Level Term Life Insurance Guide Discussion

A subject dear to my heart i currently work for a major provider for life assurance ( think rugby & paul whitehouse) servicing Natwest & RBS life policys sold on our behalf via the branch network

i deal with these policys all day everday -

There two types of policys -

Level term - sum assured remains the same throughout the life of the policy and premium remains the same, usually a short appilcation in branch asking the 5 basic med question such as have had any serious illness in the past 5 years, has any member of your family had ..... and these usually go through without any underwriting automatically, just life cover only payable on 1st death. starting from around £5/6 per month

we also do a long appilcation, usually filled out with a branch based adviser(natwest/RBS) which will go into more details of your medical history and family history & and usually subject to full underwriting and 9/10 we will apply for a full medical report from your GP, and may require a medical to be carried out at our expense. this can be taken with critcal illness cover( which covers most things from cancer too total and permanant disability) we also offer terminal illness benefit on all new plans, as standard ( we class a terminal illness as something that you will die from within 12 months) also pay out on sucide.

A decreasing term is excatly the same as a level term but the sum assured will go down each year by a set amount normally taken in conjuction with a mortgage or loan.

The most common question we get is do i get anything back if i outlive the plan ie you plan expires and you are still alive. NO you dont, plan is only payable on death, we are told to compare it to car insurance or home insurance, you are paying a premium for piece of mind in case some was to happen, and it has no cash value if you cancel mid term.

i know of several other company's offering similair plans such as AXA, Pru,LV, etc. all basically following the same hymm sheet some may require you to have a medical so do not, personally speaking its best to have full underwriting done at the start that way less likely for the company to turn round and say sorry you never told us about xyz we aren't paying out. ive been with the company now for nearly 4 years and think in that time ive only ever seen 2 case where we have declined a claim, sure there are more than that considering the amount of business we do. but used to work for AXA and they where horrid for finding loopholes

satansspawn wrote: »

mdla signed up for 2002. cancer diagnosed 2010 and insurance company denied terminal cover existed until policy cancelled august 2010. they advised yes terminal cover does exist reinstated policy on there advise and completed claim form. unfortunately, after 10 months of chemo treatment a partial recovery has been made, they advise no terminal illness now and claim declined, even though oncologists did not expect patient to make twelve month deadline in april 2010.
any advice gratefully accepted

One assumes a complaint has been made. What was the outcome?

Craig_W wrote: »

If we get a joint policy (ie one which normally pays out in the event of the first death) and we both die together, is there any payout to our children?

Yes, but only one. Whereas if you had two separate policies they would both pay out.
In other words, your children would receive double the amount assuming the sum assured was the same on both.

Craig_W wrote: »

Secondly, if we get an increasing policy (ie one that keeps pace with the RPI) how can we know whether the deals that seem like good value today will be good value in 10 or 20 years time when premiums have increased? A related question: is there some kind of set way that life insurers calculate the increases in premiums for these increasing cover policies?

Choosing a policy which includes the ability of increasing the benefit (indexation) is a way of ensuring the sum assured retains its value over time. The longer the term of the policy, the more valuable this option can be. Most insurers offer this. However, there are variation between insurance providers in how this actually works. In any event, there is an increased cost involved for this provision. This is to reflect the additional administration involved in facilitating the annual increase. Some insurers add an additional increase to the premium on anniversary, others charge slightly higher in the first instance but the premium percentage increase at the policy anniversary is identical to the benefit / sum assured percentage increase.

The other variation relates to if you chose not to increase the policy at anniversary. You will receive a letter prior to the policy anniversary to inform you of the increase. At that stage you can chose not to increase. Some insurers will permit you to do this alternate years but if you were to refuse the increase two years on a row, they will then remove the option altogether. Other insurers will remove the increasing option after just one refusal not to take up the increase.

Obviously, no one know what will happen with rpi month to month let alone over many years. There is an option to chose a specific percentage for indexation which would allow you to calculate the exact future cost and added benefit to the sum assured.

Craig_W wrote: »

Thanks, OA. :T

I've just been reading Legal and General's life cover T+C's (zzzz!) and they increase the premiums by 1.5 x the RPI% each year, whereas the cover goes up by just 1 x the RPI. So over the years the premiums become an increasingly bigger proportion of the payout (due to compounding).

I wonder if there is any way of checking how other insurers do this, short of trawling through all of the T+C's! If there are differences they coud make a big difference to the cover's cost over the length of the term...

You're welcome. I would encourage you to use a whole of market broker to do the research for you. There is a third method which is a bit difficult to explain but doesn't cost more from outset or adopt the 1.4/5 etc.