Life insurance is one of many financial products that can get swept under the carpet during times of austerity.
However, now is the perfect time to have a spring clean. So, head up to the attic and remove the dust from your life insurance policy (or lack of it), the industry is about to change in a significant way.
The European Union has ruled that gender is no longer allowed to be a contributing factor to determine insurance premiums. As women typically live longer than men, they often pay cheaper life insurance. However, this is all about to end from December this year.
The Gender Directive means that women are more likely to have to pay more for taking out new life cover and this will also impact on critical illness cover premiums as well.
The EU gender ban, which will hit the 27-nation region, comes into force on 21st December 2012, however, a number of insurers might implement the premium changes before hand. This means that women will have to act fast in order to obtain a life insurance policy where their gender still works in their favour.
The Association of British Insurers has commented on the subject:
ìFor life insurance, women on average pay less to reflect their longer life expectancy, while pension income for males is often higher because men typically have fewer years in retirement.î
Speaking to Bloomberg, Philip Jarvis, a partner at law firm Allen & Overy LLP in London claimed that several yearsí worth of insurance policies, which rely on gender analysis, will have to be reviewed.
ìInsurers will no longer be able to rely on statistical analysis to discriminate between men and women for the purpose of pricing products.î
ìThe economic effect will presumably be that these costs will have to be rebalanced,î said Jarvis.î
Now would be the perfect time for women and men to shop around for the best life insurance policies. A growing number of lenders are offering highly competitive rates to lock in consumers for the next 10 years or so.
Compare life insurance with Money Expert.
Here are a few ways that the new ruling could force women to rule out buying cover next year.
Why you should think about getting life insurance?
Whether you choose to buy life insurance today or next year, the fundamental elements of insurance mean that it is designed to provide you with peace of mind.
Life insurance typically pays out a cash lump sum to your loved ones on the event of your death. This could help pay towards funeral costs, pay off any outstanding debts and, of course, give your loved ones some financial stability.
There are a number of different life insurance policies on the market, each with a different payment structure. It can be overwhelming when you are trying to decide which policies would be best for you, so here is a quick breakdown of typical life insurance policies.
This is one of the most common forms of life insurance and its also one of the most straightforward. In some cases, it can be cheaper. The way that term assurance life insurance works is simple and, in a nutshell, if you die within the policy term it will pay out a lump sump to an agreed amount. The term varies depending on the length from a few years to a few decades.
One thing to note with this form of insurance is that it only pays out once the policyholder has died during the term of the premium. For example, if you took out a 10-year policy and died after 11 years then your family will get nothing.
In most cases, life insurance providers will offer whole cover, which means that a pay-out is guaranteed whenever a death occurs.
Whole life insurance policies
These are different to term assurance policies, whereby premiums are often invested in a fund and the performance of that investment depends on how much you get in return.
There are three different types of cover with whole life insurance protection. They are maximum cover, balanced cover and guaranteed cover. Maximum cover is where the majority of what you put in is aimed towards life insurance rather than invested in a fund. If the fund performs as well as it was predicted to then there should be no need to increase payments into the premium.
Balance cover or standard cover is when the premium is set at a level where there should be no need for payment increases in the future. The majority of the cash you pay is invested, however, one of the benefits of this level of cover is that if you decided that you no longer need cover you can simply cash in the policy. It would be worth noting that what you can expect in return may be very little in the early years.
The guaranteed whole life cover policy means that a fixed premium is charged for life with no investment and no cash value at any time. One thing that is guaranteed is that your premiums will not rise, as you are not relying on any investment performances.
Compare life insurance with Money Expert.