Life Insurance Search

Everything in life has a risk; you cross the road and take the risk of being run over.  The risk is minimised by knowing about it and taking precautions to avoid the danger, for example looking both ways or using a crossing. 

The risks that need to be taken into consideration for a term life policy are detailed below:

• Term assurance products do not contain an investment element, and therefore they have no cash in value and you do not get a payout at the end of the contact.  It pays out only on the death of the life assured
• It is important to remember that you will be making a long term commitment.  If you stop your payments your cover will stop and therefore your family may suffer financial hardship should the life assured/main earner die prematurely.  Therefore it is important to ensure that you can afford the premiums for the length of time the policy covers.
• If a person covered by the policy dies then payments cease when a claim is made.
• However if it was a joint policy the remaining partner will now have no life insurance and should reassess their insurance needs and take out an appropriate policy.
• The cover may be less than you need if you do not review it regularly to keep it in line with your earnings.  Inflation may have grown faster than your initial calculations or your standard of living has increased due to for example a better paid job or a partner returning to work and therefore a top up policy may be needed. 
• It is worth looking at your life insurance needs at least annually or if a family event such the birth of a child has occurred and you now feel there is a need for an increased amount of cover.
• The current law and Inland Revenue practices may be subject to alteration in the future.  If changes are applied retrospectively then your term contract may be affected and therefore need reviewing as changes in tax treatment may change the amount paid out
• If you have not disclosed any material fact concerning your health/lifestyle when applying for a policy the insurance company may refuse to pay out a claim on your death.  This would leave your dependants financially insecure. 
• Check if there are any exclusion clauses and if these would impact on a potential claim.
• You may wish to extend the term of the policy, however once it is up and running this is not possible.
• If you have contracted an illness during the term of your policy it may be difficult to obtain further cover once the policy has come to an end.

As with crossing the road these risks can be minimised by regular checks that your cover meets your lifestyle.  After all you look both ways every time you cross the road not just on the first occurrence, therefore doesn’t it make sense to look at your life insurance cover periodically to ensure you check the risks.

The author is Sharon Bowen who acts as a compliance consultant for Hayes Styling Limited. Sharon is qualified to Dip PFS standard with the Chartered Institute of Insurance and is a member of the Compliance Institute.  Sharon was originally trained by Prudential as a Financial Consultant in 1990 and has subsequently worked as an IFA moving onto senior management roles before starting Hayes Styling Limited. 

This article was written on the 4th March 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

Once you have decided how much life insurance cover you need and over what period of time you complete an application, which is sent to the insurance provider.  The application will look at many factors including your age, whether you smoke, your current occupation and your health record. It may also ask questions concerning the health of your parents and siblings.

The insurance provider will use this information to decide whether it requires more details about your health, this is called underwriting.

Underwriting is done to ensure that the company knows the risk of paying out over the length of time chosen.  It has to calculate the percentage of policies that it may have to pay out against the number of policies that will not be claimed upon.  It does this to ensure it has the funds available to meet a potential claim and give you the protection you are applying for. 

Obviously, the higher the risk of a pay out the higher the insurance costs.  For example as you get older the cost of life insurance goes up because you have less life expectancy, any medical condition may also impact on your life expectancy.

If there are no excess risks you will be accepted on what is known as standard rates and the cost should be the same as you have been quoted.  However, if you are classed as being ‘Rated’ it means the life insurance provider has increased your premium to match your risk.

If there is anything mentioned on the application form that may pose a higher risk the insurance provider may wish to write to your doctor for clarification.

This does not necessarily mean that you will need to have a medical examination as in the majority of such cases, the information your GP provides will be sufficient to enable the insurance provider to make a decision on the amount of risk posed by your application.

The insurance provider may also decide that it needs a second opinion or a completely up to date report on your health. In these circumstances the life insurance provider will require you to take a medical.

A medical can be done by a short visit to your home by a qualified nurse or at your Doctors surgery. Either way, the insurance provider will meet the full cost of the medical. This is usually done at a time suitable to you.

The medical report produced is the property of the insurance provider but you can request on your application form to see a copy of the report. If anything of concern is discovered within the report the insurance company underwriters or your Doctor will usually let you know.

