Are you a candidate for costly life cover?

Life insurance is usually an inexpensive protection product, but are you a straightforward candidate for cover?

There are several variables which will have an impact on what you pay, and the body has to be in beautiful condition if you are to score the lowest premium for your age and sex.

Falling cost of cover

Over the past decade, the cost of term assurance has fallen by as much as 50%, according to analysis by Lifesearch, with recent years seeing a proliferation of premium rate cuts. As an example, for £100,000 of life cover over 20 years, a 35 year-old non-smoking male is now offered a monthly premium of just £8; his female equivalent is looking at a slightly lower average of £7. This female premium rate favouritism is due to their greater life expectancy, and is a situation borne out by mortality statistics. Sixty years ago the average life expectancy was 67 years for men and 71 for women; today the respective figures are 78 and 82.

Term assurance can provide substantial life cover when you are most likely to need it at a surprisingly affordable cost.

Longer life expectancy

The UK provides some of the best value term insurance in the world, although life companies do differ in the rates they offer (albeit the difference is a few pence among the leading contenders compared to a pound or so 10 years ago). Such discrepancy is due to several factors, but the main one is the company's underwriting philosophy, allied to interpretation of mortality tables.

Unfortunately, mortality tables are a bit sluggish in keeping up with advances in medical treatment and diagnostic techniques. In the past 100 years, life expectancy from birth for men and women has increased by over 50%; 12 years ago it was calculated that a man aged 80 could expect to live 25% longer than his counterpart in 1960.

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Despite population surveys and regular updating, the tardiness of mortality statistics means that insurance company underwriting departments need to assess ongoing health trends before fixing normal or standard premium rates for different age groups. They also have to take onboard the company's marketing strategy, whether it is targeting specific age and/or professional groups, for instance, and in-house concerns such as reinsurance facilities, free asset ratios and returns to shareholders.

What's taken into account

Then there's you, the consumer, wanting the best possible deal, though you might not be squeaky clean in health and habit.

Your sex and age are just the basic considerations in determining the premium rate; the older you are the higher the cost. Generally, the longer the policy's duration, the more expensive it will be. Extra benefits such as critical illness and terminal illness cover, or double indemnity in the case of accidental death, will push up the premium.

04 October 2007 © Moneyextra.com

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