Life insurance premiums have fallen
However, life insurance premiums have actually fallen quite
significantly since the early 1900s. People buying life insurance in 2001 paid,
in many cases, half as much as someone taking out the same protection
policy just five years before. Life insurers across the board have been
cutting rates because of increased competition in the market,
and a view that people will longer than the insurers had previously thought.
Why? The AIDS scare in the 1980s is the main factor. Insurers thought at the time that the scale of the epidemic would be much worse than it turned out to be – at least in the UK. Also, heart conditions and cancers are leading to death less frequently than they were. And trends towards healthier lifestyles, advances in medical technology and better sanitation are all helping us as a population to live longer.
So if you have had a policy for more than five years, it could be worth shopping around to see if you can cut your monthly premiums. Rates vary widely from insurer to insurer.It is not that one or two insurers are good value across the board – different life companies are cheaper for different age groups. They try to target different types of customer.
But if you do decide to switch life insurer, watch out for possible pitfalls. Look carefully to see what type of term assurance you have. If it is pure term assurance, it is relatively simple to compare it with a new contract. But if you have renewable or convertible term assurance and your health has deteriorated since you took it out, a new contract may now be far more expensive. You could even be uninsurable now. Do now cancel your old policy until you have the new once in force.
Insuring against ill health
As insurance companies never tire of telling us, one in four men and one in five women will suffer a serious illness before retirement. If this left you unable to work, would you have any income at all?
As long as you are permanently employed and have been with the same company for a while, it may well be that your employer would continue to pay you for six months if you became ill and unable to work. For the six months following that, you would probably receive half pay, and then you would be on your own. But there is no minimum standard for employers to adhere to, so you must find out what your employer’s policy is.
There are two main types of insurance to protect against serious illness: critical illness insurance, which pays out a lump sum if you are diagnosed with a life-threatening illness; and permanent health insurance (PH), which provides you with an income if you are unable to work for a long period (not to be confused with private medical insurance, which covers hospital and medical cost).
Of the two types, financial advisers tend to agree permanent health insurance – also known as income replacement insurance – is the more affordable and useful option. Even if you don’t have any dependents, permanent health insurance is worth having. Few of us would like to end up not only incapacitated but also reliant on paltry state benefits. (Refer to pages 105-8, Chapter 5, income protection insurance.
Why? The AIDS scare in the 1980s is the main factor. Insurers thought at the time that the scale of the epidemic would be much worse than it turned out to be – at least in the UK. Also, heart conditions and cancers are leading to death less frequently than they were. And trends towards healthier lifestyles, advances in medical technology and better sanitation are all helping us as a population to live longer.
So if you have had a policy for more than five years, it could be worth shopping around to see if you can cut your monthly premiums. Rates vary widely from insurer to insurer.It is not that one or two insurers are good value across the board – different life companies are cheaper for different age groups. They try to target different types of customer.
But if you do decide to switch life insurer, watch out for possible pitfalls. Look carefully to see what type of term assurance you have. If it is pure term assurance, it is relatively simple to compare it with a new contract. But if you have renewable or convertible term assurance and your health has deteriorated since you took it out, a new contract may now be far more expensive. You could even be uninsurable now. Do now cancel your old policy until you have the new once in force.
Insuring against ill health
As insurance companies never tire of telling us, one in four men and one in five women will suffer a serious illness before retirement. If this left you unable to work, would you have any income at all?
As long as you are permanently employed and have been with the same company for a while, it may well be that your employer would continue to pay you for six months if you became ill and unable to work. For the six months following that, you would probably receive half pay, and then you would be on your own. But there is no minimum standard for employers to adhere to, so you must find out what your employer’s policy is.
There are two main types of insurance to protect against serious illness: critical illness insurance, which pays out a lump sum if you are diagnosed with a life-threatening illness; and permanent health insurance (PH), which provides you with an income if you are unable to work for a long period (not to be confused with private medical insurance, which covers hospital and medical cost).
Of the two types, financial advisers tend to agree permanent health insurance – also known as income replacement insurance – is the more affordable and useful option. Even if you don’t have any dependents, permanent health insurance is worth having. Few of us would like to end up not only incapacitated but also reliant on paltry state benefits. (Refer to pages 105-8, Chapter 5, income protection insurance.
