Whilst the premiums that companies charge might be increasing the are still increasing overall they are willing to get very competive to attract new business.

If you have term insurance coming up for renewal do not just assume that your current provider is going to give you the best deal.  Use a price comaprison tool like confused.com or moneysupermarket.com.  Also try out the tips and tricks on moneysavingexpert.com to see if changing some small details on your application can reduce your premium.

Unfourtunately insurance companies will regard “loyal” customers that just renew with them without question as fair game for the worst possible  quotes.  In effect your loyalty is being used to fund the offers that they give to new customers.  It may seem unfair but you will get nowhere argiung about it - just play the game.  Once you have your new shiny quote from another insurance provider you may find that your existing insurance company is much more keen to reward your “loyalty”!!

As I said at the start, this isn’t exactly amazing information, but if it stops a single person being ripped off by their insurance provider then it will be worthwhile.

1. Ambiguous Clauses

An insurance policy is a contract between the insured and the insurer. A general principle of contract law is that if the terms of the contract are ambiguous then the dispute is settled against the party that created the contract (the insurance company).

2. The Expertise Used to Decide on the Meaning of the Policy

The interpretation of the policy document is considered from the point of view of a person of average intelligence, not an insurance expert or attorney.

3. Conflicting Clauses

If the policy document contains two clauses that are inconsistent then the one that gives the most protection to the insured will be considered instead of the one that gives the most protection to the insurance company.

4. Avoiding an Absurd Result

The court will not enforce either the policy as written or as interpreted if this would cause a ridiculous result.

5. Policy Endorsements

Insurance companies will often use endorsements to limit cover. If an endorsement is attached to the policy when it is purchased it then becomes part of the policy. If the policy and the endorsement are in conflict then the endorsement is considered to be correct.

Conclusion

A disagreement over the terms of an insurance policy is a serious and complicated issue. You do really need to get legal help to resolve it. Hopefully the above facts will help you understand the issues if you do seek legal advice.

1. Lowering Overall Cost

This might seem like a strange one, given that I said in the introduction that term premiums are lower. However if you consider the cost over your entire lifetime then whole life will often be less. This is because the premiums will often rise dramatically at the end of a term policy whereas a whole life policy with guaranteed premiums will never increase.

2. Preventing Loss of Cover

Your initial premium might be low, but if you suffer a health emergency then you may find that your premiums are increased beyond the amount that you can afford when your initial term is over. In this instance you might even find yourself denied cover or unable to afford enough to cover your families needs.

3 Building an Investment

Part of your premium will be invested, as the company managing your policy have to build up a sum to eventually pay out. In the later years of the policy this can give you some flexibility as you could convert part of it to a standard endowment (if you decide you don’t need so much cover) or borrow against its value.

Conclusion

Your choice of policy will depend on your own unique circumstances, but don’t dismiss whole life cover just because the initial premiums are higher - the decision you need to make is far more complex than that!

Reasons For Choosing Term Cover

1. Budget for premiums. If your budget for premiums is small, you will probably need to opt for term insurance as the premiums for similar amounts of cover are much lower.

2. Amount of cover. Similar to the above point, if you require a large amount of cover (perhaps because of dependant children) then you will probably need to take advantage of the lower premium levels.

3. Age. If you are young, you will find that the premiums for term cover are very low. It might be possible to arrange term insurance for the whole time that you require life insurance for (e.g. the time during which you have dependant children in education).

4. Investments. If you take care of your investment needs by investing in the stock market or other forms of saving/investment then you will probably have no need for a life insurance policy with an investment component.

Reasons for Choosing Whole Life Cover

1. Insurance period. If you can see that you will require cover for an extended period then whole of life cover can be a better solution. This will avoid the possibility of a health problem dramatically increasing your premiums or rendering you unable to get insurance.

2. Investment choices. If you want the simplicity of having both your insurance and a substantial part of your investment in the same policy then whole life is best for you. Once the policy has built up an investment value (in its later years) you can even borrow against its value, therefore meaning that you don’t have to die to benefit from your policy.

Why is Whole Life Insurance More Expensive?

This type of insurance is initially more expensive than term cover because the company providing the insurance know that they are going to have to pay out the insured sum in all cases (as long as premiums are payed). This contrasts with term cover where the policy will only pay out if you die within the specified period. Don’t forget when making this price comparison that term premiums will often increase significantly when you come to renew, and a health emergency could mean that you are unable to obtain an insurance policy. Over the long term, the difference in the cost of these two types of insurance is not as great as it first seems.

How Can You Reduce the Cost?

If you can’t afford the level of cover that you want then there are ways to reduce your premiums, either by changing your lifestyle or simply shopping around.

When calculating your premiums, your medical history, lifestyle, and family history will be taken into account. There isn’t much that you can do about the medical history of you or your family (other than making sure of all the facts), but there are some lifestyle factors that can make a big difference to your premiums:

1. If you smoke, this will dramatically increase your premiums. You owe it to yourself to give up anyway to save money, improve your health and your life expectancy. Why not use getting your new life insurance policy as a trigger to give up smoking. In most cases you will need to have given up for more than a year for this to have an impact on you premiums.

2. Excess drinking is another factor in calculating your premiums. Don’t think that you can lie about it either. If you die the insurance company will investigate your lifestyle very carefully before paying out, and they have ways of finding out of the information on your application was incorrect. Start cutting down on your alcohol intake and you will see a whole host of health benefits as well as reducing your life insurance premiums.

