Life Cover

Do you have some form of life cover? Are you even sure exactly what life cover is? Many people are confused by the terms “life cover” “life insurance” and “life assurance”. Basically, they all refer to the same product. In the past, “life assurance” referred to a policy against something that is certain to happen—i.e. death, while “insurance” was traditionally used to insure against an event that might or might not occur such as accidents or illness. (Money Extra) However, today the terms are used interchangeably, along with “life cover”.

Do you need life cover?

Unless you already have some type of life cover, you should probably look into purchasing a policy. Although research shows that Brits consider life cover the most important form of cover they can have, (Abbey) the unfortunate truth is that as of 2006 there were approximately 18 million UK adults who had no life cover at all. According to The Times, the four main reasons people gave for being uninsured were:

• They didn’t want to think about death

• They didn’t understand life insurance

• They didn’t trust financial advisors or insurance companies

• They thought life cover was too expensive.(Money Extra)

Although none of us like to think about our own death, it is inevitable and it’s much better to protect our families while we can. Angus Porter, customer director at Abbey notes “…sadly only half of us have any life cover and even less have critical illness cover. If the worst were to happen, people could potentially be leaving their families with a financial nightmare.” (News BBC)

Is it difficult to get life cover?

Generally it is fairly simple to obtain a life cover or life insurance policy. The only people who may run into any problems may be those who are over 65 or so or those with serious medical conditions. And in many cases, policies are available for people with medical conditions, although they will carry higher premiums.

Most people simply fill out an application form and aren’t even required to get a medical exam. The insurance company may check with your doctor, so be sure to provide all the information that is asked for and be truthful. In 2006, approximately 1 in 10 claims were rejected due to nondisclosure on the part of the applicant. Tony Jupp, chief underwriter at Norwich Union says “If applicants don’t share with their insurers information that is requested, it is likely that they will have invalidated their policy and if they make a claim it might be turned down.” (Moneynet)

One survey by Norwich Union found that up to 1 in 14 people provided false or incomplete information regarding their health or lifestyle. This will generally invalidate your policy. If, for example you say you don’t smoke and later die from a smoking-related disease, the insurance company can claim “nondisclosure” on your part and not pay off the claim.

Does lifestyle make a difference in life cover rates?

Yes, health issues and lifestyles can make quite a difference in life cover rates. Rates have always been higher for people who are considered “high-risk”. This can be due to circumstances beyond your control such as a family history of heart disease, or can be related to your job or your hobbies. If you are a frequent flyer for business purposes or engage in dangerous sports, you may be classified as “high-risk”.

And lately, other lifestyle choices have put people into the high-risk category. In addition to smoking, obesity is being considered as a high-risk behavior by some life cover providers. On average, smokers pay 56% more for life cover than non-smokers and people considered obese (those with a BMI of 28 or higher) may find themselves paying up to 50% higher rates. (What Price) Considering that according to the Department of Health approximately 50% of UK adults are overweight, this could affect millions of people. (News BBC)

Jonathan French of the Association of British Insurers says “Insurers look for factors which are likely to increase the risk of a claim being made….if you are obese, there is a higher risk of other health problems resulting from that and therefore the risk of a claim is going to be higher and insurers will price their policy accordingly.” (Money High Street)

How much life cover do you need?

This depends upon your particular circumstances. Factors you should consider in deciding how much life cover you need may include items such as:

• Are you married?

• Are you the main source of income for your family?

• What are your average annual expenses?

• Do you have outstanding debts?

• Do you have a mortgage?

• Do you have young children that will need funds for education?

• Do you have any other life cover?

If you have any questions or are unsure about how much life cover you need, you may want to consult an Independent Financial Advisor, who can analyze your situation and make recommendations.