AIG Life has updated and cut the cost of optional child cover on its term assurance with critical illness (CI) plan.
The insurer has returned to the maximum sum and percentage method which allowed it to reduce the cost of the optional child-cover component – dropping the £7.50 per month charge.
The changes allow two child claims to an overall total of £75,000.
Revealing the changes, CIExpert explained that in 2020 AIG Life made wholesale changes to its Your Life Plan simplifying children’s CI payments so that a fixed monetary sum would be paid rather than the usual percentage of the sum insured with a monetary limit.
But the comparison service claimed the changes did not go down well with all advisers and with child cover now optional the additional fixed cost of £7.50 per month appeared expensive.
The changes are as follows:
Child cover change to sum paid
Old Definition
A fixed payment of £50,000 for Group 1 conditions and a fixed payment of £25,000 for all Group 2 conditions.
New Definition
The lower of £50,000 or 50% of the sum insured for Group 1 conditions and the lower of £25,000 or 25% of the sum insured for Group 2 conditions.
Change to the maximum pay-out per child
Old Approach
Currently the maximum total payment per child is £50,000. This could be a single claim under a Group 1 condition or two separate claims.
New Approach
Two claims will be allowed – one under group 1 and one under group 2. This could potentially mean a total pay-out of £75,000.
Providing its verdict on the changes, CIExpert director Alan Lakey said: “AIG’s introduction of fixed child payments was brave and innovative but came with a cost.
“It was hoped that advisers would focus on quality over cost however the problem with optional children’s cover is that the cost is clearly identifiable and £7.50 per month was considered too expensive.
“These changes allow AIG to reduce premiums and become more competitive with the child cover option. This will help persuade advisers to consider the plan as value for money.”
Changes to ‘broaden availability’
Neil Davies, commercial director at AIG Life, said the insurer made the changes because it believed every family should have critical illness insurance that suited their needs and budget.
“We’ve linked our children’s benefit amount to the adult’s sum assured to broaden that availability, and children’s cover has two payment levels that parents can claim on if their child suffers a critical illness,” Davies said.
“It pays £50,000 or 50% of the sum assured, whichever is lower, if the child has a serious condition such as a Child CI level one condition, and it pays £25,000 or 25% of the sum assured if they also have a Child CI level two condition – meaning payments can total up to £75,000 for each child.
“We also still double children’s cover payments if treatment is required overseas.
“Full details of all conditions that we pay out on are in the critical illness choices cover details on our website.”