3. Diet and exercise. Application forms will always ask for your height and weight, and any excess weight or obesity will tend to increase your premiums. Join a gym or a weight loss group and start shedding those extra pounds!

The final way to reduce your premiums is good old fashioned shopping around and bargaining. Don’t settle for the first offer that you receive. Use internet price comparison websites to seek out the best deals. Negotiate a reduced premium with the salesman.

The type of life insurance policy depends on you priorities and your premium budget.  If you have a lot of money to spend on your life insurance and it is important to you that you leave a lump sum to your family when you die then whole life insurance would be the best option.  If on the other hand your busget is tight and you are really only interested in being insured against death up until middle age then term life insurance would definitely suit your needs better.

The  amount of life insurance required will also feed into the above consideration.  Again this is not a simple calculation to make.  What you want to aim for if at all possible is that the amount of life insurance that you buy could provide your family with an income that is equivalent to the amount that you earn at the moment.  The income should be provided from the real return on the investment of the insured amount, that is the rate of interest less inflation.  A reasonable long-term estimate for this real return might only be 2-3% (but take professional advice about this).  Therefore to achieve an income fro your family after death of $20,000 would require a life insurance policy of $1,000,000.

Another point to bear in mind is the mortgage on your home (if you have one).  It can make a great deal of sense to arrange a separate “decreasing term” life insurance policy to pay the mortgage off in the event of your death.  The calculation of required income above can then be done excluding the mortgage payments.  If you don’t have a decreasing term element in your life insurance portfolio then you will find that the amount that your family receives after your death (and after the mortgage has been paid off) will increase with time.  This is usually the opposite of what is required.

1.  Term life insurance.  This type of life insurance covers the insured person against death during a specified period (or term).  The policy will only pay out for death (or for some policies terminal illness) within the insured term.

2.  Whole of life (whole life) insurance.  This type of insurance is intended to pay the insured amount whenever you die (be that 1 year after the policy was take out or at the ripe old age of 101!).  This type of insurance policy is therefore a hybrid insurance/investment vehicle.  The policy will build up an investment value in its later years to provide for the final death payment.

Looking at the differences between the above it is easy to see why term life insurance is so much cheaper (which is its main advantage over whole life insurance).  In the case of term life insurance the insurance company is taking a gamble on whether you will die during the insured term.  A lot of term life insurance policies will not pay out anything to the policy holder.  In the case of whole if policies it is a case of when the insurance company is going to have to pay out the insured amount - they will have to pay it whenever you die.

Term life insurance can be very useful for younger people that want to arrange substantial life insurance cover for a specific period (e.g. the time when they are responsible for children in education).  This is because the premiums can be 10% or less of the equivalent whole life policy premium.

Find all the areas in the deceased persons home where paperwork was stored.  Go through all of this paperwork in a very detailed way looking for:

1. Insurance policy documents or evidence of contact with insurance companies (not just life insurance).  If you find details of home or health insurance for the deceased it is possible that they bought life insurance from the same company.

2. Bank and credit card statements and cheque books - sort these into different accounts and scan them for policy premium payments.

3. Letters or business cards from insurance agents.  Again, if the deceased had contact with an insurance agent it is possible that they bought life insurance from them.

Follow up with all of the insurance companies/agents located above to find out whether the deceased had arranged life insurance with them.  In letters, specify the deceased full name, date of birth, and last known address (if they moved frequently it might be worth including recent addresses as well).

If the above doesn’t work then there are a few other places to try.

1.  Did your deceased relative have a safety deposit box that they kept documents in?  Try to find any likely looking keys, scan credit and bank statements for payments to companies offering this service and approach local companies with the deceased full name and address.

2.  Check the deceased medical records to find out whether they had had a medical exam for insurance purposes.  The records should show which company requested the medical.

When the life insurance industry started out all policies were on the term life basis (the insurance only pays out if the insured dies whin the agreed term).  This led to compaints that you could pay premiums for many years and no receive anything.  Also, if you died in old age (after the term of your life insurance had expired) then you might leave your family with nothing.  One anser to this would be to have separate investment plans and term life insurance arrangements.  Whole life insurance policies combine the life insurance and investment plans into one.

This is in contrast to “whole life” or “whole of life” policies which will pay out the agreed sum (if the insurance premiums are payed) whenever you die, even if this is at 90 or a 100 years of age.

Advantages of Term Life Insurance

When compared with whole life insurance, the major advantage of term life insurance is the much lower premiums for the same insured amount. As the insurance company is effectively taking a bet on whether or not you will die within the insured period the premiums can be a lot less (sometimes 10% or less) of the whole life premium. This is because there is no need for the policy to have an investment element to pay out on your eventual death.

For people on a tight budget the cost of term life insurance premiums can be varied by opting for a shorter (cheaper) or longer (more expensive) term. In this way you can get the level of life insurance cover that you think you need within your budget.

Disadvantages of Term Life Insurance

If you don’t die you will receive nothing! This is the main reason why whole life insurance policies were invented, to give an investment return in addition to life cover.

Premiums will increase when your term ends. If at all possible you should arrange term life insurance for the whole time that you think you will need it (e.g. the period of time that you expect to have children in education). Also try to get the premiums fixed for the longest time possible. Otherwise you will face the problem that when you come to arrange a new term life insurance policy the premiums will increase based on your age.