Combined policies: tests of whether qualifying
Where a combined policy includes family income or mortgage protection cover it istreated as if it is made up of separate policies and qualifying policy tests applied toeach deemed policy as described below. If both deemed policies pass the tests then thecombined policy qualifies.
Combined policy providing family income cover
Where the policy combines the provision of a fixed capital sum on death withfamily income benefit, the premium is apportioned between two deemed policies,one providing the fixed sum and the other providing the family income benefit. Thecombined policy qualifies if each deemed policy qualifies.
Combined policy providing mortgage protection cover
Where the policy provides additional decreasing insurance, it istreated as if it comprises two policies
- the first a deemed policy providing throughout a fixed capital sum on death equal to the smallest amount provided under the overall policy and as if the premium payable is that needed to provide that smaller sum
- the second a deemed policy where premiums payable are the balance of the premiums not taken into account in the first deemed policy and where the sum assured is the decreasing amount by which the actual sum assured exceeds the smallest sum assured secured by the overall policy.
The first deemed policy must be tested to see if it would be a qualifying policy on itsown terms.
The second deemed policy must be tested to see if it would qualify taking at any point intime during the life of the policy
- the amount of premium payable under the policy, and
- the amount of the sum assured
and treating them as the amounts that would apply over the life of the policy. The testof the second deemed policy reflects the fact that as the policy progresses, both premiumpayable and sum assured decrease. This test ensures they stay in balance.
If both deemed policies pass these qualifying tests then the combined policy qualifies.
Term assurance within a combined policy
Term assurance on its own does not have to satisfy the 75% test of the minimum sumassured unless it has a surrender value or insures a life past the 75th birthday - see IPTM8035. But if it is within a combined policy and that policyhas a surrender value then, for the purposes of testing the combined policy, the termelement must also be treated as having a surrender value, unless the policy conditions sayotherwise. This means the term element must satisfy the 75% test.
|Further reference and feedback||IPTM1013|