Term and premium paying term: conditions
An endowment policy has a maturity date specified in the terms of the policy.
Minimum term of ten years
To meet the qualifying policy rules the term of the policy must be atleast ten years from the date on which the policy is made - see IPTM8045.So, the maturity date cannot be earlier than the anniversary of the commencement date atthe beginning of what would be the first day of the 11th year. The premium payingterm must also be at least ten years, that is, regular premiums must be payable,annually or at shorter intervals, for a minimum of ten years.
Ten year endowment policy: payment of maturity proceeds
Insurers may wish to ensure that policyholders receive the maturity proceeds by chequeon the day their policy matures. In order to achieve this where the term of the policy isexactly ten years, an insurer would need to post the cheque a few days before the minimumterm of ten years has elapsed. The policy will not be regarded as disqualified where theinsurer posts the maturity cheque with the sole aim that it is delivered to thepolicyholder on the maturity date.
This is with the proviso that if the insured dies on or before the maturity date, anynecessary adjustment will be made to reflect the fact that the policy came to an end ondeath not maturity, which may affect the benefits paid.
Whole of life policies
Where the term of a policy is to last throughout the whole of the life of the insured(a whole of life policy), premiums must be payable for at least 10 years fromits outset, unless the policy ends earlier through payment of benefits on death ordisability. Premiums must be payable annually or at shorter regular intervals.
Term assurance policies
A term assurance policy is one where benefits are only paid if the death or disabilitycovered occurs within a specified term. Under the qualifying policy rules, there may alsobe a surrender value but where the term of the policy is less than ten years, thesurrender value must be limited to the value of premiums paid.
It is now rare for a term assurance policy to be written as a qualifying policy becauselife assurance premium relief is no longer available on the premiums and no chargeableevent gains will arise unless the policy was acquired second hand. However, there might beunusual cases where a term assurance policy is presented for certification as qualifying,for instance if it contains an option to take out another policy that is not a termassurance policy. The minimum term for a term assurance qualifying policy is one year.Where the term is less than ten years, there is no minimum premium paying term, so even apolicy with just a single premium payable could qualify. Where the term is ten years ormore, regular premiums must be paid for a minimum of ten years, or three quarters of theterm if that is shorter than ten years.
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