Much has been written over the years, regarding various types of Protection and Life Assurance. I know this could sound boring, but bear with me, there are certain times when events have a great impact on the provision or costs of certain policies, and two such events are looming on the horizon. But first, the needs outlined.
We are, as a nation, woefully under-insured. This is probably because Life Assurance is often seen as a burden, rather than an asset. There is, of course, a view that a profit ought not to be made from someone dying, but I believe that the moral need for cover far outweighs the risk of abuse. Each year, countless families lose either their breadwinner or homemaker, with the resultant catastrophic effect. Whilst we all realise that money is no replacement for a loved one, it can provide the means to make the best of what is a terrible situation. The proceeds from an adequate policy can mean that a widow could still afford the regular bills, or a widower pay for childcare, or reduce working to spend more time looking after the children. For an individual without family commitments, there is often little need for life cover unless it is to cover indebtedness. There is, however, a good case for Critical Illness cover to provide a benefit on the diagnosis of one of a number of serious conditions. This enables the individual to finance any possible lifestyle changes. Permanent Health Insurance (now more commonly referred to as Income Protection) is another protection against ill health, and is designed to pay an income in the event of long term illness preventing the Policyholder from working.
“Ok” you may say, “so what’s looming?” Well, whether you have heard of the “EU Gender Directive” or not, it is coming to get you, in some way, shape or form! The impact that I refer to particularly, is the equalisation of rating for males and females, where protection insurance is concerned. Previously, the statistical evidence regarding life expectancy and likelihood of illness had been taken into consideration, when setting the costs of protection insurance. The European Court of Justice has ruled that insurers cannot price products based on gender from December 21, 2012. The upshot of this is that, for females, Life Assurance will become more expensive, and for males, cheaper. The opposite will be the case, however, for Critical Illness and Income Protection plans: premiums for males will rise, and those for females will fall. These points should, however, be viewed in the light of my second point, the “I minus E” tax relief for insurers. This is a benefit to Life Assurance Companies that enables them to reduce premiums across the board. This relief is being removed from the 1 January 2013. The effect of this will be to outweigh some or all of the benefits of any fall in the cost of protection policies. The Gender Directive will also apply to Annuity rates, so if you are approaching retirement, you may wish to seek professional advice, as annuity-based pensions for males will tend to get worse, and better for females.
Time is running out. In case you think you have avoided all this fuss, you may well have motor insurance that will be affected as well, and will be more expensive for women drivers.
Have a happy Autumn.
David Foot firstname.lastname@example.org
Categories: Money Matters