If a medical is requested this may cause a time delay to your policy coming into force, therefore do not cancel any existing polices until all the research has been done and you have a new policy accepted.

The insurance provider can refuse to insure you if it considers you are too high a risk.

Finally, you must be totally truthful when you complete your application form. If you fail to disclose anything they ask you about or you fail to tell the truth, then if in the unfortunate case a claim is made it will be invalidated.

The author is Sharon Bowen who acts as a compliance consultant for Hayes Styling Limited. Sharon is qualified to Dip PFS standard with the Chartered Institute of Insurance and is a member of the Compliance Institute.  Sharon was originally trained by Prudential as a Financial Consultant in 1990 and has subsequently worked as an IFA moving onto senior management roles before starting Hayes Styling Limited. 

This article was written on the 3rd March 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

A trust is a way of putting something valuable (an asset) aside to benefit others - in this case, the value of your life insurance policy. The trust stops the money being used for any other purpose and ensures it goes to the people you want when you die. These people are known as the Beneficiaries.A trust means your money goes to the people you intended. For example, if you owed money when you died, a trust could mean the money paid out under a term insurance policy would go to your loved ones not your creditors. Trusts are set up for a variety of reasons:

• If the named Beneficiaries are to be minor children who are not old enough to deal with the property themselves, or if it was a class of beneficiaries such as grandchildren some of which may not have been born yet then a trust would be established.
• A trust would also be used to provide ongoing care for someone who is mentally disabled and could not handle their finances on their own.
• If you do not wish young beneficiaries to receive the money before the age of 18 a trust could be set up for this reason
• Trusts can also be used to mitigate tax.

When you die, the courts have to give permission for assets in your estate to be given to your beneficiaries. This takes time, and if you die before making a will it can take even longer sometimes up to six months and it incurs costs. However, trustees don't have to wait for courts so your life insurance payment can be made as soon as possible.

If you left behind children under 18 when you died, trustees could use the trust to support your children. Once your children have turned 18 they can have full access to the money remaining in the trust.

When property such as a term insurance policy is placed under trust, Trustees are appointed.  These people are the legal guardians of the property, and they have to administer the property for the benefit of the Beneficiaries under the trust rules and specific powers.  These specific powers may be for example to pay for further education.

The Settlor is the person who pays the premiums for the life policy.  When the Settlor dies the money paid out by the policy is managed by the trustees, and can be distributed in accordance to the trust rules and specific powers.

A trust deed is drawn up and the policy provider is informed that the policy is the property of a trust and the trustees are then registered as the legal owners. Once a trust deed has been signed the policy cannot be removed from that trust, and the term insurance policy is no longer the Settlor’s property.  The policy provider can provide trust documentation but you should seek legal advice to ensure their trust wording is suitable for your requirements.

On the death of the Settlor it is the Trustees that have to claim the sum assured from the policy provider as they hold the life policy.

Trustees must ensure that they manage the trust property and they must be diligent to avoid unnecessary loss as they could be liable to the beneficiaries for any breach in this duty.

If a policy is not put into trust the money paid out by a life insurance policy will form part of your estate. If the value of the estate is over the inheritance tax barrier (which was £285,000 in 2006/2007) then the amount over the barrier would be taxed at 40% (2006/2007). Inheritance tax is exempt for husband, wife and civil partners domiciled in the UK.

Settlors may use a trust to reduce inheritance tax liability on the Settlors death; property put into trust during the life of the Settlor may reduce the amount of tax payble.

As with most things trusts can be useful, however expert advice should be taken if you are considering a setting up a trust.

The author is Sharon Bowen who acts as a compliance consultant for Hayes Styling Limited. Sharon is qualified to Dip PFS standard with the Chartered Institute of Insurance and is a member of the Compliance Institute.  Sharon was originally trained by Prudential as a Financial Consultant in 1990 and has subsequently worked as an IFA moving onto senior management roles before starting Hayes Styling Limited. 

This article was written on the 2nd March 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

Term assurance in its simplest form is one of the basic types of life assurance; whilst there are a lot of different variations to this type of policy they all have similarities.

They pay out a sum of money when the event covered occurs.  This may be death, or diagnosis of a terminal or critical illness.  It only pays out if the event happens within a stated period of time known as the term.

