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Life insurance premiums set to soar

Falling rates likely to end in December 2012

Life insurance family

Falling premiums might be about to go up.

Life insurance premiums for new policies are expected to leap by up to a third later this year, when new European gender discrimination regulations and other market changes are introduced.

Time limit on falling rates

Premiums have fallen over the past decade, with the average 10-year-term policy for a 40-year-old-non-smoking man now at £9.93 a month, compared with £13.97 in march 2002 for £100,000 of cover. But if you’re thinking of taking out cover, act now as the trend is likely to reverse later this year.

Protection insurance industry expert Kevin Carr commented: ‘The combined impact of the EU gender ruling and other factors could lead to an increase in life insurance and critical illness premiums of as much as 30% later this year for some people. 

‘Premiums for women are likely to rise more than those for men as, historically, life cover has been cheaper for women, whose typical life expectancy is longer.’

Equalised premiums

Under the new EU ruling, pricing discrimination based on gender will be banned. Even though women live longer than men, premiums will have to equalise from December 2012.

In addition to the new gender discrimination rules, insurers will have to boost the amount of capital that they hold in reserve to protect them against any future financial crises.

Types of life insurance

Life insurance (often known as life assurance), is mostly taken out to provide a benefit to remaining family members – or pay off large debts such as a mortgage – in the event of the policyholder’s death. 

The most basic type is ‘term assurance’, which pays out if the policyholder dies over a specific period of time. There are also more expensive policies, which provide cover for the whole of the policyholder’s life. 

Don’t buy life insurance based on price

Some policies guarantee that their premium will remain level for the duration of the policy. Others – called ‘reviewable’ policies – will reprice after the first few years. Paying a little more at the beginning for a level premium can be a better option than being hit five or ten years down the line with a price rise that you can’t afford. 

So if you’re looking at policies on a comparison site, we recommend being careful if considering the ‘low-start’ policies that rise to the top of the tables. 

Action point: See our guide on how to buy life insurance, and which type of policy might be best suited to you.

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