured increases annually based on the Retail Price Index (RPI). The maximum increase allowed per year is 10%.
• Decreasing. The sum assured decreases over the years. The decreases are designed to coincide with any mortgage or debt the plan was designed to cover.

The client can then add extra benefits to these core products. This allows the client with the flexibility to customize the cover that he needs and wants. These other covers are not linked with the plan account and are rather determined individually.

For the purposes of this article, the focus will be on the Life Cover aspect.

Quick Facts

Plan Details

Lives Covered

The PruProtect / Vitality Life plan can either be a single or joint life coverage. For joint life coverage, it can either be:

• Joint Life First Death. The policy ceases to be effective after the first life claimed.
• Joint Life Second Death. The policy continues to be effective until the second life claimed, meaning, the plan will pay twice (once for each life). This option is only for whole of life cover.

Payment

The policy will pay out the death claim when:

• the Person Insured dies within the plan term
• the person Insured is diagnosed with a terminal illness.

For joint life cover, it can either be:

• Joint life first death. If the plan has two people covered, once one of the Persons Insured dies or is diagnosed with a terminal illness, the life cover of the plan account stops. If there are other core covers aside from the Life Cover, these will continue for the surviving Person Insured. However, the surviving Person Insured can also get a new plan for a new Life Cover.
• Joint life second death. This is only if the cover is a whole of life cover. The plan will continue even if one of the Persons Insured have already died or is diagnosed with a Terminal illness. The plan will still pay when the surviving Person Insured dies or is diagnosed with a Terminal Illness.

Premiums

The Vitality Program

This program of Prudential Life may affect plan premiums. With this program, the Person Insured can earn points for doing a specific activity aimed towards improving his health. Depending on points earned, discounts can be applied on the premiums.

Guaranteed Premiums

These are premiums that remain the same, except for the choices that the Person Insured makes with regards to plan amounts and additional benefits. This is not available for whole of life plan accounts with serious illness cover. For other covers, the option to guarantee their premiums should be made separately.

Reviewable Premiums

These are premiums that are periodically reviewed and may likely increase even without changes to the benefits.

• Life cover. This will be reviewed on the Person Insured’s 70^th birthday, and each year after.
• Whole of Life premiums. The first review will be on the tenth anniversary of the plan, and then the reviews will be yearly. However, if the plan’s premiums were increased as a result of a review, the premium review will be after the next ten years.
• Fixed term plan accounts. The first review will be after 5 years, and then every year thereafter.

Premiums are reviewed separately for each Person Insured in the policy.

Additional Benefits/Options

Immediate Cover

This provides life insurance coverage while the Person Insured’s application is being processed. This limited life cover is free of charge and is applicable to a single life plan or a joint life first death plan.

Maximum amount of Immediate Cover: £500,000 (combined for life, family income and education life cover)

Other conditions:

• The life insurance application has been completed and submitted, with a completed direct debit instruction provided by the applicant.
• The Person Insured is below 50 and is a resident of the United Kingdom at the time the cover applies.
• Terminal illness is not included in the cover.
• There are no other pending life insurance applications with any other company.
• There are no “yes” answers to Prudential’s medical and health questions
• The Person Insured does not take part in dangerous occupations, sports or pursuits that would have resulted in a change in premiums charged.
• The cover stops when the application is cancelled, accepted or declined.
• The cover is only up to 90 days from the receipt of the life insurance application.

Serious Illness Cover

Also called Critical Illness cover.  The lump sum to be paid upon diagnosis of the illness or condition will be a percentage based on the severity of the illness. The percentages paid are 100% (most severe), 75%, 50%, 25%, 15% and 10%. The date of expiry of the critical illness cover coincides with the expiry of the life cover.

Serious Illness Cover also includes any children (3 months to 18 years old) that the Person Insured has. Serious Illness also includes permanent disability.

