The Homeowner Plan was designed to protect and repay an endowment mortgage only. Available 21 February 2000 to 31 October 2001.
Level Plans available with terms of 15 to 25 years (longer terms are available where appropriate) subject to a maximum age on maturity of 70 while Low Start Plans had a minimum 25 year term again subject to a maximum age on maturity of 70.
Benefits, Funds and Trusts
- Proceeds payable upon death, the diagnosis of a specified 'critical illness' that meets our plan definition, encashment or maturity. The death benefit is the life cover sum assured or cash - in value, whichever is greater.
- Lifestyle Benefit is automatically included.
- The critical illnesses covered and their definitions are set out in the plan terms and conditions. If the medical condition arises while the Life Assured is living abroad, in the event of a claim, the Life Assured will be required to return to the United Kingdom or a country acceptable to Zurich (the geographical limits) before the benefit will be paid.
The amount payable following a claim will be the lifestyle sum assured or cash – in value whichever is greater.
- Funds Available; Managed, Property, Equity, Fixed Interest Deposit, Overseas Earnings, Gilt Edged, American Equity, American Managed, American Property, Far East ,European. Although the planholder could choose one fund or a mixture of funds up to a maximum of four, unless they requested a specific fund or funds, their contributions were allocated to the Managed Fund automatically. At least 10% of the contribution had to be allocated to each fund selected. The planholder may switch all or part of the units already allocated to another fund. An administrative (switch) charge is payable. This is increased from time to time in line with Average Weekly Earnings (AWE).
Future contributions can be allocated to a different fund or funds at any time subject to at least 10% of the contribution being allocated to each selected fund.
- Unit Allocation - For an initial period (called the Reduced Allocation Period or RAP) 70% of the contribution (including the Fixed Plan Amount but excluding the charge for Waiver of Contribution) is allocated to accumulation units of the Managed Fund. At the end of the RAP 101% of the client’s contribution is allocated to units. The length of the RAP will vary by age, term and plan type up to a maximum of 92 months. Increases in contributions are treated in exactly the same way
From commencement we will make monthly deductions, for the monthly expense charge, the monthly mortality cost and the monthly morbidity cost
An annual fund management charge of 1¼% pa is taken from the fund with ½% a year reinvested in further units for the benefit of the Plan.
Plan reviews will take place on the 5th Plan anniversary and every five years thereafter until the last four anniversary dates before the maturity date when annual reviews will be done. On last Valuation Date immediately proceeding Maturity Date, a favourable review with same sum assured, same contribution, the Investment element is enhanced. An unfavourable review; If the client wishes to maintain the Guarantee* of Maturity Value (i.e. ensure that the value of the plan on the maturity date is at least equal to the sum assured) the planholder has to extend the term of the plan, increase the basic contribution, or both.
*Please note that this guarantee is not available if the client chooses a higher assumed rate of investment growth than we recommend (i.e.7%).
The client can decline to take action on an unfavourable review but they would then forfeit their Guarantee of Maturity Value and the Maturity value would then be the bid value of units at maturity.
- Stopping Contributions - if the plan has no value when the planholder stops making contributions the plan will lapse. If the plan value is below £1000 when contributions cease, the plan will be taken to have been surrendered at the end of the 30 days of grace. If the cash value exceeds £1000 when the planholder stops making contributions, the plan will be made paid-up. The plan may be cashed in at any time while it is paid-up. Where contributions have stopped (and the plan has a cash value in excess of £1000) the plan may be reinstated, at Zurich’s discretion, within thirteen months of the first non-payment of a contribution. To reinstate the plan, either the missed contributions must be paid in full or the term must be extended.
