Replacing life assurance and family income benefit

property.advert

Say I want to replace my current life assurance and family income benefit policies with new companies or both with the same company and the proposed insurer has a limit for my age of £100,000, above which it would ask for varying and increasing medical tests.

So I can take out a policy for £100,000 and in all probability, face no medical examination. If I also add on a £10,000 a year family income benefit for 25 years, would this push me over limits and into the zone of requiring medical tests and so forth.

Would the situation be different if I took the policies out with different companies ?

Lastly, if I did not cancel the existing policy for £100,000 when I originally stated the new policy would be a substitute, would that invalidate my new policy ? In this example, the new insurer would be insuring me for under their medical limits but the overall sum of my life cover would be £200,000, which, although not all with the second company, would be over either company's £100,000 limit.

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ACG

Life Insurance companies have dispense limits before which medicals are required (£100k however seems very low, theyre usually closer to £300k-500k).

The general rule (it might be in every case though but im not sure), is that if their dispense limit is £300k, and you have £100k with another company you intend to keep they would want you to take a medical for anything over £200k.

Im not sure it would invalidate any other policy or not, i suppose it depends how much you were over their limits.

kingstreet

There's normally a limit beyond which a GP's report is required, then a further limit at which point a medical examination is triggered.

Worth remembering these requirements are related to age, so a lower limit applies the older you are and also depend on how you answer the medical questions. Some conditions may trigger and automatic GP report and medical, so trying to stay under the trigger points may be futile.

The limits are aggregates. If you have that sum with two or three different insurers, you will trigger the request for the appropriate information. Not answering honestly gets us into the realms of non-disclosure and all that entails.

stephenni1971

Term life insurance will count towards your underwriting limit in full.

FIB is different as it decreases over time so the insurer would usually multiply annual sum assured by the term and apply a reduction of say 25%.

Therefore £100 level term + £20k FIB for 10 years would be calculated as follows

£100k level

£20k FIB x 10 yr term =£200k - 25% = £150k

So the overall sum for underwriting would be £250k

You cant take two separate policies with same insurer to get yourself under these limits - they are not stupid. However if you were to spread your cover across multiple insurers you may be OK.

OshayAway

Why do you want to avoid medical evidence?

property.advert

ACG wrote: »

..£100k however seems very low...

I know, just used as a non random example number.

property.advert

kingstreet wrote: »

There's normally a limit beyond which a GP's report is required, then a further limit at which point a medical examination is triggered.

Worth remembering these requirements are related to age, so a lower limit applies the older you are and also depend on how you answer the medical questions. Some conditions may trigger and automatic GP report and medical, so trying to stay under the trigger points may be futile.

The limits are aggregates. If you have that sum with two or three different insurers, you will trigger the request for the appropriate information. Not answering honestly gets us into the realms of non-disclosure and all that entails.

Yes, I understand but different companies have different limits. In, addition, I do not see what concern it is of company B if I already have insurance with company A.

If company B has a limit of £100k and I already have £99k with company A, it is ridiculous to suggest that my taking out £2k of cover with company B would trigger their medical underwriting, which is listed at £100k.

property.advert

stephenni1971 wrote: »

Term life insurance will count towards your underwriting limit in full.

FIB is different as it decreases over time so the insurer would usually multiply annual sum assured by the term and apply a reduction of say 25%.

Therefore £100 level term + £20k FIB for 10 years would be calculated as follows

£100k level

£20k FIB x 10 yr term =£200k - 25% = £150k

So the overall sum for underwriting would be £250k

You cant take two separate policies with same insurer to get yourself under these limits - they are not stupid. However if you were to spread your cover across multiple insurers you may be OK.

Why does FIB decrease over time ? £50,000 per annum over 20 years is £50k today and still £50k in 10 years time. Inflation will erode it for sure but the sum payable will not reduce.

Can you substantiate this "say 25%" reduction ?

Where does the NPV of future payments come into play ?

property.advert

OshayAway wrote: »

Why do you want to avoid medical evidence?

Don't want to avoid per se, but why go out of your way to invite potential problems ?

If you had a free choice, would you choose to risk higher premiums and voluntarily choose medical assessment when there would be no benefit or cheaper premiums for passing a health check ?

kingstreet

property.advert wrote: »

Yes, I understand but different companies have different limits. In, addition, I do not see what concern it is of company B if I already have insurance with company A.

If company B has a limit of £100k and I already have £99k with company A, it is ridiculous to suggest that my taking out £2k of cover with company B would trigger their medical underwriting, which is listed at £100k.

The aggregates are probably set by the life offices' reassurers, rather than internally.

A reassurer may wish to avoid taking on too big a risk where a proposer applying for five different policies with different insurers to avoid passing the medical thresholds, but the risk ultimately being carried by that single reassurer.