Changing Life Insurance Companies

whambam

Hi,

I have never taken out life insurance only with companies I used to work for but cancelled them after I got laid off.

What happens if you find a better policy 2 years after you take one out with another company, does that policy you have initially contribute for you being covered for life and critical illness years?

Thanks.

lisyloo

Insurance is pay as you go.
So if you cancel it then it stops covering you.

You can switch but if you've developed any health condition (in the last 2 years) then you'll have to declare those so you could be in a worse position - unless of course you're in perfect health.

Not sure what you mean by "contribute", but the answer is probably no.
If you stop paying then you're not covered, simply as that.

magpiecottage

As lisyloo says, if you cancel a policy the cover stops. If your health has deteriorated then you may not get cover again - or at worse terms.

That applies right up to the point at which the new policy is IN FORCE, not merely accepted (because you must tell the insurer if anything happens that might affect your insurability until then).

You also need to check that the cover is the same. Obviously for life cover, you are either alive or dead but critical illness cover can have subtle differences which could result in the new policy not paying out when the old one would have done.

If the cover is identical, and runs to the same expiry date then, assuming you remain in good health, the replacement may well be less. This seems counterintuitive because you are older but if you think about it, a fifty year old is more likely to die in the next ten years than a forty year old but when the forty year old gets to fifty, he will face the same risk - or a greater risk if his health deteriorates in the meantime. He may also step under a bus at forty five. The older person knows he will suffer no further misfortunes in his forties. So the chance of him getting to sixty is greater because the time is shorter.

whambam

So, it doesn't matter if you swap companies every 2-5 years if you get a better deal elsewhere? As long as your covered that year they should pay out.

weighty1_2

magpiecottage wrote: »

If the cover is identical, and runs to the same expiry date then, assuming you remain in good health, the replacement may well be less. This seems counterintuitive because you are older but if you think about it, a fifty year old is more likely to die in the next ten years than a forty year old but when the forty year old gets to fifty, he will face the same risk - or a greater risk if his health deteriorates in the meantime. He may also step under a bus at forty five. The older person knows he will suffer no further misfortunes in his forties. So the chance of him getting to sixty is greater because the time is shorter.

You have said this numerous times in the past but it is simply NOT correct.
I've just run some quotes......
Male, aged 41, non-smoker, £200,000 Level term cover, 20-year term. Premium ~£38/month
Male age 51, non-smoker, £200,000 Level term cover, 10-year term. Premium ~£78/month

The only way it would happen is with a decreasing term assurance, however, the cases tends to be that even with a lower sum assured the increased age offsets any possible premium saving.

I've love to see if you can show me otherwise.

whambam wrote: »

So, it doesn't matter if you swap companies every 2-5 years if you get a better deal elsewhere? As long as your covered that year they should pay out.

No, it doesn't matter! As long as you have continous cover whilst changing over and as long as you haven't entered into a contract were you have to repay the commission the broker loses then you would be fine.

The only time that this wouldn't be the case is if you took an over 50's plan as they generally have a natural death exclusion period for the first 12-24 months. Also, most term assurance providers have a suicide exclusion in the first 12-months of a plans inception.

Also, as has previously been mentioned, if your health changes you may find loadings being applied to a new plan which could prevent any savings being made.

magpiecottage

weighty1 wrote: »

You have said this numerous times in the past but it is simply NOT correct.

I think the words "may well be" were included.

I've love to see if you can show me otherwise.

I do not sell policies any more but I have seen it happen.

I recall a case about three or four years ago when a policyholder should have been sold a level term assurance policy but was sold a decreasing term one in error. They complained that they would now have to purchase a level term assurance policy at a higher premium because they were older but the monthly cost had gone down. Actually, I don't just recall it, it is still in my archive.

If a consumer follows my guidance they may save some money or they may not.

If they follow yours they definitely won't.

I agree that if whoever sold you the existing policy received commission for it you should check your contract with THEM to see if there is any liability to reimburse them if you cancel it.

Unless this is disclosed to you in advance it cannot be enforced and it is unlikely to apply to a policy over four years old.

weighty1_2

magpiecottage wrote: »

I think the words "may well be" were included.

If a consumer follows my guidance they may save some money or they may not.

If they follow yours they definitely won't.

The only way a premium would be less for an older person is if a commission sacrifice has taken place or if the underlying premium rates have changed significantly, especially if the cheapest provider was not originally used for some reason.

Irrespective of either of the above, to state that the rates "may well be" cheaper because there is no longer any risk of you dying during the term which has already elapsed is not factually correct otherwise it would show when running quotes and it doesn't.

magpiecottage

weighty1 wrote: »

The only way a premium would be less for an older person is if a commission sacrifice has taken place or if the underlying premium rates have changed significantly, especially if the cheapest provider was not originally used for some reason.

The flaw with that argument is that in the case I referred to earlier, the provider was the same on each occasion.

Irrespective of either of the above, to state that the rates "may well be" cheaper because there is no longer any risk of you dying during the term which has already elapsed is not factually correct otherwise it would show when running quotes and it doesn't.

Again the argument is flawed.

Whilst you may have shown for one example you received a higher quote, you have extended that to mean it will always be more expensive. There are a range of factors that are used to determine premiums so it is not possible to be certain.

However, my point has only ever been that it is worth checking. It only need to be lucky once to prove my point. To prove yours you need to be lucky every time.

There is one other case that I could cite.

Some years ago I arranged my own policy whilst working as an IFA - so with 100% salary sacrifice.

I few years later I was managing an actuarial team when I replaced it. Despite then having to pay commission it was still cheaper.

So I think my experience trumps your experiment.