Maximum amount of Cover:       

• £2,000,000
• Or, when the amount of cover changes or when the indexation option is applied, three times the amount of Serious Illness Cover when the policy started

Other conditions:

• The critical illness must be a covered critical illness and listed in the policy.
• The critical illness must meet the conditions specified in the policy.
• The Person Insured must survive for at least 14 days after the diagnosis.
• Prudential may require medical evidence from the Person Insured’s doctor.
• The Person Insured can have more than one claim for Serious Illness cover.  The maximum benefit payable is the remaining value of the plan account. Payments for subsequent claims will be based on the new value of the plan account, which will have decreased after the payment of the first claim.
• The claim must be made before 6 months have passed.
• Serious Illnesses are placed under various body system categories. 
• For multiple serious illness claims caused by a single event, payment will be made only to the illness with the highest severity level.
• If claims are made for more than one life under a single event (i.e. an accident that resulted in the Person Insured and his family becoming seriously ill), the policy will pay based on the conditions for each claim.
• If a single event makes the Person Insured eligible for both Serious Illness Cover and Disability Cover

Disability Cover

This pays a lump sum in the event that a Person Insured becomes disabled due to accident or illness.  The payment will be based on the severity of the disability. Disability Cover is only up to 69 years old. For Whole Life Plans, this cover can be converted to a limited form of Serious Illness Cover.

Claims under disability cover will be payable if:

• The illness or condition is something that is covered in the policy
• The illness or condition started within the Policy’s effective dates (after the cover was issued and before it expires), or, the Person Insured disclosed this illness or condition during the application of the policy
• The claim is supported by medical reports and documents as requested by Prudential Life, including medical information provided by the Person Insured’s GP or appropriate medical specialist
• It is approved by Prudential Life as payable, based on their Chief Medical Officer’s decision
• The Person Insured survives longer than the relevant survival period stated in the policy

The amounts of payments will be based on the following categories:

Maximum amount of Cover:

• £500,000 (initial cover amount)
• For serious illness, combined benefit payments for Disability, Serious Illness Cover, Family Income Cover and Education Cover should be not more than £2,000,000.

Income Protection Cover

This pays a regular income in the event that the Person Insured becomes incapacitated, as defined in the policy.

The definition for being incapacitated may be:

• Own Occupation. This pertains to the inability to perform material and substantial duties for the Person Insured’s Own Occupation. This is for someone who is currently employed.
• Activities of Daily Living. Incapacity is based on the inability to perform at list three activities from a specified list of everyday physical activities.
• Special definition. For the first 12 months, the “own occupation” definition will apply. After this period, the “Activities of Daily Living” definition will apply for the benefit to be paid in full. However, if the Person Insured is still able to perform the activities of daily living but can no longer meet the work requirements for one’s own occupation, the benefit will be halved.

The payments will start once the deferred period is done. The deferred period is a “waiting period” in which there is continuous disability. The deferred period is selected by the Person Insured at the time of application. Once a Person Insured is incapacitated, it is important that he files notice within the deferred period. The policy specifies the notification period for the selected deferred period.

Amount of Payments

The Income Protection Cover can either remain level or increase according to the Retail Prices Index.  If the Person Insured opts for Indexed Income Protection Cover, this will increase annually by 2.5% or the actual percentage rise in the Retail Prices Index, with 0% as the minimum and 10% as the maximum.

Income Evaluation

Part of evaluating the claim is to verify the earnings. This will be the basis of the amount of Income Protection benefits paid out. The verification of the earnings is made at the request of the claimant/Person Insured. If no such request is made, the payments will be based on pre-incapacity earnings.

The verification requirements will be different for different kinds of employment:

• Employed
• Self-Employed
• Director of a limited company

The payments will either be based on a set maximum or on a percentage of the verified earnings or pre-incapacity earnings.

Other Benefits/Add-Ons Related to Income Protection Cover

Escalation of Claims in Payment

While the benefit payments are being made, there will be no increases in the payments, except when the Person Insured opts for the Escalation of Claims in Payment. These increases are made annually on the anniversary of the first Income Protection payment date.

Permanent Disability Increase

The monthly benefit payments will be increased if the Person Insured becomes permanently disabled. This is for those that have Comprehensive Income Protection Cover.  The increase will be 10% of the monthly benefit, for as long as the annual maximum benefit does not exceed £200,000.

Recovery Benefit

This provides the Person Insured with benefits to help him during his recover. This is not a direct monetary payment to the person insured; rather, these are services such as:

• Medical services. This includes therapy, private medical care, osteopathy, physiotherapy and psychotherapy.
• Assisted care. This can come in the form of adapting the home, assisted devices, or providing a carer.
• Education support. This provides help in improving education qualifications

The amount is up to £1,000 (for Primary Cover) or £2,000 (for Comprehensive Cover).

Back to Work Benefit

If the Person Insured is able to get back to full-time work and he has a deferred period of 3, 6 or 12 months, Prudential Life will pay a back to work benefit after all payments under the Income Protection Cover are paid, including the above benefits. The benefit will be based on a specified percentage of the last full monthly benefit payment.

