Aviva latest to offer income protection for self-employed

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Aviva latest to offer income protection for self-employed

Aviva has launched an income protection plan covering basic living costs that could help advisers to cater for the self-employed and contractors.

The insurer’s Living Costs Protection product provides a monthly fixed benefit of between £500 and £1,500 to cover outgoings such as a mortgage, rent or bills if an individual cannot work due to illness or injury.

There is no limit to the number of claims a customer can make, and the payment period runs up to 12 months for each individual claim.

Aviva will not conduct a financial assessment or apply deductions at the claim stage, and the customer will receive their selected benefit amount once Aviva has accepted their claim.

Mark Cracknell, head of protection distribution, Aviva, told FTAdviser a premium for a sample client would be £30 per month.

That compares to £60 per month for two-year limited benefit and £100 per month for fully comprehensive Income Protection Plus.

Living Costs Protection could help customers with fluctuating incomes such as the self-employed and contractors, where the income-based benefit calculation required for traditional income protection at both point of sale and claim can be complex.

In addition, it could provide a more affordable option for those in higher-risk occupations.

Mr Cracknell said Living Costs is not the first product of its kind on the market, but it represents an improvement on existing schemes because it covers mental illness and has guaranteed premiums.

It will form part of Aviva’s product menu, and the insurer will return three quotes as options for advisers to consider.

He said: “We will have a range of options, and the idea there is when you are sat in front of a customer, you can create the right product and proposition.

“It is an interesting product to add alongside a mortgage. By the time a customer has taken out a mortgage, they will probably not have a lot of money left. [If they take out Living Costs], they have at least some form of income protection. We see it as being sold alongside a mortgage.

“We are all living longer, and the one thing we are likely to have is a year or short period of time off work with illness.”

According to the Chartered Insurance Institute, a million people a year in the UK suffer a prolonged absence from work due to sickness, which can result in financial hardship – yet Aviva’s statistics show only 8 per cent of UK families hold some form of income protection.

Lucy Brown, head of protection at London and Country, commented: “The simplicity to choose the amount you want without having to carry out a calculation against your income is good, particularly alongside gaining the peace of mind that you are guaranteed to get that payout regardless of any fluctuations in your income. 

“This could be particularly attractive to the self-employed, who have a greater need than most for income protection giving they have no extra support from an employer.

“Overall, this product seems to remove some of the barriers that exist with other income protection policies, be it at application, underwriting or claim, and a simplified customer journey should appeal to advisers and customers alike.”

Emma Thomson, life office relationship director at LifeSearch, commented: “It’s great to see Aviva launch this type of product that takes away the requirement for financial assessment at claims stage.  

“The number of self-employed workers has grown and they have a real need for income protection. Their incomes though do fluctuate and can be challenging to prove, so this type of cover will suit them well and help more consumers benefit from the financial safety net that income protection can provide.”

simon.allin@ft.com