Life Insurance Quote Reviewer

For the self-employed, whose income may vary consider­ably from one year to another, flexibility is important and the single-premium method is eminently flexible. It allows the selection of unit-linked, with-profit or non-profit schemes as the individual wishes, in accordance with his estimation of investment opportunities. In 1976, for example, high interest rates might have made a unit-linked fixed-interest fund a natural choice for a single-premium investment. In other years other sectors might have more appeal, and in the years close to retirement age guaranteed non-profit schemes could be chosen.

In one respect non-profit, unit-linked and with-profit plans differ considerably from one another. This is in the sum they payout if the life insurance plan holder dies before retirement. Some repay only gross premiums contributed; others pay back contributions plus interest at a rate ranging from 3% to 8% p.a. and unit-linked plans repay the accumulated value of the units at the date of death. Nor is there any apparent relationship between the generosity in this respect and the final retirement benefits. For many people, it probably makes sense to purchase term assurance or FIB along with a regular pension policy, and in this case the exact treatment of premiums on early death is not so important.

An important option that is available under all self ­employed pension plans is to take part of the benefits as a tax-free cash sum at retirement. The amount taken can be up to three times the remaining annual pension - a complicated sum to work out but one usually provided in companies’ illustrations.

It will normally be worth the policyholder’s while to take the biggest possible tax-free sum at retirement. The reason is that any pension payable under the pension plan will be taxed as earned income, while if cash is taken and invested in a purchased annuity, then part of the return will be tax-free as a return of capital. Except for those paying very high rates of income tax and/or investment income sur­charge in retirement, commutation offers one method of boosting their income.

Some unit-linked plans have, however, introduced guarantees. Normally these involve a special fund which allows the company to guarantee a value at retirement age and hence an actual pension. Such guarantees are no different from the non­profit ones discussed earlier, and may be useful at ages close to retirement.

The unit-linked plans involve charges expressed slightly differently from unit-linked life insurance policies. The initial charge on units is normally 5% but may be higher, and the annual charge is between 1.5 % and 1 %. Many plans, however, also involve the allocation of capital units in the first one, two or three years, embodying an extra management charge of 3% or more.

As previously mentioned, this is not a once-for-all charge; it is an annual charge and means that 3% (or whatever) of the value of the relevant units will be deducted by the company each year the plan is in force. This can add up to a substantial amount over a long-term pension plan. The reason capital units are used is that under a personal pension plan the company is unable to make deductions from the fund if the plan is stopped by the plan holder (in the case of the life insurance contract it can do so via the surrender value). So to take account of “lapses” the company has to build into its charges an element that will recoup its costs. Nevertheless, some companies do not use capital units on personal pension plans, and their plans can often offer better value (capital units are not allocated when unit-linked funds are used on a single-premium basis).

 At maturity, the unit-linked plan holder has the option of converting all his units into an annuity, in which case he gets a fixed level income for life (though he may also, if he takes a slightly lower annuity, have a guarantee that it will be payable for a minimum of 5 or 10 years whether he lives or not) or of keeping the units and drawing off an annual pension by selling some each year.

As much of the business taken on by companies was very long-term, they didn’t keep all the reserves in the bank. Investments, in government securities, property and shares were made, and these helped to increase the surplus achieved. As the presence and predictability of the surplus was recognized, companies split their policies into two classes, those participating and those not participating in profits, with different rates of premium.

What the companies were saying, in effect, was that according to the necessarily conservative assumption of the actuary, such-and-such a rate of premium was necessary at such-a-such an age. This would be the non-participating rate. Those prepared to pay higher rate of premium for the same sum assured would, however, be allowed to share in the surplus achieved. This surplus would arise first from the investment of extra premium paid by the participating life insurance policyholders, and from any surplus arising on non-participating business as a result of the conservatism of the assumptions made by the actuary in settings premium; secondly from any reduction in mortality rates over the period finally from any reduction in operating expenses below those anticipated.

From this it might seem that non-participating policyholders were getting a raw deal, but this is not the case. The actuary’s assumption proved conservative on two accounts. First, mortality declined. It has done so fairly steadily for over century, and, though we know now this has happened, actuaries cannot simply extrapolate and assume the trend will continue, since to do so would lead, among other thing, to the conclusion that human would all become close to immortal within a few hundred years.

