Life Insurance

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Less than 50% of the UK population has any form of life insurance cover,

says Swiss Re, one of the largest insurance companies in the world. In

their latest annual report they estimate that £4.2 trillion worth of

insurance cover is needed whereas only £1.8 trillion has been taken up.

That leaves an insurance gap of £2.3 trillion.

But in all probability, the gap is not that large. Firstly, there's the

people who are ruled out from having life insurance due to their age -

just over 1 in 5 are under 18 years of age, the minimum for life

insurance cover, and 1 in 6 are over 65 and they're effectively

uninsurable. Then there's a raft of single folks aged between 18 and 65

without dependents, and for whom life insurance is just not necessary.

Having said that, without doubt, there are still many families who

desperately need life insurance but who don't have cover.

Why do people hold back from Life Insurance?

There are still plenty of people who have no idea what life insurance

does and because it's never top of their minds and they don't care,

nothing ever gets done. After all life insurance isn't exactly a thrill

to buy, there's no pleasurable window-shopping or sense of enjoyment

about it. The likelihood is that unless a financial advisor sits down in

front of these people and talks about life insurance, they'll remain

totally uninsured and uninterested.

The media coverage given to the insurance industry also tends not to

help. The press is regularly full of stories about one company or

another that has turned down a claim. These stories make headlines as

behind them, there's always a sad story of personal tragedy and

distress. It all gives the industry a tarnished image and creates a

feeling that they can't be trusted.

Then there are those who realise life insurance is needed but just can't

be bothered or say they can't afford it. More realistically, for many

"can't afford" actually means, "I choose not to afford". They might be

happy to spend £2,000 a year on a 20 a day smoking routine but are

unwilling to cut back to afford the monthly premium that protects their

family's future.

Of course, there is no disputing the fact that some people will have

applied for life cover and found the final premium truly unaffordable.

Whilst for the majority, life insurance at normal rates is okay, over

the last seven years we've seen a huge rise in the number of people who

have seen the price substantially increased once the insurer has seen

their application form. It's a result of the life insurance companies

making it increasingly hard for people to meet the insurers definition

of "healthy". Seven years ago half as many people were seeing their

premiums increased as a result of the insurance companies rating them as

an above average health risk.

Even three to four years ago it was pretty obvious who'd have trouble

getting insured at normal rates - someone with a history of heart or

circulatory problems, former cancer suffers and diabetics for example.

How the situation has changed. Insurers' application forms are now much

more detailed and health problems that were previously considered

acceptable are now only accepted with increased premiums. Take your

weight - insurers are clamping down when they judge a person's weight to

be a risk to their longer-term health. And it's not just the obviously

over weight that attracts the insurer's notice. Insurers are now using a

measurement called the Body Mass Index to identify weight problems. This

is a persons weight divided by the square of their height. Insurers now

want a BMI of no more than 29, whereas previously up to 40 was fine.

This means that a woman weighing 83 kilos and 1.66 meter tall would now

face higher premiums.

Applying For Life Insurance

People can also be put off by the application process. Whilst about 30%

of applicants will receive a decision almost straight away, for others

the process can become one delay after another. As if a 16 page

application form were not enough, some people are being faced with more

forms to complete plus medical examinations. The whole process can take

up to 8 weeks, even more, before the applicant knows precisely how much

their premium will be. If that works out more that they can simply

afford, they're often too fed up of the whole application process to

start again with a new insurance company. That leaves yet another family

without insurance.

Despite these problems, the life insurance companies claim that thanks

to more sophisticated underwriting procedures, premiums are lower today

that they were a few years ago. Furthermore, around 10% of life

insurance is bought on the Internet where discounting has become the

norm. This too has helped push average premiums down.

Nevertheless, in the author's view it will take many years to get people

covered by life insurance above the 50% mark.

Article Resources:

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Michael writes for Brokers Online who offer life insurance cover

and most UK financial services including car

insurance.Visit our finance blog for useful tips on uk finance

Written By: Michael Challiner

Copyright: 2005

Contact Email: Michael@andromedawebs.co.uk

Contact Phone: 01477 535919