Insurance World

One-Year Monthly Point-to-Point

The monthly point-to-point index change is determined by subtracting the prior month’s index value from current month’s index value and dividing it by the prior month’sindex value. If this results in a positive monthly point-to-point index change and is not more than the declared cap, then it is
used as the capped index change for that month. If it is more than the declared cap, then we use the declared cap as the capped index change for that month.

A negative monthly point-to-point index change is not subject to a cap.

A “capped index change” for each month is captured over a 12-month period. The sum of the 12 monthly “capped index changes” will be the index credit rate on the index crediting date. The index credit rate is multiplied by the option’s account value to determine the index credit.

One-Year Annual Point-to-Point

The annual point-to-point index change is determined by subtracting the prior year’s index value from the current year’s index value and dividing it by the prior year’s index value. If this results in a positive annual point-to-point index change and is not more than the declared cap, then it is used as the index change for that year. If it is more than the declared cap, then we use the declared cap as the index change for that year.

A negative annual point-to-point index change is not subject to a cap. The index change will be the index credit rate on the index crediting date. The index credit rate is multiplied by the option’s account value to determine the index credit.

Participation Rate

The participation rate may very greatly from one annuity to another and from time to time within a particular annuity. Therefore, it is important for you to know how your annuity’s participation rate works with the indexing method. A high participation rate may be offset by other features, such as simple interest, averaging, or a point-to-point indexing method. On the other hand, an insurance company may offset a lower participation rate by also offering a
feature such as an annual reset indexing method.

Annual Point-to-Point

The index-linked interest, if any, is based on the difference between the index value at the end of the one year term and the index value at the start of the one year term. Interest is added to your annuity at the end of the one year annual reset term.

You can freely reprint this article as long as the author, bio, and live links are left intact.

Buildings Insurance went up again last year, costing homeowners another 1% a year, taking the average to just over Ј205 for a year’s insurance. Contents insurance also went up, this time by 2% - now it costs the average homeowner Ј151 a year. However, some lenders are hiking prices even higher than that – Norwich Union for example, raised its prices by a whopping 6% last year.

The question is - why? There’s so much competition out there, you’d expect prices to be falling, not increasing – but there are other forces at work, as we go on to discuss.

No 1 – the cost of having a house repaired or rebuilt

Labour and building materials are getting more costly, so when the insurance company calculates how much it would cost to rebuild your house, prices are higher. This is due to inflation, and the same thing affects the insurance company and its own operating costs. Wages, bills, office rental – all these costs are increasing year on year – so of course insurers have to factor these in.

No 2 – the weather

The British weather is getting more and more tempestuous, whether it’s due to global warming we are not qualified to say, but it’s a fact that we have been experiencing a lot of extreme weather in the past few years. The 1987 hurricane was a freak occurrence, but flash floods such as the incident in Boscastle, Cornwall, Helmsley in North Yorkshire, and Carlisle are making the headlines on a regular basis. The Association of British Insurers has stated that the average insurance claim due to flood damage could be anything from Ј15,000 to Ј30,000, making huge dents into the insurance industry’s profits. In fact, floods cost insurance companies millions every year.

No 3 - Burglary

Claims due to burglary have been going up, now average at around Ј1,400. The 2 main causes are:

• From digital cameras to laptops, game consoles to ipods – our houses are full of electronic gadgets with a high value bought new, and a high value resold. Burglars are after these items and it’s hitting the insurance industry where it hurts – their pocket.

• Burglars pick posh neighbourhoods to ensure they get away with the best items - with expensive items like jewellery for the taking, the value of these kind of claims is increasing.

Insurance companies use statistics relating to a postcode area to calculate premiums for everyone in that area. If your neighbours have suffered subsidence, or your area is near a river which has been known to flood – you will have to pay higher premiums. Similarly, if people in your area have been broken into, then it will be assumed that you are at a higher risk of making a burglary claim too.

Having a no-claims discount is a help when it comes to offsetting the annual rise in premiums, but insurance companies cap these discounts once you have 5 years no claims, so you will not get any further discounts.

So is there any way to avoid the rising cost of home and contents insurance?

The first thing you can do is look around for the best deal. Try the Internet for the best deals, because most insurance companies offer a discount, often 10%, for customers that buy online. You will also save if you pay by direct debit. It’s tempting to accept your current insurer’s renewal quote but don’t be fooled – the small amount of effort it will take to shop around will pay good dividends. One of the reasons for this is because insurers always offer their best deals to new customers, existing customers are virtually penalised for showing loyalty!

Improving your home security is another good way to reduce premiums – while giving you essential peace of mind. Neighbourhood watch schemes, external security lighting, a burglar alarm, security locks on windows, and industry-recognised locks on external doors will make a difference. Obviously these things cost money to install, but they pay for themselves in the long run.

Play the insurance company game and you will always win – shop around, be prepared to move insurance company every year, and don’t accept any high prices. There’s always a better deal out there!