IPTM8150 | Significant variations: examples

Examples of changes to a policy that are significant variations falling short of a reconstruction are:

• an extension or shortening of the term or premium spreading term

• an increase or decrease in the premium

• an increase or decrease in the amount of death benefit assured

• the addition or removal of critical illnesses from the list of illnesses covered under the policy where the insured person is charged in any way for that benefit: but note that

- if there is no charge for the benefit then the change is an insignificant variation - see IPTM8160

- the addition of critical illness cover to a policy that did not have it before or the complete removal of critical illness cover is a fundamental reconstruction - see IPTM8110

• the addition, removal or significant alteration of an extra benefit for death by accident or of any other permitted benefit the addition or removal of a waiver of premium condition

• permitting the policyholder to take a premium holiday

• permitting the policyholder to make a part surrender of rights under the policy

• the addition or removal of an option to the policy, the exercise of which would itself be a significant variation in the terms of the policy.

A change in the way the benefits secured under the policy are determined, as for example between with-profits, without profits and unit-linked (or ‘investment linked’) was a significant variation before 7 October 2005. However, since that date, such a change is no longer treated as a significant variation - see IPTM8155.

Note that switches between different unit-linked funds are regarded in any event as insignificant variations - see IPTM8160.