Exploring the Features of Scottish Widows' Life Insurance Products

Scottish Widows carries three life insurance products:

• Lifetime Cover
• Term Cover
• Critical Illness with Life Cover

Why Go with Scottish Widows?

Here are some reasons to go with Scottish Widows:

• Great value. Scottish Widows provides a cash voucher for every policy, depending on terms, conditions and time limits covering the promotional offer.  Also, if the Person Insured buys more than one type of policy, he can enjoy discounts for the multiple purchases.
• Flexibility. With the Protection for Life plan, changes can be made to the policy during the term of the policy (i.e. change the length of cover or add a partner). The life cover can be tailored to fit the unique needs of an individual. For instance, one can choose a lump sum payout or a monthly payout.
• Extra benefits. Going with Scottish Widows provides free additional benefits such as access to Best Doctors, which is an independent company that can give second opinions to diagnoses of critical illness.

Quick Facts

Plan Details

Payment of Benefit. The policy will pay out the Sum Insured when the Person Insured

• dies
• becomes terminally ill (except for Lifetime Cover)
• becomes critically ill (for Critical Illness with Life cover)

The payments will only be made if death or illness occurs within the plan term and as long as the policy remains in force.

Sum Insured. The Sum insured can be level, increasing or decreasing.

• Level. This keeps the Sum Insured constant throughout the term of the policy.
• Increasing. This increases the Sum Insured yearly to keep up with inflation as computed based on the Retail Price Index (RPI). The increases will be no more than 10% and no less than 2% annually. The premiums will also increase based on the increase in Sum Insured. The annual increase may be declined but once an increase is declined, the Person Insured can no longer opt to increase the Sum Insured in the future.
• Decreasing. Commonly used to cover a mortgage, the Sum Insured is decreased to coincide with the decreases in a mortgage as it is being paid off. The decrease applied is a fixed rate of interest of 10% annually. Note that the Sum Insured may be insufficient to cover the loan if the interest rate applied on the loan is more than 10%. The same is true if the loan amount is increased or the term of the loan extended.

Monthly benefit payments. An option to get a monthly benefit is available. This is to ensure that there is a regular income for the family upon the death of the Person Insured. If the Person Insured dies within the policy term, this provides a monthly income until the policy ends. The monthly benefit payments can also be at an increasing basis (based on the RPI, but not less than 2% or more than 10% annually). The beneficiaries have the option to convert future monthly benefit payments into a lump sum.

Premiums. For life cover and critical illness with life cover, the premiums can either be guaranteed or reviewable.

• Guaranteed. The premiums will not change throughout the policy term.
• Reviewable. The premiums will be reviewed every five years. The changes in the premiums will not be based on age, medical condition or previous claims for children’s critical illness or waiver or premiums. Rather, premiums will be based on updated past claims experience, changes in UK statistics related to morbidity and mortality, medical advances up for review and so on.

Additional Benefits/Options

Critical illness cover. This covers the Person Insured in case he gets critically ill. It pays out the Sum Insured if the critical illness meets the definition stated in the policy.

The Critical Illness Cover will pay if the Person Insured is diagnosed with:

• Alzheimer’s disease
• Aorta graft surgery
• Bacterial meningitis
• Benign brain tumour
• Blindness
• Bone marrow failure
• Cancer
• Coma
• Coronary artery by-pass grafts
• Creutzfeldt-Jakob disease
• Deafness
• Heart attack
• Heart valve replacement or repair
• HIV infection
• Kidney Failure
• Loss of hands or feet
• Loss of speech
• Major organ transplant
• Motor neurone disease
• Multiple sclerosis
• Paralysis of limbs
• Parkinson’s disease
• Progressive supranuclear palsy
• Stroke
• Third degree burns
• Total permanent disablement
• Traumatic head injury

Other details:

• Children’s critical illness. This is automatically included and covers all of the Person Insured’s children (natural, legally adopted and stepchildren) aged 6 months to 21 years. This pays out a maximum of £25,000 or 50% of the Sum Insured (whichever is the lesser of the two) if a child is diagnosed with a covered critical illness. Any claims under this will not affect the main benefit.
• Exclusions to Critical Illness (Main Cover):
  • Alcohol or drug abuse
  • Criminal acts
  • Self-inflicted injury
  • Unreasonable failure to follow medical advice
  • War and civil commotion
• Exclusions to Children’s critical illness
  • Alcohol or drug abuse
  • Criminal acts
  • Self-inflicted injury
  • Unreasonable failure to follow medical advice
  • War and civil commotion
  • Illnesses or conditions that are present before the child is officially included under children’s critical illness:
    • Before the start of the policy
    • Before the child reached 6 months of age
    • Before the child was legally adopted by the Person Insured
    • Before the marriage or civil partnership that resulted in the claiming of a stepchild

Terminal illness cover. If a Person Insured is diagnosed with a terminal illness, this benefit will pay the Sum Insured. A terminal illness is one that is reasonably expected to result in death in one year or less from the date of diagnosis.

