Are we ready for a longer life?
It’s a fact people are living longer thanks to advances in medical care and an increasing awareness about how to live our lives in a healthier way. This is great news for mankind but are we prepared for a longer life?
People are buying their first homes later, starting families later and often working into their retirement years (or past it with the abandonment of ‘Default Retirement Age’).
As these key financial milestones are now often occurring later in life, it’s important that people review their life insurance to ensure they’ve not only got enough cover in place, but that the length of time they have it for is also adequate.
Despite the changing landscape, the Life Cover market is still dominated by Term Assurance sales In 2014, there were three times as many purchased (832,935) as there was Whole of Life policies (273,991).
Even though people need cover for longer why does this gap still exist?
The cost of whole of life cover is one of the key reasons for this. Although cover is cheaper the younger a person takes a policy out, they will pay a higher premium than for an equivalent term assurance policy. As we all know, reasons for this include:
• Whole of life policies are guaranteed to pay out on death;
• As we grow older, our mortality risk increases.
Providers are finding that younger clients are subsidising their future risk in order to keep premiums steady throughout the duration of their policy. This means they are compromising on the level of cover they actually need.
Although a Whole Of Life policy is more expensive, it’s important to weigh up the total premiums that you will pay into a Term Assurance policy. If you outlive the term you wont receive anything back. You could chose to take out another policy at this point, however this will be an expensive option as you will be older and chances are your health may have deteriorated, worse case scenario you could find yourself uninsurable.
One option that is proving more and more popular is clients are choosing to take out a Term Assurance policy to cover large expenses such as their mortgage which has an end date. They are also taking out s separate Whole Of Life policy to cover their funerals and leave money behind to their loved ones.
Whole Of Life cover is more expensive than Term Assurance cover, however taking out a Whole Of Life policy now, might mean you will not require additional cover at a later stage in life, potentially saving you lots of money.
A Whole Of Life policy provides you with a guaranteed payout, no matter what age you live to. Premiums are usually free past the age of 90 but your cover will remain in force.