Exceptions: group life policies: conditions about permitted benefits
Limitation of benefits may be permitted
A limitation in the policy on the death benefits payable is permitted provided thelimitation is the same in the case of any death. An example of this is where a policy hasa free cover limit whereby any single payment of death benefits is limited to a specifiedsum in order to limit the insurers exposure and keep the premium to an acceptablefigure. This might be necessary where, for instance, the general method of calculatingdeath benefits would otherwise give a very high death benefit in the event of the death ofa very highly paid individual, such as the managing director, who is covered under thepolicy.
Another example might be where the general method of calculating benefits includes acalculation of certain benefits based on dependants circumstances. Then the benefitsare by definition limited where the deceased individual has no dependants. A similarexample would be where certain benefits are limited to married individuals, based on apre-determined formula which is the same for every married individual.
No surrender value is permitted
The policy must not have, or be capable of having, a surrender value other than anamount which equates to a proportion of unused premiums if the policy is cancelled. Thismeans that policies with an investment element will not fall within the exclusion.
Sums or benefits permitted under the policy
The only sums or benefits which may be paid under an excepted group life policy aredeath benefits or refunds of premiums for unexpired periods. The policy must not providefor payments on any other contingency such as on the disability of an insured individual.
Death benefits are sums of money or other benefits of a capital nature which are payableor arise on the death of an individual. These can include lump sum benefits representingthe purchase price or capitalised value of a pension which is to be provided to the spouseor dependant of the deceased. However, a policy which provides for the direct payment ofsuch a pension would not meet the conditions since the benefit being provided is income,not a benefit of a capital nature.
If as a matter of fact the policy provides for a capital sum payable on death by a seriesof capital instalments then that is permitted. However, provision of an income stream isnot.
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