Other details:

• This is not payable if the claim is given within the last 12 months of the cover term.
• Once payment for terminal illness is given, the cover stops and no more claims will be payable.

Premium Protection. This pays the premiums for the policy if the Person Insured can no longer do so because of illness or injury. This is an optional benefit.

Other details:

• This option is not available on the Lifetime Cover if the Sum Insured is less than or equal to £15,000.
•  There is a waiting period of 26 weeks from the date that the Person Insured becomes incapacitated. This means that the benefit will only start after 26 weeks and that the Person Insured still has to pay for the premiums during that time in order to keep the policy in force.
• The definition used for incapacity may be:
  • Own Occupation
  • Suited Occupation
  • Activities of Daily work. If the Person isn’t working before the incapacity occurs, the incapacity will be based on the Person Insured’s inability to perform three or more of work tasks, which include walking, climbing, bending, getting in and out of a car, lifting, writing (with the use of a keyboard, pen or pencil).
• Once selected and added into the plan, this benefit can no longer be removed from the cover.
• The benefit payments will stop at the earliest of:
  • The Person Insured’s recover so that he is able to return to work
  • The Person Insured reaching 66 years old
  • The end of the policy term
• Exclusions:
  • Drug or alcohol abuse, including overdose of lawfully prescribed drugs
  • Participation in criminal acts
  • Self-inflicted
  • Unreasonable failure to follow medical advice
  • War and civil commotion

Free life cover. This provides free life cover for the Person Insured before the policy becomes effective. This serves as the Person Insured’s insurance protection while he is waiting for contracts to be finalized or for his policy to be evaluated. It is referred to as 90 Day’s Mortgage Free Cover or 30 Days’ Free Accidental Death Cover.

Other details:

• This pays out up to £250,000 or the amount of insurance being applied, whichever is lower. This may also include critical illness if this is included in the application.
• The proposed Person Insured should be 59 years old or younger at the time of the cover.  The cover will not be payable if the Person Insured has applied or is in the process of applying for the same type of cover from another insurance provider.
• 90 Days’ Mortgage Free Cover
  • Applicable for plans bought to cover a mortgage.
  • Cover starts: When filled up application form and direct debit instruction is submitted, and whenever applicable, the exchange of contracts or concluded missives.
  • Cover ends:  At the earlier of:
    • The issuance of the policy
    • The filing of a death, terminal illness or critical illness claim, whichever is applicable
    • The date the policy is declined
    • 90 days
• 30 Day’s Free Accidental Death Cover
  • Applicable for other types of life cover. This only pays out for accidental death.
  • Cover starts: When filled up application form and direct debit instruction is submitted.
  • Cover ends:  At the earlier of:
    • The issuance of the policy
    • The filing of a death, terminal illness or critical illness claim, whichever is applicable
    • 30 days

How to make a claim

Claims are made and payments are received by:

Death claims: Beneficiaries

Critical illness claims: Person Insured or owner of the policy (if these are different)

Waiver of Premiums claims: Premiums paid out directly to the company

Documents that may be required include:

• Proof of the event that necessitated the claim (i.e. death certificate for death claim, report of doctor’s diagnosis for critical illness)
• Proof that claimant has the legal right to claim (i.e. marriage certificate, policy with the claimant named as beneficiary)
• Birth certificate to confirm the Person Insured’s date of birth
• Other document required by the company

Time limits:

Critical Illness – Claims should be made within 6 months from the date of diagnosis.

Terminal illness – Claim should be made at least 1 year before the date the cover ends.

Waiver of Premium – Claim should be made within 13 weeks of the disability.

The content of this article is provided for informational purposes only and is not created to be a financial advice. Contact Scottish Widows directly for details about their offerings.
Updated on: 10.06.2013

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