In a Reduced Capacity Benefit

If the Person Insured is able to get back to work but in a reduced capacity with a lower monthly income, the Person Insured will receive a fraction of the full benefit amount, based on the Person Insured’s new income.

Waiver of Income Protection Cover Premiums

While the benefit payments for Income Protection Cover are ongoing, premiums for the benefit will be waived. The waiver of premiums will stop if the benefit payments are also stopped. One other reason for the waiver to stop would be if the Person Insured performs any kind of work for reward or profit, unless the Person Insured is receiving the rehabilitation benefit.

Other Details:

Overpayment

When there is overpayment, this will be offset using future benefit payments or by asking the Person Insured to return the excess payments.

Length of Payments

Benefit payments start after the Deferred Period. It will end when:

• the date of expiry of the benefit payments is reached. This is specified in the plan schedule.
• The Person Insured dies
• The plan is no longer effective or the Person Insured is removed from the plan
• The Person Insured no longer is incapacitated such that he can perform the tasks related to his own occupation.
• The Person Insured earns an income from his own occupation, regardless of his illness or injury
• The Person Insured is not able to provide medical or other proofs that show that he is entitled to the benefits or that the incapacity is ongoing at the time the claim is made.  This includes company-paid medical tests and physical examinations required by Prudential Life.
• The Person Insured unreasonably refuses treatments and therapy that can help him recover or lessen the effects of the illness or injury
• The Person Insured refuses to make modifications that can enable him to perform the essential duties of his occupation

For those who are living abroad at the time of the benefit payments, the benefit payments are made only up to a maximum of 26 weeks’ worth of benefit within a year.

Subsequent Claims

When a Person Insured has returned to work, the benefit payments will stop.  If the Person Insured needs to make another claim for the same condition, the deferred period will be waived when the second claim is made within six months after the benefit payments for the 1^st claim has ended.

Mortgage Free Cover

This is temporary and free Life Cover which provides life insurance protection while the application is being processed. This is for Mortgage Life Insurance plans, where:

• The plan is bought to cover a mortgage or home renovation loan
• The Person Insured wants the plan to start at the same time the mortgage payments start

This provides life insurance cover for:

• The amount of cover stated in the acceptance letter
• The amount of the mortgage or loan
• £300,000

This is made available to Mortgage Life Insurance applicants who:

• Have a loan with a recognised financial institution
• Applied for the loan for the purpose of buying a home or renovating it
• Are not using the loan to cover a remortgage payment
• Don’t have any other life insurance policy that covers the same loan
• Have applied for Life insurance cover with Prudential Life and the application has been accepted
• The period from the time of application of the policy to the lime you legally commit to a loan is less than four months
• Are not older than 50 years old at the time the policy was issued
• Apply for a single life plan or a joint life first death plan

The mortgage free cover starts either when there is an exchange of contracts or when Prudential Life issues an acceptance letter. It will end when the actual life insurance cover of the plan starts, three months after Prudential has issued an acceptance letter

Waiver of Premium on Death

This is only for joint life plans. This will waive the premiums on the death of one Person Insured or upon diagnosis of terminal illness. The waiver will cover the premiums for the other person that is covered by the plan.

The Waiver will also include premium increases when these are increases for

• An indexed plan account
• Accelerator premiums
• Prudential Life raises premiums after a review

The waiver will also stop when the plan is cancelled and when the remaining Person Insured dies.

This benefit is not payable if:

• The Waiver of Premium cover has already expired at the time of death or diagnosis of terminal illness
• The diagnosis of a terminal illness occurs within 12 months from the date of expiry of the Waiver of Premium on Death

Education Cover

This provides education benefits to a Person Insured’s child when he dies or is diagnosed with a Terminal Illness. These are benefits related to the child’s education and can be for one or more of the Person Insured’s children. The benefit will also pay out if the Person Insured includes Serious Illness as part of the reasons for payment.

Education cover can cover various types of schooling: State school or private school, with or without boarding. The education cover may pay for:

• School fees
• University fees
• School expenses
• Star award  (for special achievement in an extracurricular activity)
• School absence benefit (for extended absence of the child due to injury or illness)
• Serious illness cover

Waiver of Premium on Incapacity

If the Person Insured becomes incapacitated/disabled, premiums for the whole plan will be waived. This is if the Person Insured meets the definition of incapacity/disablement.

