Decreasing Term Life Insurance

A1dan_2

I've got a question that's been bugging me about Decreasing Term Insurance. I'm probably being thick, but...

Given that, as time goes by the amount payable by the policy, and the length of the policy decrease, is it not worth continuously cancelling your policy and getting a new one, which will be cheaper?

Is there anything to sotp you doing this?

Or have I missed something?

stephenni1971

I'm probably being thick, but...

You are :-)

There are risks involved in taking cover out for short periods of time with the intent of renewing when you have a long term need ( the mortgage ).

Wutang_2

It will be more expensive each time as the price of life insurance goes up as you get older. And if you ever suffer any illness year on year, you then have to add it to your application (which sould also increase the premium - and cannot be reversed from then on).

So - no, there is nothing to stop you but if you did it wouldnt be beneficial.

A1dan_2

stephenni1971 wrote: »

You are :-)

There are risks involved in taking cover out for short periods of time with the intent of renewing when you have a long term need ( the mortgage ).

Thanks for the response, Stephenni. Can you elaborate on the risks a little?

A1dan_2

Wutang wrote: »

So - no, there is nothing to stop you but if you did it wouldnt be beneficial.

Thanks Wutang, that makes sense.

The reason I'ev brought it up is that I've noticed that I can now get life insurance a fair bit cheaper than I currently have. Presumably, this must be down to the market having changed, with cheaper products available, rather than the fact that my mortgage is less?

I guess the answer is that it's worth checking for quotes every now again, and if there is something cheaper available then take it, but don't necessarily expect there to be anything!

dunstonh

Thanks for the response, Stephenni. Can you elaborate on the risks a little?

You may get an illness that makes you uninsurable in future or have reduced cover or higher premiums.

If you really want to go down the route of a year by year basis then go with a yearly renewable term assurance rather than short period term assurances that need underwriting with every period.

stephenni1971

I guess the answer is that it's worth checking for quotes every now again, and if there is something cheaper available then take it, but don't necessarily expect there to be anything!

Are you sure you know what it is you have? Unless you are aware of all the conditions and levels of cover on your existing policy it's easy to see a replacement policy as 'cheap' as it may not cover the same terms/conditions etc.

There are more than a few threads on here of those who replaced a policy to save a few quid only to find out that they were unable to make a claim later due to new policy not matching the old, or where they went from guaranteed premiums to reviewable and the cost spiralled out of control.

lisyloo

The reason I'ev brought it up is that I've noticed that I can now get life insurance a fair bit cheaper than I currently have.

The market can certainly change.
I remember when I was at uni (late 80's) we thought that in 2 years we'd all known someone who have died from aids (it wasn't referred to as HIV back then).
Some time later life insurance premiums went down as it was recognised that the risks were overblown.

However as has already been pointed out you need to make sure that
1) You are buiying the same cover and not (for exmaple) switching from a policy including critical illness to one without. Also some policies have fixed premiums which are guaranteed not to rise and others don't.
2) That you don't have any illnesses that might affect your life expectancy. Something like depression for example could cause problems.

So if you are perfectly healthy and sure that all the terms are the same then you should be able to go for it - but it does need some due dilligence in checking the policy.

A1dan_2

dunstonh wrote: »

You may get an illness that makes you uninsurable in future or have reduced cover or higher premiums.

But, presuming the below conditions are met, and your'e sure you are getting like-for-like cover that is no more likely to go spiralling up in cost, I don't see how that makes a difference?

If you may get an illness that makes you uninsurable in future, then you're in the same boat whether, in the past, you stayed witht he first policy or changed, surely?

stephenni1971 wrote: »

Are you sure you know what it is you have? Unless you are aware of all the conditions and levels of cover on your existing policy it's easy to see a replacement policy as 'cheap' as it may not cover the same terms/conditions etc.

Yes, this is a good point... as with many things in life, will need to check the small print!