What types of Premiums are there?
A premium is the amount you will pay each month for your insurance. Once the plan has been accepted and has started the premiums cannot be changed by the insurance company due to your health or lifestyle circumstances, so if you took the policy out as a non-smoker and decided to start smoking after the plan has started, the insurance company would not be able to change your rates to that of a smoker.
What are Guaranteed Premiums?
Guaranteed premiums will never increase throughout the term of your policy. Having guaranteed premiums will give you peace of mind that your premiums will never change however you will pay more for the privilege of securing the rates now. Due to inflation, the true cost to you of a guaranteed premium decreases. For example what you can buy today with £100 will be significantly more than you can buy in 10 years time.
What are Reviewable Premiums?
By taking a policy with reviewable premiums, the insurance company will conduct a review of your policy at intervals, normally every 5 years. Many people prefer reviewable premiums as they can adapt their insurance as their life changes throughout the term of the plan. Some people do not want to pay more up front if they are planning to re-mortgage in a few years or are planning to start a family.
Increased Stepped Premiums
The UK is unique when it comes to life insurance premiums. Many other countries have what is referred to as aged costed premiums which mean the premiums increase over time, as you get older. The older you become the more expensive the premiums get as it makes sense that in effect, the older you are the more likely you are to claim therefore you pay more for the cover as you get older.
In the UK we normally pay premiums based on an average price. Therefore we may pay more when we are younger but the price does not change as we get older, as opposed to an aged costed premium which start off cheap and become more expensive as you get older.
There are insurance companies that offer age costed premiums in the UK but it mainly relates to income protection plans.
How much Life Cover should I have?
There is a good chance that the reason you are on this website is that you know how important protection insurance is. You have understood the benefits of continuing to provide an income for yourself and your family in situations where you are no longer able to do so.
What you may be struggling with is how much life insurance is sufficient and what amount you should request as your sum assured. How can you put a value on your life or worth to your family?
While it is clear that your loved ones would rather you are here to support them than to claim on your life cover, knowing your family will be looked in the event that something did happen to you will bring you peace of mind.
Everyone is different and therefore everyone’s life insurance needs are going to be different. If you are married and have three young children and a mortgage, you are probably going to need more insurance than if you are single, with no children and are renting your property.
Do I need Critical Illness Cover?
With the medical advancements in today’s society, the chances of surviving a critical illness are better than ever before. In fact, illnesses such as cancer, heart attack and strokes are no longer necessarily a death penalty whereas years ago the chances of survival with such an illness would have been slim. As a direct result of the medical advancements, people today are surviving longer and living with chronic medical conditions. Many of these critical conditions covered by the critical illness policies may force you to give up work while you recover and this is where the critical illness cover comes into play. The critical illness plan will pay you out a lump sum so that if you are forced to give up work due to a specified critical illness, you will be financially secure. You can use the critical illness cover pay-out to pay your mortgage off and keep a roof over your head. You can even use the money for private treatment if you so wish. It’s your pay-out and yours to spend on what you deem most necessary.