Helen, from Diss, asks: "My husband and I have a whole of life insurance policy with Barclays with a sum assured of £80,000. For the last 10 years we have paid a premium of just over £27 a month, but this is increasing to almost £68 a month. My husband says there is no point in looking around for a better deal as we are 10 years older than we were when we took the policy out. He says all insurance companies will charge about the same premium for that level of cover. Is that true?"
Not necessarily, Helen. If you do some shopping around before you accept the increase, you could save yourselves a lot of money.
A whole of life policy runs until you die or until you cancel the policy. At outset, the insurance company calculates how much it needs to charge you in order to provide a set level of cover if you die.
This calculation is based on your age, health, lifestyle and, sometimes, the job you do, as all these factors can influence the risk to the insurance company.
Most whole of life policies are reviewed after 10 years and again every five years after that so that the insurance company can ensure it is charging the right premium for the level of cover you have under your policy.
Your husband is right to say that the premium will cost you more now because you are 10 years older, but it is definitely worth shopping around for a better deal.
Not all companies apply the same rates for a new policy as they do for an existing policy after it has been in force for a few years. Two years ago I saw a couple in Essex who had a whole of life plan with Norwich Union with a sum assured of £70,000.
At the 10-year review point, Norwich Union wrote to them to tell them that the premium would increase from £24.31 a month to £114.51 if they wished to maintain the same level of cover – an increase of 375 per cent!
I did some shopping around and found them a similar whole of life policy with Canada Life International with the same sum assured. The premium for this plan was £32.60 a month, which was again guaranteed for another period of 10 years.
Obviously, these clients will face another potential premium increase after 10 years have elapsed, but switching the policy means they will have saved more than £9,800 in premiums over that 10-year period.
Contacting NickNick Plumb is an independent financial adviser. Send your questions to Nick at Bright Financial Planning, 58 Station Road, Sudbury, Suffolk, CO10 2SP, email them to
nickplumb@aol.com or telephone Nick on 01449 675674.
Nick's answers to reader questions in this column are provided only as a general guide and do not constitute personal financial advice. For any readers requiring specific advice on their own circumstances, Nick is happy to offer a complimentary initial meeting.
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