February 21, 2018


Factors that can affect your life insurance premium

Taking out life insurance is only common sense in an unpredictable world, and is essential if you have loved ones dependant on you. While we all don’t like to think of the worst happening, it can and does, so taking out adequate protection on your life is essential.
Basically a life insurance policy pays out a predetermined sum of money in the case of the death of the insured.
However there are many clauses which can affect and cause the policy to become void should the cause of your death be linked to them. There are also many factors which apply to policies in general regarding premiums and cover.
This is why it is important that you understand what you are covered for and what exclusions apply to your policy. While these can vary there are some common factors:
Not mentioning an illness you already have at the time you take out the policy can have a serious affect on whether your loved ones can make a successful claim. It is essential you always give honest information at the time of taking your policy out and declare any illness you have or have had when applying.
The premium you are quoted when you consider taking out life insurance is dependant on many factors. As an example, how old you are at the time of taking out the policy is a big factor in how much the policy will cost per month as will your height and weight.
Your occupation is also is taken into consideration – the more at risk you are, the higher the premium. Whether or not you are a smoker and the general state of your overall health will also play a deciding factor.
How much you will pay will also depend on the amount of cover you wish to take out and the type of policy you have chosen. Along with this you will be asked questions regarding your lifestyle. Obviously, if your favourite weekend activity is sky diving or a similar high risk sport, then you will be classed as a higher risk and the costlier the cover will be.
Always make sure you know what you are covered for and what you aren’t covered for. Check out the exclusions which will usually be found in the small print and definitely take the time to look a policy over.

How To Use Life Insurance To Protect Your Family Finances

Most of us know just how valuable Life Insurance can be, particularly for protecting your dependents against the financial hardship caused by the unexpected death of the main family breadwinner.
When looking for plans to provide the required cover, most people tend to focus solely on the monthly cost which may not provide a true indication of the best value over the required term.
Are your life insurance premiums guaranteed?
For example term life insurance plans usually offer two types of premium, guaranteed and reviewable. As the name implies guaranteed premiums are just that. The premium is fixed at outset and cannot subsequently be changed by the insurer in the light of poor claims experiences. Reviewable premiums however are subject to a periodic review and therefore the premiums could be increased by the insurer if this class of insurance was subject to more claims than anticipated. Although guaranteed premium plans tend to cost slightly more initially than reviewable plans they are worth considering particularly for terms in excess of 10 years.
Perhaps the best way to obtain maximum value is to select the right type of plan to match the need. For example most people automatically select lump sum cover when setting up a life insurance policy for family protection. This type of plan is fine if you need to provide lump sums to pay off debts such as mortgages and loans etc. Family protection however is more about providing an income to replace that lost as a result of the death of the life assured. Having a lump sum is fine but where do you invest the lump sum to generate the required income? Will the income received be subject to tax and will the lump sum be sufficient to generate the required income for the required term?
A better protection solution
A far better solution is to select a plan which is designed to provide an income to the end of the required term. This type of plan is known as Family Income Benefit (FIB) and has several advantages over lump sum term life assurance. First of all it’s usually quite a bit cheaper than a comparative lump sum plan designed to provide the same income. This is because the risk to the insurer decreases over the term unlike level term insurance. For example, a 20 year level term plan with a sum assured of ?100,000 will cost the insurer ?100,000 if a valid claim is made up to the end of the 20 year term.
By contrast a Family Income Benefit policy providing an income of ?10,000 per annum over a 20 year term could potentially cost the insurer ?200,000 if a claim was made shortly after inception. In practice however this is unlikely and therefore the insurers risk will decrease with each claim free year throughout the term. So for example if a valid claim was made during year 10 the insurer would pay the claim to the end of the term i.e. for the next 10 years.
Another valuable feature of Family Income Benefit plans is that in the event of a claim, the income can be provided on an increasing basis. This feature must be selected at outset and most insurers will usually offer a range of increase options from flat rate percentage increases or links to various indices such as Retail Prices or Average Earnings.
Cheap and tax free!
Family Income Benefit provides an almost perfect solution to the problem of providing an income for dependents on the premature death of a family breadwinner not only because it is perhaps the cheapest form of family protection life insurance but also because the income benefit is currently totally tax-free. It therefore totally eliminates the need to search for suitable investment vehicles to provide the required income.
To Summarise:-
1.Where possible choose guaranteed premiums

2.If you require income, consider Family Income Benefit