Women urged to act now over life insurance

Saturday 8 September 2012

Women are being urged to take out life insurance before December 21 or face a significant increase in their premiums.

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HELEN PRIDHAM

The EU Gender Directive, which comes into force on that date, means insurance companies can no longer take gender into account when calculating life insurance premiums.

At present, women's longer average life expectancies mean they are charged less than men for life insurance. A 30-year-old woman, for example, would currently pay an average of 22% less than a man for an equivalent amount of life insurance, according to Money-minder.com, a life and protection insurance comparison website. While she will be charged an average premium of £7.84 per month for £200,000 of life insurance over a 25-year term, a man would have to pay £9.48.

Many women do not have any life and critical illness insurance to help protect their families in the event of something happening to them. If they were to die or suffer a serious illness, their loved ones could suffer serious financial hardship. Roger Edwards, managing director of protection insurers Bright Grey, said "It is a great opportunity for women to take advantage of current rates before they go up."Ray Black, IFA and founder of Money-minder.com, urges women not to delay: "Insurers will already be testing new underwriting processes but how long they leave it before switching over to a non-gender system is anybody's guess. December 21 is the latest, but insurers could switch at any time. "For any women who feel they might need to arrange some life insurance in the next few years, now might be a good time to buy at least some of that cover to lock in the lower, gender-based prices. Whatever premium you agree now, if it's a guaranteed premium, you'll pay throughout the term of the policy and the saving over a 20 or 25 year term could be thousands."Another reason not to hang around is that some insurance policies can take several weeks to set up if someone has health issues. Michael Ward of comparison website Payingtoomuch.com says: "Give the insurance company time to do its work. Almost all life insurance goes through an underwriting process. For some this is almost instant but for others it can involve getting a standard report from your doctor, which can take up to four weeks. Given there is likely to be a last-minute rush and there is no flexibility on the cut-off date, applying early could be prudent."However, women who are not in tip-top health, or have other issues such as being overweight, might be better off avoiding comparison websites, where insurers tend to only offer policies to those in the best health. Matt Morris of Lifesearch pointed out "It is more relevant than ever that people who may have health issues should go to advisers, such as us, who know which companies are most likely to provide them with cover."It is not only women who are being encouraged to take out life insurance. Men are advised to sign up for income-protection policies before December, as their premiums are likely to rise when premiums are equalised. They are often charged lower rates at present because they tend to claim less for long-term illnesses than women, according to insurers. On average, men currently pay 40% less than women according to LV=.The exact extent to which premiums will rise or fall after December 21 is not yet clear. It is complicated by the fact that the way insurance companies are taxed is also changing at the end of the year, which will push up the cost of providing life assurance.Roger Edwards of Bright Grey predicts costs will rise for both sexes. He said "Life assurance rates for women are likely to rise by 15% to 20%, while men's rates will also increase by 5%. Because more men than women take out life assurance, men's rates will have to rise to cover the extra risk."LV= has come up with a list of potential premium changes that reflect the combined effect of the gender initiative and the taxation change. It predicts that average rates for women will increase for life assurance, whole-of-life assurance and critical illness insurance, but they will see a 28% decrease in income-protection premiums. Men will also be hit by increases except for whole-of-life insurance, where they are likely to see a 5% reduction.However, Mr Edwards believes it will take time for premiums to reach their final levels. He said: "Rates will be changed on 21 December, but companies are likely to change them again before they reach an equilibrium."

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Women urged to act now over life insurance

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