Insurers generally insert review clauses into mortgage-linked endowments, typically at 5- yearly intervals, sometimes more frequently as the policy approaches maturity. The aim is to assess whether the policy is on track to pay off the loan. These review clauses may require additional premiums to be paid. Or, more commonly, offer the policyholder a choice whether to increase the premiums, to bring the policy back on track.
If the policyholder does not object to the increase, then the
qualifying status of the policy is unaffected. An increase under a
mandatory review clause will be restricted so as not to breach the
premium spreading rule outlined at
IPTM2020. This is merely an application
of the policy terms.
If the policyholder objects to the increase, and the insurer accommodates the objection, then this would amount to a variation in the policy terms that may lead to loss of qualifying status, depending on other features such as the remaining term of the policy.
As with mandatory increases, the status of the policy will not
be affected if the holder accepts the increase. It is possible for
the optional increase to breach the premium spreading rules
IPTM2020 without affecting qualifying
policy status if the policy still has at least 10 years to run.
This assumes that the terms of the policy were certified at the
outset as qualifying having regard to the review option clause.
If the policyholder does not accept the increase, the qualifying status of the policy is not affected.
This would amount to a significant variation of the policy. The rule at ICTA88/SCH15/PARA18 would treat the varied policy as a new policy, applying the rules at ICTA88/SCH15/PARA17. See IPTM8165.
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