Regularly switching life insurance

andypa1

Hi folks, 
Does anyone regularly switch life insurance? 
I'm on a depreciating cover to last 20 years , the length of my mortgage. 
Currently pay £9.25 a month, but by switching every year I can get generous cashback. i.e. £100 on a £12 a month policy with legal and general. 

I don't see any discussion online about switching life insurance, and wondered if there was any reason for that? As long as I don't kill myself in the first year I don't see any restrictions for claiming! 

Cheers

csgohan4

Switching life insurance is false economy for some. Insurance gets more expensive the older you are and you will have more medical issues the older you are, so again more expensive premiums or no cover
You can certainly try and see if the premiums and cashback are worth it for you, but it will be hassle, some require 30 min medical questionnaire calls which is time consuming

mgfvvc

Switching life assurance isn't normally a good idea. As you get older premiums increase, so sticking with your original policy is usually sensible, if you haven't been sold an uncompetitive policy.

If the cash back makes it worthwhile, then sure, switch, but bear in mind that if you are accepting an increased premium the long term costs might be more than the gains from cash back.

Aretnap

Life insurance is a long term policy. Most of the risk for the insurer's is in the later years of the policy. You are much more likely to die aged 60 than aged 30, so a 29 year policy taken out when you are 31 will have a higher monthly price (all else being equal) than a 30 year policy taken out when you are 30.

Hence you should not expect to save money by swaping around every year, as with car insurance. It might be that you can, for a short time, especially if you make use of cashback offers, in which case good luck to you; but eventually you will find that the increase in price as you get older negates any benefit of the introductory offers.

 andypa1 said:

Currently pay £9.25 a month, but by switching every year I can get generous cashback. i.e. £100 on a £12 a month policy with legal and general. 

Case in point. You will never get that £9.25/month premium back, so by switching you are increasing your payment by £2.75 per month for the remaining 20 (?) years of the policy - a total of £660 extra. £100 cashback doesn't make up for that. And if you do it again next year you might get another £100 cashback, but you'll add another few hundred quid to your future premiums, on top of the £660 you've already added. 

Old_Lifer

And to add to what others have already said,  if you are DIY-ing and using a comparison web site you will presumably have access to only a limited number of choices and assuming acceptance at ordinary rates of premium .  With advice (independent),  you may get  cheaper/better cover elsewhere.

csgohan4

Old_Lifer said:

And to add to what others have already said,  if you are DIY-ing and using a comparison web site you will presumably have access to only a limited number of choices and assuming acceptance at ordinary rates of premium .  With advice,  you may get  cheaper/better cover elsewhere.

Don't forget if your using a broker, they will usually have a clawback if you cancel within x years/months of the policy starting so there may be a penalty to pay.

dunstonh

csgohan4 said:

Old_Lifer said:

And to add to what others have already said,  if you are DIY-ing and using a comparison web site you will presumably have access to only a limited number of choices and assuming acceptance at ordinary rates of premium .  With advice,  you may get  cheaper/better cover elsewhere.

Don't forget if your using a broker, they will usually have a clawback if you cancel within x years/months of the policy starting so there may be a penalty to pay.

Technically not allowed since the consumer right act 2015 unless the fee is stated explicitly at the start or where there is an explicit fee and commission to the value of the fee (no more, no less) is retained to offset it.  I don't believe there has been a court case to test it yet but the legal interpretations warn against it.

andypa1

thanks for the excellent advice folks. 
As someone who loves saving through a switch, I find it incredibly hard to just leave it as is, but completely understand and appreciate the warning about the extra £2 - £3 overtaking the £100 cashback over the next 19 years. 

Flipping mortality eh! 

Weighty1

andypa1 said:

thanks for the excellent advice folks. 
As someone who loves saving through a switch, I find it incredibly hard to just leave it as is, but completely understand and appreciate the warning about the extra £2 - £3 overtaking the £100 cashback over the next 19 years. 

Flipping mortality eh! 

If you have a decreasing term plan then that is actually one of the few options which CAN be more cost-effective to switch, although the difference is normally pence than pounds.  I suspect, if you have found an option which is now that much more expensive than the existing cover you aren't looking at a like for like plan.

That said, would I recommend it?  Very rarely, as I say, it's normally a pence saving per month so hardly worth the hassle, plus you open yourself up to new underwriting and the potential for premium increases if your health has changed since taking the last plan out.