Life insurance premium rates have therefore to be set on the basis of historical mortality statistics, so as mortality improves there is a tendency for each generation of policyholders to go through the accumulation of surpluses due to greater longevity. Secondly, the actuaries may have regard to historical experience in assuming a future rate of interest to be earned on the funds, so long as many values and interest rates are fairly stable.

Term life insurance provides coverage for a set lapse of time. This can range for a year or even extend beyond that.  It pays a death benefit only if you die during the specified term and if you have paid the required premiums to keep it in force for the term. Term life insurance can normally give you a high level of benefits for the premiums you pay. The majority of term policies can be renewed for further years even if your health status is not intact.  Every time you renovate the life policy, your premium rates can become higher but will normally stay level to keep the balance in the term. If you are considering term life insurance, be sure to check the premium schedule at the specified renewal ages, and find out how long the policy can be renewed, if you decide to keep it.

Many term insurance policies can be exchanged for a permanent life insurance policy during the term period. This conversion privilege could prove to be very important, especially if your health deteriorates and you are unable to qualify for a new permanent policy. Be sure to check the conversion eligibility period as you review the coverage before applying for a policy. Common types of term life insurance include:

• Annual renewable term (also known as yearly renewable term, ART or YRT). It features an annually increasing premium and a level death benefit.
• Level premium term- features a level premium for a specified number of years. At the end of this level premium period, some policies allow you to renew coverage for another term at very favourable rates, provided that you meet the company’s underwriting criteria. If you do not meet the company’s current underwriting standards you will not be eligible for the re-entry term rate.
• Return of premium term- permits the owner of the life insurance policy to obtain the amount of premiums paid (at times with interest) following a set number of years, generally at the closing stages of the premium phase.

There are policies that are designed especially for children and young people in some countries. They are sometimes called deferred assurances and are sometimes known as junior policies or child’s assurances. In this case it is the parents or guardians who take out the endowment policy on his or her life so that the policy matures when the child is 18 or some other specified age. On maturity, the parent has the choice to either take the money with profits from the policy or the child may continue to pay the premiums at the same level or increase the premium levels.

In case the parent who has contracted the life insurance dies before the child reaches the age specified in the policy, the premium payments are ceased until the child reaches the specified age on the life endowment policy. In some countries insurance companies will also pay an income benefit. This will obviously depend on the terms specified in the life policy documents. You should check these documents carefully before taking out a policy.

In some cases because the policy was taken on the parents own life, there may be some tax relief available. Your insurance broker will be able to advise on such matters. If not, the authorities responsible for finances are best placed to advise and inform you of your rights with regards to tax relief on life insurance premiums.

If in case the child decides to continue the policy, some insurance companies will accept to continue on the same policy. In normal circumstances the policy premiums would not change for an endowment policy. But as always check carefully with your insurance provider or broker.

This policy is obviously useful when the child reaches the age where money is needed for a number of important things. College or university fees would more than likely need to be paid at the time of the policy maturing.

Term life insurance goes by a number of different names, it is also known as level life insurance or some companies call it family life insurance. The term life cover will pay you a lump sum if you were to die during the term of the plan. The majority of life insurance polices also include terminal illness insurance and this is when you would get paid out on the plan if you were to be diagnosed with a terminal illness prior to the policy finishing. This gives you the opportunity to sort out your finances prior to you passing away. The plan can be taken on a sole basis and can also be joint in some circumstances.

The majority of plans want your to be at least 16 and will go up to 89 before they will stop offering you cover. The plans can be suited to your needs and the term of length of the plan is up to you obviously dependent on it fitting the age restrictions that the specific plan.

You can also add  critical illness into your plan, this is normally quite a lot extra as there are a lot more critical illness claims than there is life insurance claims within the protection market.

Please dont get terminal illness and critical illness confused as they are two very different products.

There are a number of commitments you have to abide by inorder to get you life insurance and to make sure it will pay out once you have your policy in place.

These are to disclose all relevant information asked in the application form when taking out the policy. Companies do not automatically write to the doctors to pick up medical information as it costs a lot of money  so you should not assume they will do this.

At the time of the claim the life assured must once again attach all the information asked for and answer any questions to the best of their knowledge.

If there is a time gap between the underwriting process being completed and the polcy starting then the life assured must tell the insurance company of any changes in their lifestyle health or occupation.

The final and most important part of the life insurance contract is to keep up with the direct debit payments, there is no specific contract as such however if payments stop the cover will stop. There is no form of investment attached to the plan so will be no dividend or such like due.