Premium savings with Crisis Extension

ARTICLE

23 May 2022

5 mins read

Meet Ryan an AIA Priority Protection client

Ryan^ SAVED $637 per annum on his premiums after he took out $150,000 of Crisis Recovery cover combined with $150,000 of Crisis Extension cover, rather than a straight $300,000 of Crisis Recovery

Ryan’s adviser was able to look at several scenarios to best meet Ryan’s needs due to the flexible options available with AIA Priority Protection Crisis Recovery and Crisis Extension.

What options were available to Ryan’s adviser?

Ryan’s adviser could have chosen the traditionally designed Crisis Recovery product, which would pay Ryan the same maximum sum insured for all the Crisis events defined in the Product Disclosure Statement (PDS) irrespective of their varying degree of severity and potential financial impact on Ryan. One downside of this single sum insured approach is that the cost can be significant and may even limit the total sum insured which Ryan can't afford to take.

This is where the combination of Crisis Recovery and Crisis Extension work so well together.

It can provide an alternative solution which could offer Ryan more appropriate cover and a more affordable premium.

Crisis Extension is an optional extra that when taken out in conjunction with our Crisis Recovery benefit means you get to choose two separate sum insureds which together form the maximum benefit paid under the policy.

The split between the two sums insured is completely your choice!

Example 1 - Crisis recovery stand alone policy

Example 2 - Crisis Recovery and Crisis Extension policy

Example 3 - Crisis Recovery and Crisis Extension policy

_{*Total annual premium shown includes policy fee and stamp duty costs.}

For the majority of crisis events covered, both sum insureds will be paid out, just like a traditional product.

There are a smaller number of events that will only trigger the Crisis Recovery sum insured, however if this is the case, the Crisis Extension remains available as an additional payment should the original crisis event progress in severity to a point where more financial support is appropriate.

This intelligent design allows you to match the sum insured payment to better reflects the impact the condition may have on your client's lifestyle, work and family at its particular point of progression.

The benefit to your client is that it can offer a premium which can be significantly cheaper than the equivalent maximum sum insured under a traditionally designed Crisis Product – alternatively the same premium can give access to a higher total sum insured.

Choosing the balance between Crisis Recovery and Crisis Extension can come down to a variety of different factors within your advice strategy.

Age and Health factors

For example, younger clients with reduced risk (and therefore healthier) may prefer lower Crisis Recovery funds and higher Crisis Extension funds. As this client takes on more debt and their risk of illness increases, their coverage may move from Crisis Extension into Crisis Recovery – but this comes at a slightly higher cost. When moving into their more senior years, clients may choose to move their cover back into Crisis Extension as this allows them to reduce costs, freeing up money to transition into a retirement strategy.

Strategic approach

As an adviser, you may consider a clients Crisis cover in conjunction with all other covers in place. This may include reducing their Crisis Recovery to the minimum amount available to them and putting the remaining portion into Crisis Extension. The intention here may be to use any claims payments from a client’s income protection policy to offset payments that may have otherwise been received from their Crisis Recovery policy.

No, if the existing client already has Crisis Reinstatement

if the Total sum insured remains the same or lower: the combined sum insured Crisis Recovery and Crisis Extension on the new policy are not greater than the Crisis Recovery sum insured on the replaced policy.
if no claims have been paid: the insured has not been paid a Crisis Recovery claim.

No, if the existing customer does not already have Crisis Reinstatement

if the Total sum insured remains the same or lower: the combined sum insured Crisis Recovery and Crisis Extension on the new policy are not greater than the Crisis Recovery sum insured on the replaced policy.
if no claims have been paid: the insured has not been paid a Crisis Recovery claim.
if at least 20% of sum insured is moved to Crisis Extension: the Crisis Extension sum insured on the new policy must be at least 20% of the Crisis Recovery sum insured on the replaced policy.
Loadings/exclusions limit: the insured has a maximum of + 50% underwriting loading on Crisis Recovery, and the overall loading / exclusions are within the limits of acceptance for Crisis Reinstatement and Crisis Extension.

If the existing customers Total sum insured across Crisis Recovery and Crisis Extension is going to increase: they will need to be underwritten.

Crisis Recovery still covers the same comprehensive list of crisis events it previously did, but adding crisis extension gives you a boost should a condition become more advanced

While the covers are treated separately, they can be claimed at the same time for both Crisis Recovery and Crisis Extension, provided it meets the definition outlined in the PDS.

When an event doesn’t meet the Crisis Extension definition, clients are more than likely able to claim under their Crisis Recovery policy, provided the event meets that definition as outlined in the PDS. This means from a Best Interest Duty perspective; clients are still being covered through the initial Crisis Recovery benefit commensurate with the illness or injury they have.

What happens at claim time?

Scenario 1 – Ryan has all his cover in crisis recovery

Ryan takes out $300,000 of Crisis Recovery.
His premium is $3,492.14 per annum. Then, life happens.

Ryan is diagnosed with a prostate cancer that evolves.

Scenario 2 – Ryan has his cover split across Crisis Recovery + Crisis Extension

Who is Ryan?

_{^Ryan’s is a hypothetical customer based on a next birthday 50-year-old Male, non-smoker, occupation A1 without any loadings, taking out Crisis Recovery, Crisis Extension and Crisis Re-instatement as quoted March 2022. The premium difference between Crisis Recovery and Crisis Extension is an indication only and will vary depending on the age of the insured. These examples do NOT include any other AIA discounts that may be available such as the AIA Vitality or AIA Bundled discounts. This is an illustrative example only and the premium difference between Crisis Recovery and Crisis Extension will vary depending on the individual circumstances of the insured.}

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For more information about AIAA’s Priority Protection you can talk to your AIAA Client Development Manager or Associate, or our Adviser Support team on 1800 033 490.