Life insurance - stupid question?

snowchick1977

Hi

I'm new here, but have been lurking for about 6 years

I need to take out some life insurance. I've had differing quotes due to the fact that my husband is a light smoker. I want fixed term cover that will cover us both and pay out to either person, should the other person die/or have a critical illness. The amount is for a fixed amount of 250k

All of the insurers advise to insure until your retirement date which I can fully understand, but is there anything stopping me from taking out a 5 year policy, as the premiums differ by about £35 a month.

What I am trying to say is can I take out a 5 year policy and then in 5 years time just shop around for another policy as the level of cover will be exactly the same but it is loads cheaper.

This sounds stupid I know!

StephenMarsh

Im no expert on life insurance but I would guess the risk involved in 5 years time will be greater as your older. So a policy for 20 years now will surley be cheaper than 4 different policies taken out 1 now, 1 in 5 years, 1 in ten years etc..

JimmyTheWig

Hi,

Taking a 5 year policy now will insure against you dying (unless I've missed the point of your username) between the ages of (approximately) 33 and 38. The policy you'd have to take out in 5 years time would cover you against death between the ages of 38 and 43.

The older you get, the more likely you are to die. Therefore the second policy you take out would cost more than the first one.
This also explains the reason why the premiums are higher for cover until retirement. Basically they average out the risk across all the years of the policy.

Whether it works out cheaper one way or the other I don't know. But you can be sure that your 38-43 policy will be more than your 33-38 policy.

OshayAway

Hi Snowchick, the down-side to a shorter term is that it will be more expensive when you come to take out the new plan in 5 years. To see for yourself, run a quote for £250k then add 5 years to your d.o.b. The other issue is that in 5 years your circumstance, health, family medical history may be a factor that increses you premium further or event prevents you from getting cover at all.
A third issue is financial underwriting limits which prompt certain medical evidence depending on age. In other words, £250k of life and cic may be underwritten just from the applicaiton, but when taking out that same level when older can require gp reports and medicals etc.

snowchick1977

Thanks, really grateful! Very useful info.

I assumed that was the case, however I'd rather have "some" cover now than none at all, and as our budget is really tight I think it would be sensible to take out the 5 year cover and then hopefully in 5 years we'll be in a better financial position to take out the cover until retirement!

Thanks again

OshayAway

It would be worth getting advice as it's probably a false economy. A good adviser will be able to make you aware of options that can maximiase the cover and options within your budget. E.G. Multi-benefit plan with a reduced cic benefit but with the option to increase it in future via GIO without underwriting.

dunstonh

I assumed that was the case, however I'd rather have "some" cover now than none at all, and as our budget is really tight I think it would be sensible to take out the 5 year cover and then hopefully in 5 years we'll be in a better financial position to take out the cover until retirement!

Whilst that can be false economy as mentioned by Oshayaway, if you do decide to do that then you should look at a yearly renewable term assurance instead as you would at least have guaranteed insurability that way (or a term insurance with guaranteed insurability options in there which are of use).