There are various forms as stated above, the first being a level term assurance policy.  This type of policy has the sum assured amount constant throughout. You can usually take this cover out for a minimum of 1 year with a maximum age of 85.  No surrender value is payable on these policies and once the sum assured and term have been selected they can not usually be altered.

The premiums can be guaranteed to remain the same throughout the policy term or they can be reviewable and could go up with the insurance provider’s mortality experience.

This type of life insurance is cheap and easy to understand.

Terminal Illness cover is normally provided as a benefit with these policies.  This is where there is a high probability that an illness confirmed by a doctor will cause death within 12 months.  If this benefit is included in the policy then the insurance provider will pay out the sum assured early to enable the person covered by the policy to start to put their affairs in order.

This benefit under current legislation and Inland Revenue regulations is paid tax free.

Decreasing term assurance is a popular way to cover an outstanding mortgage debt.  The sum assured decreases each year by a stated amount, so at the end of the term the amount of cover will be nil.

The reduction can be either a fixed or variable amount but although the cover reduces the premiums normally remain the same.  Because the insurance providers risk decreases each year this is normally one of the cheapest forms of life cover.

It is normally used to cover a mortgage on a repayment basis and the cover goes down together with the amount owed to the mortgage lender.  However if the amount of decrease chosen at the outset of the policy decreases faster than the capital owed on the loan then if a claim is made there may be a shortfall. 

Decreasing term assurance can also be of value in Inheritance Tax planning the term for these policies is usually 7 years and the sum assured covers the amount of Inheritance Tax that would be payable on a lifetime gift.  This may mean the gift can be made without possible reduction as a result of this tax becoming payable.

These policies are called Inter Vivos Term Assurance Policies

Term assurance policies can also increase, this increase is usually linked to the retail price index or a fixed percentage each year.  The premium normally goes up each time the sum assured is increased.

If the life insurance policy is being used to protect dependants then this ensures that the benefits keep pace with inflation.

If in doubt as to which policy you need, seek independent advice. 

The author is Sharon Bowen who acts as a compliance consultant for Hayes Styling Limited. Sharon is qualified to Dip PFS standard with the Chartered Institute of Insurance and is a member of the Compliance Institute.  Sharon was originally trained by Prudential as a Financial Consultant in 1990 and has subsequently worked as an IFA moving onto senior management roles before starting Hayes Styling Limited. 

This article was written on the 1st March 2007.

This article does not represent ‘financial advice’ as each person’s individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

This is intended as a very brief introduction to this subject. First of all a life insurance policy is a contract between the insured and the insurer. In English law there are five basic requirements for a contract which are as follows, 

• Offer and acceptance;
• Consideration;
• Capacity to contract;
• Insurable interest;
• Consensus ad idem, which in English means a consensus of agreement.  You were both contracting about the same thing.

Offer and acceptance.  In English law under a contract there is offer and acceptance. One party makes an ‘offer’ and the other party accepts that offer without qualification.  If the acceptance is qualified it simply becomes an alternative offer.  There is also under English law something called an invitation to treat. That is basically an advertisement. Insurers issue out their prospectus and brochures. They are not offers in their own right. You could not go into the insurer’s office and hand over your cheque for the policy shown in the advertisement.

In life insurance the insurer usually makes the offer to contract by telling the insured that he has accepted the proposal and is willing to offer insurance at a set sum, based on a set policy and subject to the first premium being paid. The insured then usually accepts that offer when the insured pays the first premium. 

Usually when a life insurer make their offer they make it subject to the first premium being paid by a certain date and that until the first premium is paid the life to be insured should remain in the same state of health.

So if once you get the insurers offer, your health deteriorates before you pay the first premium then the life insurance contract may not be valid. You would need to discuss that with your insurer.

Consideration.  There needs to be consideration on both sides. This applies to all contracts which are not under seal. The insured’s consideration is the first payment of premium and then after that the continuing payment of premium. The insurer’s consideration is the offer to pay out the sum insured if the life insured was to die during the policy period.

