Not everyone needs life insurance. However, it is one of the most commonly bought protection products in the UK with over 800,000 policies sold last year, or 1.2m if we include life cover plans where critical illness cover was added.
The UK offers some of the lowest cost life insurance in the world although sales of life insurance are falling. According to Swiss Re’s annual Term and Health Watch report sales of term assurance fell by 17 per cent last year, while whole of life sales fell by 20 per cent, which may partly be down to price increases limiting the opportunity to switch or rebroke cover to save money.
Since ‘G-day’ 18 months ago, whether or not people benefited from the price changes may depend on their gender. According to information from IRESS average life insurance premiums for males have fallen by around 10 per cent on average since gender neutrality came into force, while rates for females on the other hand have increased by around 25 per cent.
Whether or not a client needs life cover is a subjective matter. Even if they don’t need it right now they may well need it in the future when life changes and buying it now while young and healthy, and when cover is much cheaper, may be worth considering.
As the Money Advice Service website rightly points out: “If you’re young – or even not so young but still healthy – life insurance is very good value. Often just a few pence a day is all you need to provide your loved ones with plenty of financial protection.”
The concept of buying something you do not yet need (and may never need) is a tricky one, especially from a regulatory point of view, although it is exactly what I did myself. If explained properly there should be no risk of over selling, or dare I say even mis-selling.
Put simply the need for cover often boils down to two factors: debts and dependents. If a client’s children, partner or other relatives depend on someone’s income to cover the bills and the cost of living then life cover and other protection insurance should always be considered. Comparing products, though, is not as simple as it once might have been.
Commenting on the difficult advisers can have when comparing products, Adam Higgs, Head of Research for Adviser Services at F&TRC, said: “Even just for life insurance there are hundreds of options for advisers to consider when recommending a provider.
“People often say life cover is a vanilla product where all insurers are the same but when you look at the detail this is not the case. Areas such as flexibility, plan options, counselling and free cover are potentially important, as are operational issues such as tele-underwriting and back office integration.
“Being able to compare insurers quickly and accurately on a wide range of factors is becoming more important than ever.”
So let’s take a look at the pros and cons of 10 different types of life insurance.