Frequently Asked Questions
Life assurance will pay out a lump sum if you are to die within the term of the policy or you can take out a whole of life insurance life cover which will cover you until death. Life assurance can come in many different forms, such as level term, decreasing term and increasing term plans. With a life assurance plan you also have the choice of guaranteed premiums, reviewable premiums and age costed premiums. With life cover, you can also select whether to have the money paid as a lump sum or as a monthly pay-out and in addition to this you can also choose whether you wish to take out life insurance on your own, as a single insurance policy or with a partner as a joint insurance plan.
I have a pre-existing medical condition, what should I do?
In cases where you may have a pre-existing medical condition it is vital that you disclose all your information to your Proadvice financial adviser. Your Proadvice adviser will be able to inform you of which insurance company will be the most suitable for you and your needs. If you are living with a medical condition or conditions, you can now be placed with an insurance company to fit in with this so there is no need to attempt to hide the condition away. If you do not disclose a pre-existing medical condition this may invalidate your insurance plan.
“It is important that you provide truthful and accurate answers to the questions in this section of the application as your answers form the basis of our determination of your eligibility for this coverage. Failure to provide complete and accurate information may result in decline of claim or the policy being cancelled.”
How is insurance priced?
Many factors can determine how the insurance companies work out how much to charge you for your premium. A number of factors are;
- Your age
- Smoking status
- Term (the length of time you wish to be covered for)
- Sum assured (the sum of money you wish to be covered for)
- Medical history
Up until December 2012 your gender had an effect on your premiums. However the European Union has now made it illegal to price people differently based on their gender in relation to insurance. This ruling has now also spread to protection, car insurance and pensions. This equalisation has changed the way that the insurance market works for ever.
G-DAY or the European Gender Ruling came into force in December 2012. The ruling by the European Court of Justice means that insurance companies are longer able to use gender as a factor to determine whether someone represents a bigger risk to the insurance company in insurance terms. In the past, insurance companies could use historical evidence and claim statistics to show that men generally die younger than women and women claim more on critical illness than men. However the ruling by the European Court of Justice has put a stop to all of this and you can no longer be priced differently on the basis of whether you are male or female. The ruling has not however ruled out loadings due to medical history, for example, a female who has a family history of breast cancer is still likely to have an exclusion or an increase reflected in the premiums. Before the ruling came into effect, a male with the same family history would not face exclusion or increase in premiums as a male is less likely to get breast cancer so the risk is not added to the plan. This after the ruling this has remained the same.
The gender ruling has changed the cost of insurance and not the underwriting process, this means men and women can still be priced differently based on medical risks.
What is Critical Illness Cover?
Critical illness insurance is a long term insurance policy designed to pay a lump sum or income on the diagnosis of certain life threatening or debilitating (but not fatal) conditions such as a heart attack, stroke, certain types of cancer, multiple sclerosis and loss of limbs.
How much will Critical Illness Cover cost?
Critical illness premium costs are worked out based on a number of factors. Every insurance company will price their critical illness policy individually as each insurance provider will analyse and rate the risk factors differently. The insurance providers will rate people differently at different times as insurance companies require a broad range of people based on age, smoking status and gender. An insurance company does not want to just insure 18 year old, healthy, non-smokers as they will not make much of a profit from the premiums they will pay as the premiums will be at the lower and cheaper range of the spectrum based on them not being a high risk. In the same instance, the insurance companies also do not want to insure lots of 55 year old smokers with high blood pressure as they will be seen to be high risk and potentially more liable to make a claim. This is in the insurance industry referred to as ‘pooling.’ The insurance companies want to spread their risk across all ages and demographics and changing the premiums to suit based on if they need more of a particular type of person or less of another in any particular group of clients. If you are lucky enough to be looking for a policy or in a current policy with reviewable premiums in a demographic where an insurance company is looking for people of that particular calibre, you could find yourself getting access to much cheaper rates than you might at any other time.