Capacity to contract. Both parties must be able to contract.  Minors under the age of 18 years are restricted by the Family law Reform Act 1969. Minors under the age of 18 can enter into a contract but subject to certain restrictions the contract can not be enforced against them. That is why most insurers will not issue a policy to someone under the age of 18.

Generally you can not enforce a contract against some one of unsound mind if you knew they were of unsound mind when you contracted with them. Under the Mental Health Act 1983 the affairs of a person of unsound mind can be placed into the hands of the court of Protection who can then appoint someone to handle affairs on their behalf.

The Life Insurer must be authorised under the Financial Services and Markets Act 2000 in order to issue policies of life insurance in the England.

Insurable interest. The life insurance proposer, the person taking the policy out, must have an ‘insurable interest’ in the Life Insured. Prior to the Life Insurance Act 1774 this was not the case and many people would take out life insurance policies on famous or notorious people as a form of gambling. The Life Insurance Act 1774 put a stop to this. The act requires the proposer to have an insurance interest in the life insured and that the level of insurance taking out must not exceed the value of that insurable interest.

Courts will usually hold that a person has an unlimited interest in their own life and that of their spouse. In an 1854 court case called Dalby v India and London Life Insurance Co it was held that a life insurance policy was not a policy of indemnity, and so the insurable interest only had to exist when the policy was first taken out.

Consensus of agreement. The parties basically must be in agreement about what they are contracting for at the time the agreement comes into force. The original idea came from a case where one party was selling a boat and another person was buying a boat. Unfortunately there were two boats with the same name and each party thought the other party was talking about a different boat.

In life insurance this area of law has been extended by the idea of ‘utmost good faith’. Courts believe that the insured has all the knowledge about themselves and the insurer has none. The insured therefore under English Law has the duty to advise the insurer of all material facts.

The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.

This article was written on the 28th February 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

There are many reasons why people decide it is time to start to purchase term life insurance. Everyone’s life and priorities will be different. The best we can do is to give you some indicators as to why others decide it is the right time to purchase term life cover.

Some couples will take out term life cover as soon as they start to have financial commitments and they appreciate that if one of them was the die the remaining loved one would have to face those financial commitments alone.  Money will never replace the loss of a loved one but it can help get through the immediate financial hardships. Even enough money to cover funeral costs, all existing debts and enough for one or two year’s standing costs going forward then that can help reduce the immediate concerns. Ideally provision for a much longer period would be preferable. Whilst certain living costs can be managed by two people perhaps both working, one person alone may find real financial problems.

When people start to take on a loan or mortgage then they need to consider what would happen if they were no longer around to continue to pay of the monthly payments on that loan. If they died would their estate or their dependants be able to clear the debt. Would at worse the home have to be sold to meet the debt. This is why most people who take out a mortgage also purchase term life insurance to protect the outstanding balance of debt left on that mortgage.

When people have dependants it is natural that they want to provide for them if they themselves were to die. Term life insurance is one of the various life insurance products that can be used for that purpose. The 2006 ASHE weekly median pay for all full time workers was shown as £447 per week. That equates with £25,272 per year. You may expect to earn more or less than this figure. If you were to die how many years wages would you like to provide for your family going forward.

Over the term of our life we may be fortunate to build up riches. With the increase in the property market this may be easier to do than we would expect. However if those riches exceed a certain amount then when we die they will be subject to inheritance tax and death duties. A report in 2005 indicated that inheritance tax could hit five million home owners based on the value of the property alone and ten million could be affected if other owned wealth is also considered. Insurance can be a way of helping to offset the cost of inheritance tax. Term insurance may or may not be best suited for use in this case and it will depend on each persons own particular situation.

Many of us now are choosing to be self employed or to go into partnership or own shares in our own firm. If we are in partnership or are the main worker/shareholder in our own company then how to we provide for those we work with and our family if we were to die. Would our partner or children want to take over the firm and even if they did, would they have the skills, time and ability to operate the firm successfully. Equally we may have agreed to financially help or support someone going forward. That may be an important personal commitment to us. What would happen if we then die? Certain term life policies may provide possible solutions in these cases.

The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.

