Life cover cheaper for bigger lump sums

Life cover has become cheaper for individuals who want to insure larger sums, with premium discounts of up to 20 per cent now being offered by some providers.

Scottish Provident, a subsidiary of the Royal London group, this week announced new lower premiums for term assurance, which pays out a lump sum on death within a fixed term agreed in advance.

These discounts are targeted at new customers, insuring higher-than-average sums of £500,000 or more.

For example, a 50-year-old male non-smoker with a level term policy for £500,000 over 20 years can now pay 6 per cent less
on his premiums with
Scot Prov.

But the insurer’s biggest discounts are for younger customers. A 25-year-old female smoker who wants to insure a level lump sum of £500,000 for 25 years
can save 18 per cent on a new policy.

“If someone was looking for £50,000-£100,000 of cover then we may not be as competitive as other providers,” said Scot Prov.

“However, if they were looking for a more substantial level of cover, then we are likely to be more competitive.”

Scot Prov’s life cover does not appear on the “best buy” tables of price
comparison websites, as it is only sold through independent financial advisers.

But the price revisions have made the insurer competitive with industry heavyweights Legal & General and Aviva (see table).

Advisers said rate reductions for bigger cash lump sums were part of an ongoing “rate war” for lower value life cover.

“It’s always good to see policies becoming less expensive and these re-
pricings will benefit the consumer,” said Matt Morris, senior policy adviser with LifeSearch, an independent financial adviser (IFA).

Scot Prov has also not skimped on other benefits that tend to be wrapped into life plans, such as critical illness cover.

“At a time when budgets have been tighter, the cost of the cover as well as the quality of the product is crucial,” said Emma Walker, head of protection with Moneysupermarket.com, the price comparison website.

“(Scot Prov’s) move is a positive step especially as the re-price isn’t at the sacrifice of any of the product features and benefits.”

But while the rate war benefits new customers, existing policyholders who were hoping to save money by switching to a new provider were urged to act with caution.

“If you have developed any health issues since taking out your existing policy, tread very carefully,” said Roy McLoughlin, senior partner with Master Adviser, an IFA.

“If you have developed diabetes, started smoking or suffered from a range of other health issues then you could find it difficult to obtain a new policy on the same terms, or even find yourself uninsurable in the worse case scenario.

“So never cancel a policy without having a new one in place.”

Scot Prov’s discounts do not apply to whole-of-life policies, which provide cover throughout a person’s life.

More choice for over-50s

Options have widened for people over 50 looking for a low-cost alternative to traditional term assurance. Over-50s specialist insurers Saga and RIAS have launched two budget “life plans” that offer guaranteed lump sums of up to £30,000, for premiums starting from as little as £5 a month. Saga’s “Guaranteed Acceptance 50+” cover is open to 50-85 year-olds and will pay a maximum benefit of £30,000, with fixed monthly premiums ranging from £10-£50. Healthier customers get better benefits, with the lump sum paid out even if the policyholder dies soon after taking out their cover. Customers declaring health problems have a one year no-claims moratorium, rather than the two years offered by most other providers. Under the Saga policy, a 55-year-old male non-smoker paying £20 a month will receive £5,506 under its standard plan or £6,332 if he has no health problems. RIAS’s “Over 50s Life Plan” is available to 50–75 year-olds and also offers guaranteed acceptance, but is unique in that policyholders do not have to answer medical questions. Premiums range from £5-£50 per month with a maximum benefit of £25,000. A 50-year-old male will receive a cash lump sum of £7,624 under the RIAS plan, with the cash sum trebled if he dies accidentally within the first two years. One-and-a-half times premiums will be paid back if the customer dies for other reasons in the first two years of the policy.