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COVID-19 has introduced many unwelcome realities into every aspect of our lives. It is safe to say that life may never be the same again, even after we have moved past this pandemic.
One of the biggest challenges is the significant impact on individual's finances. Most jobs have been put on hold during the COVID-19 lockdown which means that there is a significant decrease in disposable income.
One of the unfortunate realities is that insurance is one of the first items that gets cut when a financially constrained household needs to make finance-based decisions. However, imagine if you are the only breadwinner in the household and you suddenly pass away without having any insurance in place. What financial future does your family face in this situation?
Johan Minnie, Managing Executive for Client & Adviser Experience at Liberty says, "Insurance plays a vital role in protecting the financial future of families. For this reason, Liberty is giving customers the option on certain products to not pay or pay a reduced premium on their cover up until 30 September 2020* during the COVID-19 period.
Minnie responds to some of the most pressing questions when it comes to insurance policies and finances during this time.
Looking for relief
One of the most pressing questions during the COVID-19 pandemic has been if insurers are going to offer financial relief to clients in the form of premium waivers:
Liberty’s position is that premium relief can be offered during its prescribed premium relief period, which is from now until 30 September 2020. If a client requests premium relief, but does not apply a specific period, the relief period will be defaulted to the full duration of the premium relief period. If the client gives a specific period less than the full duration of the premium relief period (for example four months), we will apply the shorter period.
Furthermore, premium relief will apply to policies which have already exercised the six-month premium flex/waiver twice before.
Unfortunately, premium relief does not apply to investment policies with risk benefits; this offer(premium relief) is applicable to all Retirement Annuity Builders and Investment Builders that have no risk benefits attached.
* Terms and Conditions apply. This expiry date is subject to the product type and may be extended by Liberty as circumstances unfold.
Will arrear premiums be due on reinstatement of premiums?
No. The Premium Flexibility option means that the policyholder is able to reduce their benefit cover to any amount between their current level and the cover equivalent to the minimum allowable premium. Should a policyholder claim during this period, and they have reduced their benefit cover amount, claims will be paid at the reduced benefit cover amount.
This option gives the policyholder the ability to reinstate their benefit cover without underwriting, subject to some terms and conditions. Therefore, unless there are shortfalls or missed premiums on the reduced premium amount, no arrear premiums should accumulate.
If policies have premium waiver benefits which are removed to enable the premium relief option; will Liberty consider that this benefit is reinstated without underwriting when premiums are reinstated at the end of the premium relief period?
Liberty will allow the premium relief to apply on investment policies with waiver of premium benefits. If the policy has a disability or retrenchment waiver benefit, then the waiver benefit will be equal to the amount of premium being paid at the time of becoming disabled or being retrenched, as applicable.
However, if premiums do not resume at the end of the premium relief period, then this benefit will lapse.
For retrenchment waiver, there will be a waiting period of three months for retrenchment claims when premiums resume.
Ensuring cover
Some insurers in the financial services industry apply the following rule when it comes to their policies: if the premiums on a policy are not paid for a period of three months, then that policy will lapse. Because of this there are many clients who are very diligent when it comes to making sure that their premiums are up to date.
Will unpaid premiums during the premium relief period be paid back into the policy at the end of the premium relief period? If so, will there be a cut-off period to pay back what was waived?
Our default position (which we will be applying from 30 September 2020) is that Liberty will write off the unpaid premiums which accrue during the premium relief period.
However, policyholders have the option to contact Liberty prior to 30 September to arrange to pay any unpaid premiums.
If a policyholders claim during the premium flexibility period, will the policyholder get the lower cover paid out even if they have paid for the policy for many years??
Yes. Claims will be at the reduced benefit cover amount for claims arising in the premium flexibility option period. The client needs to be cognisant that reducing benefit cover places them at a higher potential risk should something happen to them and that their reduced benefit cover may be insufficient.
Professional advice
While this is welcome relief to policyholders, it is important to note that there are financial implications associated with reducing your cover amount and taking advantage of the above offerings.
"We encourage clients to have discussions with a Liberty financial adviser about these implications before making any decisions. Financial advisers play an important role in protecting policyholder's interests, " concludes Minnie.
This post and content is sponsored, written and provided by Liberty.