This article was written on the 27th February 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

• Research the market to find out what is available. A good way to do this is on line as some insurers offer special rates over the internet. You do not have to do all the work yourself. Many web sites such as protected.co.uk offer to search over 100 plans from the UK’s tops brands.
• The premiums for term life insurance are usually banded by age. So the younger you are when you take out the insurance the lower the premium will be.  Putting off the decision to purchase term life cover could mean you will end up paying a higher premium.
• You will need to decide how much cover you want to purchase. You should set yourself a premium budget to work from as well as trying to see what lump sum amount would be essential to provide a reasonable level of protection.
• When you fill in any insurance application or proposal form always tell the truth. This is the basic information which will determine whether or not the insurer will want to offer you insurance. If it is found out at a later date that you provide incorrect information then the insurer may be allowed to void the insurance policy.
• Life style choices which help to keep you healthy are also likely to result in lower life insurance premiums. Correct body weight, non smoking, fit and healthy with low alcohol intake all help you to get into the low premium bracket for your age. 
• Insurers usually incur some costs in acquiring your business and in issuing the policy documentation.  Because of this some insurers will increase the rate on policies with a low sum insured and reduce the rate slightly for a larger sum insured. So if you can see the need to have more life cover in the future then you might want to consider taking the cover out now as a single larger policy sum insured.
• Even if you already have life cover you should always check that the cover you have is suitable for your present needs. Life can bring with it several changes and what might have been a reasonable level of cover a few years ago may not now match your existing arrangements. For example you may have higher life style commitments, an addition to the family, higher mortgage or debts.
• Consider whether you have life insurance through other sources such as life insurance cover tied to your employment or to a mortgage.
• Do you want the life cover just to be based on your death or to also include the death of your partner (referred to as a joint life policy).
• Do you want the sum insured to remain level throughout the term of the policy or do you wish the sum insured to reduce in line with the outstanding balance on a repayment mortgage.
• Do you want the policy paid to your remaining estate, a specific beneficiary or written in trust? Some of these considerations may have tax implications and you are advised to seek financial advice if you are in doubt.

The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.

This article was written on the 25th February 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

Insurance is there to meet the unexpected. To help us get through that bad spell or to recovery from an adverse event. What could be worse than to have a loved one die. No amount of life insurance will replace a loved one in your heart but it can help with the financial difficulties that may also be caused by a early death.

Life insurance is not compulsory in the UK although many people think it is essential. It is estimated that about half the UK population are covered in some way by life insurance. It is certainly true to say that many families and dependents have benefited because a term life policy had been taken out and was there when it was needed.

With insurance we purchase a policy documents which is basically a promise to pay if a certain event occurs. We are not all experts on insurance and so we need laws and regulations to protect us when we purchase insurance. That protection is now offered through the Financial Services and Markets Act 2000 and the work done by the Financial Services Authority (FSA), the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS). All of these three organisations work together to help give you peace of mind.

Firstly the FSA have to authorise those who provide financial services and either arrange, sell or provide insurance policies. The names of the firms who have been authorised by the FSA appear on the FSA register which is accessible at the FSA’s web site www.fsa.gov.uk. Firms or individuals who behave badly can be struck off the register and can be open to criminal prosecution.

Secondly the FSA produce a set of rules and code of practice which firms must adhere to. The rules deal with how businesses are run whilst the codes of practice deal with how businesses treat their customers. One of the benefits for customers is that insurance intermediaries have to provide their customers with an Initial Disclosure Document. That explains the size of the life insurance market the intermediary deals with, the level of service they provide and provides details about fees.

Even with the FSA in charge problems and disagreements can occur. If you are a private individual or a small business then you may be able to take your complaint to the Financial Ombudsman’s Service (FOS). The FOS provides you with an independent service which is funded by the financial markets that have to pay a fee out of the turnover they receive. If you have a complaint then you must first use the complaint system offered by the firm against who you have the complaint. If after having gone through that system, you are still not satisfied then you may be able to take the matter up with the FOS.

Finally there is the Financial Services Compensation Scheme which is there to provide a financial safety net in the event that an authorised firm is unable to meet its financial commitments. Details of who is protected by the FSCS and the level of protection provided is advised in the initial disclosure document and on the FSCS web site www.fscs.org.uk

The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.

