Level Term Assurance Discussion

payless

works out at about 5 times cheaper than Norwich Union, unless I'm doing something very wrong!). It includes critical illness cover also

if such a difference - are you sure you are including Crit Ill on both quotes- or perhaps its just Terminal illness ?

MimiJane

if such a difference - are you sure you are including Crit Ill on both quotes- or perhaps its just Terminal illness ?

I'm pretty sure it's critical illness on all counts ... but I will check on this. Thanks.

dunstonh

Norwich Union tend to come top 5 providers usually.  However, the difference between these providers is usually a couple of pound a month only.

Sainsburys life cover is underwritten by L&G and they also appear in top 5 usually.

I checked the key features of the sainsbury's plan and they do not offer critical illness cover.

Hence the difference.

payless

Sainsburys are just discounting L&G standard premium by a small amount-
other brokers may do the same and even offer advice
( which sainsburys don't)
or even discount it further / totally for a fee

MimiJane

Sainsburys are just discounting L&G standard premium by a small amount-
other brokers may do the same and even offer advice
( which sainsburys don't)
or even discount it further / totally for a fee

Sorry, it's terminal illness cover included with the Sainsbury's quote. It does however still work out a few pounds cheaper a month than a lot of other policies.

payless

yeah - but as a rebadged L&G policy it may be cheaper eslewhere
( although note they also give £15 of nectar pts)

dunstonh

On the example on their webpage, I was within 7p of their price. They picked an example where L&G pricing is good. In areas where L&G arent as good then other discount providers would beat their pricing.

payless

And with a bit of our own discounting ( off L&G rates or another provider's rates) its not hard to beat them anyway

Reestit_Mutton

I've been looking at taking out level term assurance and decided that it would be sensible (in the money-saving sense) to put enough money aside to pay for this in a separate account at the inception of this policy so that I need not worry about being able to pay for this throughout the term of the cover and therefore do not need to include cover for the premium payments themselves.

Anyway, being the mathematician that I am, I worked out an equation for calculating the necessary deposit up front that, along with an assumed rate of interest, and taking into account annual payments out of this account, will be sufficient for funding the policy on the basis that the premiums are guaranteed not to change throughout the term of the policy. For the benefit of other MSE readers, here it is:

D = A(1 + (1+I) + (1+I)² + ... + (1+I)^(Y-1))/(1+I)^(Y-1)

where:
D = initial deposit
A = annual premium
I = assumed interest rate (net of tax), 0 < I < 1
Y = policy term (in years)

Or, substituting G = 1/(1+I) and using knowledge about power series:

D = A(1 - G^Y)/(1-G)

As an example, if you were to take out a 25 year policy that is charged at £100 per year and assume a fixed interest rate of 5%, reduced to 3% after tax at 40%, the calculation would be as follows:

D = initial deposit
A = 100
I = 0.03 (G = 1/1.03 = 0.97087379)
Y = 25

Total premiums to pay = 2500.00

Initial deposit must be 1793.55

At end of year 1, balance = 1744.36
At end of year 2, balance = 1693.69
At end of year 3, balance = 1641.50
At end of year 4, balance = 1587.75
At end of year 5, balance = 1532.38
At end of year 6, balance = 1475.35
At end of year 7, balance = 1416.61
At end of year 8, balance = 1356.11
At end of year 9, balance = 1293.79
At end of year 10, balance = 1229.61
At end of year 11, balance = 1163.50
At end of year 12, balance = 1095.40
At end of year 13, balance = 1025.26
At end of year 14, balance = 953.02
At end of year 15, balance = 878.61
At end of year 16, balance = 801.97
At end of year 17, balance = 723.03
At end of year 18, balance = 641.72
At end of year 19, balance = 557.97
At end of year 20, balance = 471.71
At end of year 21, balance = 382.86
At end of year 22, balance = 291.35
At end of year 23, balance = 197.09
At end of year 24, balance = 100.00
At end of year 25, balance = 0.00

For anyone thinking of doing this, what i would suggest is that you do an annualised calculation as above and staple it to your paperwork. Then you can check your balance on account against the model every few years and, if it is deficient in any way (because of a period of particularly low interest rates) you only need to make up the difference in the feeder account to get back on track. Chances are, if your original interest rate estimate is conservative enough, you will never need to top the account up at any stage and may even end up with a significant sum of money remaining in the feeder account after the policy lapses.

If anyone uses Linux, I have written a simple perl program that does this calculation for you - PM me if you would like a copy.

HtH
Reestit Mutton

sunsetgirl

Thankyou Martin for the level term insurance guide!
I have now got a really good deal on our joint policy for £150000 for 20 years with norwich union ( non smokers f 32, m 35) by going back and forth between brokers getting prices matched for the same product.

I got the cheapest quote from cavendish for £15.20 a month with £35 fee and have now got it undercut by moneyworld at £ 14.60 a month with a £25 fee.

I would never have tried to get it cheaper if it wasnt for this site!