If any option is exercised within 10 years of maturity, the term has to be extended to run for at least 10 years from the date the option is exercised. The plan is available in two versions:1) Homeowner, this version of the plan was designed to be used to build up sufficient capital to repay an existing or new mortgage. In this version the Plan provides an amount equal to the guaranteed sum assured at the maturity date provided the standard assumptions are met. Any excess performance creates surplus cash for the client or allow early repayment of the mortgage.2) Low Start Homeowner, designed to meet the same objectives as the Homeowner but for a given sum assured, contributions begin at approximately 70% of those required on the Homeowner. To ensure the Low Start Homeowner Plan will generate sufficient funds to repay the mortgage the contributions will be automatically increased at 5% a year compound for the first 10 years of the Plan and after that the contribution will remain level.
- Choice of Assumed Growth Rate, the client can choose a growth rate of either 6%, 7% (Zurich’s recommended rate) or 8%. This can be changed at any time. Low start plans can only have a growth rate of 7%. The guarantee (i.e. that the maturity value is at least equal to the sum assured) is not available if the client chooses a higher assumed rate of investment growth than that recommended (i.e. 7%)
- Variable Sums Assured, for greater flexibility the Homeowner Plan allows the target maturity value, the level of life cover and the level of Lifestyle Benefit to be different from each other. However, the life cover and Lifestyle Benefit cannot be less than the maturity amount and the Lifestyle Benefit cannot be less than the life cover. As the plan is a mortgage related product the life cover or Lifestyle Benefit cannot be greater than the outstanding mortgage amount.
- Increases are available on all versions of the plan provided that contributions have not been suspended or are not being waived. Any increase will go through its own RAP allocation period.
- Benefit Increase Option - the sum assured can be increased at any time throughout the term of the plan, subject to underwriting and an increase in the contribution, where the level of cover required is higher than for the MIO option.
- Early Cash Facility (Partial Withdrawal) - The immediate effect on the Sum assured is a like for like reduction in line with the value of the partial taken. However a further proportion of the sum assured will be reduced at the next review based on the % of the current value they take now. For example if you take 50% of your value as a partial your sum assured can potentially reduce by an equivalent 50% when the next review is completed. We won’t know the full affect of the partial on the next review until the review takes place, other factors such as fund performance (which we are unable to predict) will also contribute to the review outcome.
If the plan is assigned to a lender, we must have the lender’s express written consent. Partial withdrawals may result in a reduction in the sum assured. The planholder cannot exercise the facility if contributions are being waived due to disability. The plan term may have to be extended.
- Career Break/Stop Start Facility, client may miss up to 12 monthly payments, whilst still maintaining full life cover. The plan may be restarted by paying outstanding contributions or extending the term of the plan (Client may request Stop/Start), or Stop Start can be exercised due to non payment of contributions.
Requirements for Career Break/Stop Start Facility1. The cash - in value must be equal to, or in excess of 50% of the current years total contribution. No options allowed whilst plan is at Stop/Start status.
2. If plan has remained in Stop/Start for 13 months and is not reinstated, then :If value less than £1000 = Surrender, If value £1000 or above = Paid-up.
- Mortgage Increase Option (MIO) is available to those accepted at standard rates or where only ratings by exclusion are present. MIO Enables the plan holder to increase the plan up to the greater of twice the underwritten sum assured or up to £60,000 to cover a new mortgage or further advance without further underwriting. Increases above these limits will be underwritten. The sum assured used to calculate the MIO is the Lifestyle benefit, if present, otherwise the death benefit will be used. Increases above this limit are available but must be underwritten.
- Waiver of Contribution (WOC) contributions will be waived if the plan holder is totally disabled due to sickness or accident for more than three months, and is unable to earn a living from his usual occupation or one which is reasonably suitable for as long as he is disabled or until retirement age.
- Continuation Option at the end of the term the planholder may extend the term for a further 10 years for mortgage purposes only.
Taxation and Trusts
Proceeds are tax free after 10 years, or 3/4 of the term, whichever is sooner, provided contributions have been paid in full. The Early Cash Facility is only tax free if taken after 10 years.
The policy can be written in trust.