Legal & General has launched a key person income protection product to complement its other key person offerings within its business protection proposition.
The insurer credited advisers attending its workshops with highlighting the gap in its product portfolio.
The new product sits alongside the insurer’s share protection, relevant life plan and executive income protection.
It provides a monthly benefit to a business in the event of a valid claim to help them meet the costs of repaying a business loan, replacing lost profits or hiring a temporary replacement employee in the event of a key employee being unable to work due to illness or injury.
Speaking to Health & Protection, Robert Betts, market development manager at L&G, revealed the insurer began developing the product before the pandemic in response to increasing numbers of questions from advisers who we were attending the insurer’s business protection training workshop programme.
Betts explained when key person critical illness or death cover was discussed, advisers noted the most likely event to occur before retirement of someone being off work incapacitated for an extended period of time was not adequately provided for.
However, the financial risks such as loss of profits, loan repayments and hiring temporary replacement staff still existed.
This led advisers to point out that meeting ongoing business loan or mortgage repayments was a big concern for their clients, as was finding and hiring qualified temporary replacements for skilled employees.
“We see key person income protection as another part of the overall key person and business protection conversation,” Betts said.
“It gives advisers a complete solution to discuss with their clients, one that meets the needs of longer term incapacity due to illness or injury, providing a valuable monthly cash injection at a financially vulnerable time for the business.
“Those businesses who have been forced during the pandemic by necessity to access additional borrowing, maybe adjust to a reduction in profits or have needed to replace skilled staff quickly in order to survive, will have felt the financial squeeze as a result.
“A solution such as this could help businesses offset or negate financial disruption in the future event of unplanned incapacity of a key person,” he added.
Although development of the product began before the onset of the pandemic, Betts noted that the last 18 months had provided businesses and advisers a collective reference point to discuss the difficulties they faced or could face in the future without adequate protection planning.
“Using this shared experience and focussing on how they plan to cope financially in the future will give advisers an opportunity to present their clients with appropriate solutions leading to better client outcomes,” he added.
Product cover details
- Profit protection – up to 75% of gross profit that can be attributed to the contribution of the key employee;
- Temporary replacement cover – to meet the cost of hiring a temporary replacement employee at up to 2.5 times the key employee’s annual earnings;
- Loan protection – covers the part of the repayments and related interest to a business mortgage or loan, which relate to the contribution of the key employee.
In the event of a claim the payment can be made for any one of the above with the relevant supporting evidence.
The product is available for between a five and 20-year term with level or increasing cover to help protect against the effects of inflation.
It also includes:
- Maximum cover up to £20,833 per month (£250,000 per year) for level plans, £14,583 per month (£175,000 per year) increasing plans; (subsequent increases cannot increase the monthly benefit above £28,833 or £250,000 per year);
- Choice of how long the benefit pays for – either 12 or 24 months depending on business needs – and of deferred periods, with 4, 8 ,13, 26 and 52 weeks available;
- Rehabilitation support service and access to wellbeing support included as standard.
The insurer has also unveiled a series of seminars to support businesses and their employees with workplace wellbeing.
The series of bite-size webinar sessions, starting in October, are also designed to help group protection intermediaries who are new to or perhaps lack confidence talking about wellbeing with clients.
The three part series runs on the 5, 6, and 7 October.