Life Insurance Quote ...............

[Gizmonster]

I've had a life insurance policy (Level Term Assurance) for the past 12 years - it still has 13 years to run.
It's designed to pay out £40 000 on my death and it's also got critical illness built in.
Anyway, I got some "junk" mail from the same firm that provides my cover, with an offer of £60 M & S vouchers, if you take out a new policy.
So I went online and got a like-for-like quote for £40 000 to run for 13 years.
Well I did expect it to be slightly more expensive, as I'm older (and wiser ??) .... but not to this extent:

Current premium = £6.70 per month.
New quote = £36.10 per month.

Eh ??

Someone care to explain why the massive price increase ??

Surely 'cos I'm 13 years older than when I initially took the policy out, can't make that much of a difference ..... can it ??

[factor-fiction]

Presumably the existing policy was £6.70 a month x 300 months (25 years) whereas the new one is £36.10 a month for 156 months (13 years), so that accounts for some of the difference

[Gizmonster]

I understand what you're saying FF, but the original policy was designed to run for 25 years.
This new quote is just for the last 13 years of the original policy, so thinking about it, it should be cheaper than the original policy.
The chances of me snuffing it in the next 13 years are the same for both policies; plus the original policy has the added risk of me snuffing it in the first 12 years of the policy - so surely the original policy carries more risk and should be more expensive ??
I don't get it .... I feel a phone call to the insurance company is due :)

[SeaJayPea]

Do you get anything if you reach the end of the policy and are still alive?

[SirOracle]

Life Assurance Premiums are based on age at the time you effect the Assurance .

They use Mortality Tables which show life expectancy.

Surely you wouldn't expect an 80 year old male to pay the same as a 60 year old,for a whole life policy (to say nothing of the illness cover provided).

[Gizmonster]

No you get nothing at the end of it - it's a level term assurance which pays out on death.
To compare like with like - yes I would expect an 80 year old to pay less than a 60 year old, if they're covering for up to the same age.
So say, for example, the 60 year old and the 80 year old want cover for up to the age of 90:
The 80 year old needs cover from the age of 80 up to the age of 90.
We can break the 60 year old's cover into 2 parts:
Cover from the age of 60 to the age of 80
and
cover from the age of 80 to the age of 90.
With the 60 year old, there's clearly more risk, as they have the added period from the age of 60 to 80, then the rest of the cover is identical to the 80 year old's, viz: cover from the age of 80 to 90.
I don't get it lol :P

[SirOracle]

The system has been that way for over 300 years.

You are now getting a bargain for the NEXT 13 years....saving yourself £30 per month against taking out a new policy with your present Assurer,or indeed with any other Assurer.

Just forget the £60 M&S voucher. !! :-)

[ubasses]

It is all to do with risk, when you took the policy 12 years younger, they see themselves getting your premiums banked and invested for many years without a claim. Now you are older the risk is higher and there is more chance you could claim in the next 13 years, but without having the benefit of the invested previous 12 years premiums.

[Hopkirk]

I had one of these policies with critical illness cover, and it happily ran for years.

However I didn't know that in the small print they had they right to review the premium every five years. Lo and behold they suddenly told me I had to swallow a MASSIVE price hike.

I told them to shove it and got life insurance without critical illness cover from one of their copetitors.

[Gizmonster]

Thanks for all the answers ..... I think ubasses may have hit the nail on the head :)

[factor-fiction]

I agree with ubasses too. In fact what he says is what I was getting at in my answer at 12:16 but I didn't set it out clearly enough. The companies like to start taking the money in early