The amount of critical illness cover you decide is suited to your individual circumstances and requirements will also have a direct impact on your premiums. If you have £100,000 worth of cover it will cost twice as much as £50,000 with the same provider. It stands to reason the more you are insured for the more you will be required to pay.
The term of the critical illness cover required again has an impact on your premiums as the longer you have a plan the more likely you are to claim on the plan. It is a well-known fact that the older you are the more likely you are to become ill or have complications, therefore the critical illness cover premiums are priced to take this into consideration.
If you are a smoker then you have probably already realised that your critical illness cover insurance is going to be more expensive than for someone that does not smoke, in many cases the premiums can as much as double. The reason for this is due to the added health risk that is associated with smoking. If you are a smoker, the insurance companies will also be more intrusive when it comes to your medical history and requesting information such as your height and weight, blood pressure and family history, as there is an increased risk of claiming on a critical illness cover as a smoker compared to a life insurance plan.
How can I save money on my life insurance plan?
The general rule with life insurance is that the younger you are the cheaper your premiums are likely to be, it works in complete contrast to that of car insurance. We at Proadvice understand that when you are younger that there are much more exciting things you can be spending your money on than insurance and what may be in the future, however if you could see into the future it is almost certain that you would take out all the insurance you are ever going to need at a young age, when you are likely to be fit and healthy to get the best rates you will ever be entitled to. There are more realistic ways to save money on your insurance plan.
What is a trust?
One of the most important things you can do when taking out a life insurance policy is to set your life cover into trust, yet approximately only about 6% of the population do so. The other 94% could be facing a potential tax bill of 40% on their life cover, this is called ‘Inheritance Tax’ (IHT). I am sure you will probably agree that it feels as if we pay far too much tax when we are alive so the last thing you want your family to do is pay 40% of tax on the money you intended to see them through a difficult time when you pass away. By setting up your life cover in trust we can help you to not only avoid taxes when you die but also ensure your loved ones get the money straight away and without this significant deduction. A trust does not interfere with any Will you may have in place as a trust only deals with your life cover. A Will is put in place to cover all other avenues regarding your estate.
What is Income Protection?
Income protection replaces part of your income, (tax free), if you are unable to work for a long period of time due to an illness or disability and will usually continue to pay out until you can return to some kind of paid work or reach retirement, whichever is sooner.
How to find the protection that is right for me?
You can spend hours of your time comparing hundreds of different insurance plans and terms available on the market as well as reading all the Key Feature Documents for all of the products and all of the providers which would be an extremely lengthy and time consuming activity or you can simply speak to a Proadvice Adviser and we can do all the hard work for you.
At Proadvice we have done all the leg work for you, we have read the manuals and know the Key Feature Documents from back to front and pride ourselves in knowing details from each plan and at the very least, where to get the answer. We can focus your enquiry to be specific on what you actually want the cover for and make sure your plan covers all of your major concerns.
Does protection insurance pay out?
The simple answer is yes, protection insurance does pay out. It is a common misconception that protection insurance does not. Unfortunately bad news travels faster than good, so for all the stories you read in the news and online of cases of insurance policies not paying out, there are certainly many more that have yet these are mainly the stories you hear about. This is far from ideal as it changes people’s perceptions and may prevent someone who needs protection to not take it out. The real statistic of this is life cover pay-outs in 2012 honoured 99% of claims and £6 million a day was paid out in the UK for protection. The insurance industry is an industry that wants to pay out. (1)
By having an in-depth knowledge of the insurance market, claims statistics from insurers and amendments to policies your Proadvice adviser can guide you to the best insurance provider for you. If there is an unavoidable amendment to the plan, i.e. because you happen to have a dangerous hobby, such as sky diving at weekends, then your Proadvice adviser will explain what the changes to your plan are and what you can expect from the plan during a claim (should the situation ever arise where you need to do so), before you agree to start the plan. It is certainly better to be armed with all the facts before you start the plan than to find out later down the line that you are not covered when trying to make a claim.