AIA has announced that they have expanded their requirements to exercise the “Suspension of Premium Benefits” in response the economic impacts of COVID-19, and other providers will be following suit with similar moves. But what do these changes mean for you? and when should you use?

Previously this benefit allowed you to suspend you premium payments for up to 12 months if you were on parental/maternity leave. You cannot make claims during this period, but you can resume your cover as normal at the end of the suspension period. The new changes in response to the current crisis means those who are made redundant or are on leave without pay can now also access this benefit. New measures are being put in place for self-employed customers to access this or similar benefits.

This will allow those who will suffer financial hardship during this economic downturn to better manage their cash flow. The move is somewhat similar to some lenders providing cash-flow relief for example offering 6 month mortgage holidays. You would have likely read lending brokers advising people to only taking these types of “payment holidays” if you absolutely need to, advisers are taking the same approach to these new measure from insurer.

You need to be aware that during this suspension period you will not be able to make claims, and any health issues arise during this suspension period would not be covered in the future. So there are definite risks suspending your cover during a health crisis. This will, however, allow you have your cover essentially on a retainer. Once your suspension period is over (again up to 12 months) your cover will be reinstated provided you resume premium payments without having to undertake any new underwriting. This is vitally important for those that have suffered any health issues since they have taken out the policy and would likely have conditions excluded in a new application.

How long you suspend your cover also needs a fair amount of consideration. You can extend an original period if you choose a period less than 12 months, up to a maximum of 12 months total but you cannot restart your cover before the suspension period is over. So going straight for the maximum available may not be the best decision for you.

For example: Andrew has recently been made redundant and phones AIA to suspend his policy for three months. After two months, Andrew phones AIA to extend his suspension period up to 12 months (in total the maximum allowed). After ten months, Andrew phones AIA to re-activate his cover; however, he is unable to do so until the end of his 12 month nominated suspension period.

Those who are also AIA Vitality members also need to carefully consider taking up the suspension benefit as this may mean that you cannot continue to take part in the programme during this suspension and you may lose your points and be put back to Bronze membership level when the policy and membership is re-activated.

Other measures to better service clients during the current crisis include a more empathetic approach to those who are in arrears. Please contact your broker/adviser or your insurer if you are going to be unable to make premium payments, they will work with you as much as possibly can.

At this point there is no indication that these changes will be permanent as they are in direct response to the current COVID-19 crisis. You can expect other providers to release similar measures in the coming days and weeks so stay in touch with your adviser or insurer.

Please contact me with any questions you may have.