Life Insurance Reviews

The cost of life insurance cover is dependent on a number of different factors and will vary between the various insurance companies out there that offer life insurance policies.

Initially when looking for your life insurance cover you ideally want to compare quotes from the various insurance companies.  To do this you could go onto a website which has an online quote station which would then provide you with a list of the various insurance companies that will provide the life insurance cover you are wanting and their standard quote for that cover.  The standard quotes are based upon the life insurance amount you would like, the length of time you require the cover (the term), your age, whether you are male or female, if you have smoked or not in the last 12 months. 

These quotes are normally, unless otherwise requested differently, a monthly premium.  However, you can request for the cost of the life insurance to be quoted as an annual premium and pay for your cover in one lump sum for the year each year.

The standard quote is normally a guaranteed premium.  However, a few companies may also quote a reviewable monthly price.

A guaranteed premium life insurance quote is where the cost of the life insurance policy remains the same throughout the life time of the plan.  Regardless if it is paid monthly or yearly.

A reviewable premium life insurance quote is where the cost of the life insurance policy is reviewed by the insurance company every five years.  The insurance company will then either keep the cost the same, or the price may increase or possibly decrease slightly.  This new premium will then remain the same for the next five years.  Once again this will be the same for monthly or annual payments.

Once you have chosen your preferred insurance company before a final offer can be given and life insurance provided, you will be required to complete their application form.  The information provided in the application form is then looked at by the insurance company’s underwriting team whom then will make a final decision on the cost of the life insurance policy you are applying for.

The life insurance application form asks for details such as your occupation, lifestyle, health, family health etc.  If you do not pose as a high risk to the insurance company then the life insurance premium will most likely remain same as originally quoted, the standard premium.  However, should there be information provided on the application that the life insurance company feel could mean that there is a greater risk of a claim being made then the cost of the life insurance will most likely be adjusted accordingly to take into account the risk.  For example, such risks could be a health issue, family health problem, a hazardous pastime, an occupation that is classed to be more dangerous etc.  In some cases the life insurance premium may stay standard but exclusion(s) put in instead.  Additionally, the life insurance premium may be increased as well as exclusion(s) being put in place.

A company may, for example, have five funds (equity, property, fixed-interest, securities, cash managed) and allow the investor to switch his premiums from one to another on an annual basis. He may also, for a modest fee (around 1% of the value transferred), switch the units accumulated in any fund to any other fund when he wants to. So such policies offer the investor the opportunity to build a “do-it-yourself’ portfolio of investments within the life insurance policy.

This is an appealing concept, but it must be used to make it worth while. There is no point in taking out such a policy and starting it with premiums directed to a gilts fund, because you think that is the one with the best current prospects, unless you are prepared to review that decision and if necessary switch the units when conditions change.

The tax refinements of these policies are concerned with the drawing of the ultimate benefits. So long as premiums have been paid for 10 years the policy is a qualifying one and the proceeds are free of tax. But the investor who has accumulated this capital does not really want to cash it in, reinvest the proceeds and end up paying tax on the income. Ideally he wants to draw off part of the policy proceeds each year without any tax liability. Ways of doing this have been devised, and normally involve continuing the payment of premiums to the company at either a reduced or nominal (£5 p.a.) level in order to maintain the policy in force. So long as this is done it is possible to draw off a proportion of the benefits each year free of tax as an income, while the accumulated capital continues to grow in the funds chosen.

 Contracts of this type have a variety of names but usually involve a 10-year premium payment period with the option to continue for a second and third l0-year stint; “income” may be drawn by one of the conversions mentioned above after a minimum of 10 years.

As we shall see, are fairly straight forward. But in investment-oriented life insurance policies a number of factors enter into any comparison of value. The most important concern, an assortment of methods.

In conventional companies, the method of distribution is the bonus system. The with profit policyholder, having agreed to pay a given premium for the guaranteed sum assured, has bonuses allocated to his policy from time to time, and by the middle age date these can add up to a very substantial sum, far exceeding the sum assured itself.

There are two basic bonus systems, the simple bonus and the compound bonus. Both are expressed as £4% and when you see that a rate of bonus is £4%, this means that £4 is added to every £100 provided under the course of action. Bonuses may be “declared” annually or triennially, and once they have been declared they “attach” to the policy and cannot be taken away. Such bonuses are referred to as “reversionary” bonuses because they “revert” to the policyholder only when a claim is made.

The simple bonus system is, as one would expect, the less complicated method. If a company pays an annual bonus of £4% simple, this means that 4% of the original sum assured is added to it every year. Thus if you have a policy with a sum assured of £3,000, and the bonus rate is £4%, then after the first year the sum assured will be £3,120, after the second year £3,240, after the third year £3,360, and so on.

Under the compound bonus system, the bonus is a percentage of the sum assured plus the bonuses already declared. On a £3,000 policy a £4% compound bonus declared annually would therefore produce a sum assured of £3,120 after the first year, £3,245 after the second, £3,375 after the third, and so on.

Many companies announce “interim” bonuses every year but compound them only every three years. Thus, a company paying £4% compounded triennially would add £120 to the £3,000 sum assured for each of the three years.