This article was written on the 24th February 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

From articles appearing in the financial press (February 2007) it would appear that the UK life insurance market is booming with annual premium equivalent income rising 54% to a staggering £1.44 bn.  Some of this rise was attributed to the change in tax laws last April over pensions and customers investing lump sums in self invested personal pensions.

With this level of insurance being purchased you would have thought that every one would be adequately insured. However that is not the case. Many people still do not have adequate life insurance. Some people simply have not reviewed the level of life insurance they have for some time. Others are working to tight budgets and are putting off considering life insurance purchases until later. We hope not too late. Some people have only purchased small amounts of life cover based on the argument that something is better than nothing. A very correct view, but that still may leave them with inadequate cover which should be rectified when they can afford more. Others were in jobs with healthy benefit and pension packages with employers providing cover for their staff. In some cases these may have provided levels of life cover at 4 times annual salary. Unfortunately firms re-size, redundancy happens or there are brighter prospects with firms who do not offer those massive benefit packages.

There has also been a trend for people to allow their insurance policies to lapse. This may be because they no longer wish to keep up with the premiums. Sometimes it is because the policies were linked to some form of investment and the policies can be cashed in.  Surrendering a policy to get out the investment factor is OK but at the same time you may also be loosing valuable life cover.

Most of us would agree that life is for every changing. Five years can see many events occurring in our lives and those of the ones we love. How recently have you seriously considered you level of life cover? Could you do with more? Would you and your family be fully protected if any thing was to happen?

Term life cover offers one of the cheapest forms of life cover. It is simple and easy to arrange and what is more important is that the market is very competitive.

As with any life insurance policy, you are recommended to shop around. With so many insurers offering so many policies there will be good deals out there and also some not so good deals.  The internet offers a useful medium for shopping round. It is quick and easy to use and what is better is that some insurers will also offer lower rates to those who buy over the internet. 

Most important getting a quote will cost you a penny. Don’t say no to getting more life cover until you have fully assessed the cost. 

The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.

This article was written on the 23rd February 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

Insurers charge a premium and when they receive that premium they use it to build up a fund. That fund then earns interest however the insurer incurs some costs not only on writing the business, selling the policies but also on administering the fund.  In addition the fund must be sufficient to pay out claims (deaths).

The life insurance companies use mortality tables which help them estimate when a group of people may be expected to die. Insurers can not tell when any one person will die, but they often they can say with some level of certainty that of 100 people aged ‘x’ next birthday one person will be expected to die within the next twelve months.

So if all people were the same then insurers could manage the fund and charge premiums to make certain that the fund always had enough money in it to pay the deaths that would be expected to occur that year.

However not everyone is the same. Some are fitter than other. Some have illnesses. Some have had accidents. Some are over weight. Some smoke whilst others drink.

To get a better idea how fit people are insurers ask medical and life style questions. From this information they can load (increase) premiums for those who they believe present the greater risk.

Now insurers could have every one take a medical. However medical reports are expensive and would slow the process up. So insurers set a financial limit where customers who want a certain sum insurance and above have to have a medical and those below do not. These limits may be varied by answers given to the medical and life style questions.

Insurers also have to make certain that their premiums reflect the type of cover they give.   Including terminal illness cover may not increase the risk much more but over a period of years and over 1,000 insured’s it must increase the cost of the risk by a certain amount.

Also each insurer will have different customers selecting that insurer. Maybe one insurer will attract young people. Another might attract office workers whilst another might attract those in the medical profession. Some insurers may attract customers who live north of Watford whilst others those who live in the London area.

If you add enough diversification then you can see how it is easy for premiums to differ from one insurer to anther. They will attract different types of customer; their customers may live in different locations, they have earned different investment incomes, use different mortality tables, have different administration costs, have different aged customers in their fund, have higher or lower administration costs and offer different cover options.

Not only will each insurer differ in how profitable they are, they will also differ in how they calculate their premiums, at what point they require a medical, how much they think each additional cover option should cost and also which customers they want to attract and which they want to avoid. The end result is a very sophisticated market which is also highly competitive.

The life insurance premium you get charged could vary substantially from insurer to insurer. Why pay more for the same cover or even worse why pay more for less cover. So the first piece of advice I can give is ‘shop around’ or better still let someone shop around on your behalf.

