Insurance World

If you’re in the market for a term life insurance policy, here are a few money saving tips to help you keep the premiums down.

1. Buy when you are young healthy: Life insurance rates, although they contain fees, and a myriad of expenses, are primarily based upon the statistical chances of a person dying in a given year. Insurance companies use their own experience plus the statistical information collected by the government. The statistics are used to calculate the yearly ‘cost of death’ for each $1,000 of life insurance benefit. As people grow older, the chances of dying increase. At first the increase is slow up until middle age, and then the chance of death increases more rapidly. As the chance of death rise, so do the premiums.

2. Quit smoking: Smokers’ premiums are nearly three times as expensive as non-smokers. Staying away from cigarettes a week or two before your company physical won’t do. Urine tests will detect traces of nicotine (yep, this means chewing tobacco too). Most companies require you to be smoke free for a minimum of one year. Some companies require two years.

3. Lose weight: Companies don’t charge by the pound, but you may be charged more if your weight exceeds a certain level.

4. Buy direct: The internet has made it easy to shop around for life insurance policies directly. By eliminating the middle person, you save on salespersons commissions which are built into the policy premium.

5. Healthy people don’t need ‘guaranteed issue’ policies: People with medical conditions may want to purchase guaranteed issue policies. These policies do not require a medical exam and tend to have higher premiums. The company is taking more of a risk because they don’t know your true medical condition. However, if you are healthy, take the exam. It will prove that you are a good risk and your rates will be lower.

Who needs it?

Life Insurance cover provides either a lump sum or an income on the untimely death of an individual. Therefore, anyone who’s death would create a financial loss to another has a need for life insurance cover. This could/should include the following: -

Parties to a Mortgage or indeed a loan (mortgage life insurance cover)
Anyone with dependents (whilst a parent may not work, surely there would be a financial loss if anything were to happen whilst there are young children to be cared for)
Key Individuals. Where a business would suffer financial loss on the death of an essential employee.

In essence any situation where monetary loss would be incurred could possibly have a need for life insurance cover.

630,000 people in the UK will die this year* *source:National Statistics, Winter 2002

Types of Cover

Term Life Insurance

Term life insurance is as it suggests taken out for a specified number of years at outset. With this type of policy you are merely paying for the cover provided based on your age, health and the term. Therefore, it is important to obtain the most competitive term life insurance quote for the cover provided. It is possible to take out term life insurance that will pay level lump sums, decreasing lump sums (mortgage life insurance cover) or regular payments (income).

Whole of Life

As the name suggests, potentially, this type of policy will provide cover through an individuals life time. However, when obtaining a whole of life insurance quote, as well as level of premium there are other aspects to be considered, such as investment performance, effect of charges, financial strength of the company.

Which one?

There are good arguments for both type of policy. We would suggest that the following could make up the main considerations: -

Cost - Whole of Life insurance, as a rule of thumb is usually the more expensive type of product.
Period that cover is required - If cover is required for a specific period i.e. a Mortgage then Term cover could be more appropriate
Future Plans - If, for instance a family is planned, then whole of life can offer the flexibility to increase cover for this or other like events.

Note

Critical Illness(CI) now provides an equally important benefit and we would strongly recommend that you view the CI Factsheet.

Conclusion

This artice is meant merely as a rough guide to the needs and options surrounding Life Assurance. It is by no means a comprehensive outline to anyones particular requirements. It would be, therefore, wise to use this as a guide and seek more comprehensive advice, via a professional Independent Financial Adviser. All advisers are Regulated and Authorised by the Financial Services Authority (FSA) and are now required to explain their status to you (either independent and fee charging, independent but paid by commission only, or tied)