As with Family Income Cover, the definition for being incapacitated may be:

• Own Occupation
• Activities of Daily Living
• Special definition

The premiums will be waived at the end of the cover’s deferred period and will stop when:

• the date of expiry of the benefit payments is reached. This is specified in the plan schedule.
• The Person Insured dies
• The plan is no longer effective or the Person Insured is removed from the plan
• The Person Insured no longer is incapacitated such that he can perform the tasks related to his own occupation.
• The Person Insured earns an income from his own occupation, regardless of his illness or injury
• The Person Insured is not able to provide medical or other proofs that show that he is entitled to the benefits or that the incapacity is ongoing at the time the claim is made.  This includes company-paid medical tests and physical examinations required by Prudential Life.
• The Person Insured unreasonably refuses treatments and therapy that can help him recover or lessen the effects of the illness or injury
• The Person Insured refuses to make modifications that can enable him to perform the essential duties of his occupation

Guaranteed Insurability Options

This allows the Person Insured to increase his cover for certain life events, without the need to provide additional medical information. This is for plans that are issued at normal rates and without special plan exclusions.

For the life cover, the events that can merit an increase are:

• Childbirth or adoption
• Marriage or civil partnership
• New or increased mortgage
• Increase in estate value with a resulting increase in inheritance tax liability (for whole of life cover)
• Changes in the law that results in an increase in inheritance tax liability (for whole of life cover)

When applying, the life event should have occurred within the last three months and you present evidence of this. The Guaranteed Insurability option will not be available for:

• Those who have already made a claim under the life component of the plan
• The life event occurred after the Person Insured’s 55^th birthday
• The increase in inheritance tax liability occurs after the Person Insured’s 70^th birthday
• Plans that have been suspended

Limits

The maximum increase applicable for the life cover is £150,000. This is further capped when it comes to specific life events:

• Childbirth/adoption: 50% of the initial cover amount
• Marriage or Civil partnership: 50% of the initial cover amount
• New or increased mortgage: Up to the new or increased amount
• For whole of life cover:
  • Increases in inheritance tax liability due to changes in legislation: 50% of the initial cover amount
  • Increases in inheritance tax liability due to increased estate value:
    • 50% of the initial cover amount
    • £50,000
    • The increase in the estate value, which results from an inheritance or gift

The Person Insured can also exercise this option a maximum of three times.

Minimum Protected Account

With the PruProtect Plans, a claim from the other benefits (i.e. Serious Illness) will result in the decrease in one’s plan amount. The Minimum Protected Account option tops up the plan account up to a minimum level. This is only applicable if, aside from the life cover, the plan also has at least one of Serious Illness Cover or Optional Serious Illness Cover for children.

Protected Life Cover

If the PruProtect (now Vitality Life) Plan has both Life Cover and Serious Illness cover, having the Protected Life Cover ensures that the Life Cover will not be reduced, even after a claim under Serious Illness Cover or Optional Serious Illness cover for children has been made.

Exclusions

The cover will not pay for:

• A fatal accident caused by Terminal Illness that is diagnosed after the life cover has expired or is diagnosed less than 12 months before the life cover will expire
• Claims that arise from a condition that is specifically excluded in the policy
• For additional covers, aside from Life Cover, illnesses or injury which resulted from the unreasonable failure to seek or follow medical advice
• Suicide
• Engaging in specified hazardous pursuits
• Participation in a criminal act
• Participation in a war, riot or civil commotion
• Air travel/flying other than as a passenger of a commercially licensed aircraft
• Self-inflicted injuries
• Accidents due to alcohol or drug abuse

How to Make a Claim

There are time limits to make a claim, it is very important that once there is cause for a claim that the Person Insured files a claim as soon as possible.

When making a claim, Prudential Life will usually require the following:

• Completed claims form
• Death certificate
• Birth certificate of the life insured (to show proof of the Person Insured’s age)
• Proof that the claimant is indeed the one to which the benefit is to be paid (i.e. Marriage certificate if the spouse is making the claim)
• Police reports/doctor’s reports, where applicable
• Other documents that will help Prudential Life properly assess the claim

The content of this article is provided for informational purposes only and is not created to be a financial advice. Contact Prudential (http://www.pru.co.uk) or VitalityLife (https://www.vitality.co.uk) directly for details about their offerings.
Updated on: 12.09.2012

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