The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.

This article was written on the 22nd February 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

The duty is on the insured to disclosure any material fact to the insurer. Basically the insured should know their own details. The life insurance insurer who may know nothing about the insured to begin with can not be expected to ask all the relevant questions. So whilst the insurer should ask sensible questions it is under UK law still incumbent of the insured to advise a material fact.

A material fact is basically any fact which may make an insurer charge more or less premium or a fact which may make the insurer decline or accept the risk or only take the risk subject to additional conditions.

As an insured you can not hide a material fact simply because the insurer did not ask the right question.

So initially the onus is on you to provide all relevant information. However the law is also there to protect you as well. There have been several agreements between the major life insurance insurers and governing bodies and trade associations whereby insurers are required to point out your obligations to advise material facts. Insurers are expected to ask questions about those matters which have commonly proved to be material.

Generally courts would not expect you to disclose a fact which on the face of it would not be considered material on its own. There was a case where a person was having occasional headaches but thought they were just that and did not attribute anything else to the matter.  Now an experienced doctor may consider the headaches as perhaps the possible on set of symptoms of a more serious nature and therefore request further investigation. But in that particular case the court held that the insured had no reason to believe the worse. He had no reason to believe that these headaches might be a material fact instead he thought that they were just an occasional headache. The court held that a reasonable man would not be expected to know that the occasional headache might be material. So the insured knew of the fact but would not have been expected to know that it was material.  

The courts however considered that an insured whose doctor had sent him to the hospital for a kidney problem should have advised his insurer even if the insured was not aware how serious the situation might have been at the time. The question of materiality was not based on the insured’s ability to judge if the fact was material but on that of the life insurance insurer who had access to professional advice.  In this case the insured knew of the fact and we assume also considered that it might be material, but decided to use his judgment on whether or not it was material. 

Another court case determined that the information is based on the insured’s knowledge and does not require him to make extensive investigation before answering the question. 

The duty of disclosure continues until the contract of insurance is concluded. So information that you learn about whilst the proposal form is still being considered should be advised.

So as a general rule advise all details which could be material.  It is not your job to decide what might or might not be material. If you learn of something late in the day before the contract is concluded then still advise it. If you do not then the risk is that the policy may not be valid and if a claim was presented it may not get paid.

The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.

This article was written on the 15th February 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.

Below lists different types of term life. Each is a choice representing how the policy operates. The choices can usually be mixed.

Decreasing term or level term.

With a decreasing term life insurance the sum insured decreases over the period of the term of the insurance policy. The rate of decrease is usually fixed to some other object such as the decreasing outstanding balance of a repayment mortgage. In fact this type of term insurance is mostly used to cover repayment mortgages.

Level term life cover has a set fixed sum insured which remains constant over the period of the term.

Single or joint life.

The term life policy can be fixed to pay out on the death of a single life insured. However many couples want to provide life cover as a form of financial buffer if either member of the couple die. The term life can then be arranged to pay out if either of the joint lives die. life insurance policies can be arranged to pay out on either the death of the first person or to pay out only when both parties have died. It is now more common for these policies to be automatically worded to pay out on the death of the first person. However it is worth checking that point before you purchase the policy.

Variable premium or guaranteed premium.

Life insurance premiums get higher as your age increases. Some policies are written so that when you pass a certain age the premium increases relative to that age. This may be useful when you start the policy because the initial premiums will be lower. However at the end of the policy the premiums will be high. Policies can also be written where the premiums remained fixed and even each year. The premium will be higher at the policy start date but it never increases. This can make budgeting easier.

Written in trust or not in trust.

The starting point is that the policy will not be written in trust unless you request it to be written in trust. When the life insured dies the policy, if it is not written in trust, will form part of the dead person’s estate and be added to other estate values when death duties are considered. If however the policy is written in trust then it is assumed to always have been for the benefit of the person(s) who are the beneficiaries of the trust and this can avoid death duties. Because this involves tax law, trust law and can vary with an individual’s circumstance, it is not appropriate for us to go into great detail here. It is something you should be aware of and something you may wish to consider. Writing as policy in trust will not be the right choice for every person.

The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.

This article was written on the 20th February 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.