Legal & General offers pay as you go indexation

Legal & General will now offer indexation on family and income protection products on a ‘pay as you go' basis. Indexation ensures that a policyholder's sum assured keeps pace with inflation, helping to maintain its value in real terms. This is primarily taken as an option on family protection policies, to ensure that monthly benefits allow a family to maintain a reasonable standard of living.

Pay as you go means that instead of covering the additional risk cost as an upfront initial charge it is factored into any price increases resulting from an annual indexation review. The advantage of this is that should a client decline the increase to their sum assured at review their premium is frozen and they then only pay an increased premium based on the additional risk and sum assured increase taken out to date. This method is seen to be more TCF for those clients who decline indexation increases in the early years of their policy.

Previously, Legal & General charged a premium upfront which included the additional risk cost of indexation, but advisers' feedback was that clients preferred the pay as you go method.

Bonnie Burns, Legal & General's Protection Product and Technical Director said: "We've offered indexation as an option for some time, but this is the first time that we have done this on a pay as you go basis for life insurance, critical illness and income protection products. Advisers told us that market pressure for competitive premiums means it is more difficult in today's market to justify an initial loading to a client so we've listened and taken that on board. We're sure it is going to be popular."

Pay as you go indexation is an optional product feature on term Family Protection Plans and Income Protection contracts and is also part of Legal & General's menu proposition (Multi Protection). This offers multiple products and allowing advisers to tailor a protection package to suit individual clients' needs. It offers value for money through competitive pricing across all products and further discounts for clients applying for multiple products. It also offers flexibility in the form of split sums assured, which means that clients can choose different sums assured for term assurance and critical illness cover.