Exceptions: group life policies: conditions about when benefits may be paid and how they are calculated
The conditions which need to be satisfied by a group life policy in order to be anexcepted group life policy, thus taking it out of the chargeable event rules, areexplained in this section and IPTM7030 to IPTM7050. The tests of whether a policy meets the conditions to bean excepted group life policy apply continuously, not just at the inception of the policy.It is possible for a policy to cease to be an excepted group life policy if any of theconditions are subsequently failed.
There is no formal approval process for approving excepted group life policies soinsurers, policyholders and their advisers will need to satisfy themselves as to thestatus of any particular policy by reference to the legislation in ITTOIA05/S480 onwardsand this guidance.
Age restriction - 75 years
The terms of the policy must specify an age over which no benefits will be paid on thedeath of the insured individual. This specified age must not exceed 75 years. So, forinstance, if the policy specifies that benefits are paid on the deaths of individuals upto the age of 80 then the policy cannot be an excepted group life policy. But thespecified age need not be the same for all individuals insured under the policy, forinstance if the age limit is dependent on the retirement age, which might differ betweenthe individuals covered.
Death exclusion clauses
Although the general condition is that a benefit must be payable on each death of anindividual insured under the group policy, an exception is permitted where the policycontains an exclusion for death in certain specified circumstances, provided thatexclusion applies to all the individuals covered. An example might be a policy that doesnot pay benefits in the event of death through suicide or terrorist action.
Same method to be used for calculating death benefits
The terms of the policy must specify that the same method is to be used for calculatingthe benefits payable or arising on each death of an individual in the group insured by thepolicy. This condition may stretch quite widely so long as the method is pre-determinedand consistently applied. Any variables must have the same objective source and multiplesor fractions used in formulas must be the same for all individuals covered by the grouplife policy and universally applied. Examples of factors which may be used in the methodof calculation of the death benefit without causing this condition to be failed are:
- benefits based on a specified multiple of an insured employees salary, provided that the multiple is the same for all individuals covered by the policy. But, for instance, basing benefits on three times salary for one set of employees and five times salary for another set under the same group policy would not be acceptable
- benefits based on age of the insured individual at date of death
- benefits based on the age of the beneficiary, for instance where a capital sum is insured to provide a pension to the insured individuals spouse which is dependent on the spouses age at the date of death of the insured individual.
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