Life Insurance - Why does less than half the UK population have cover?
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 ofinsurance 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 thepeople 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 lifeinsurance 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 65without dependents, and for whom life insurance is just not necessary.
Having said that, without doubt, there are still many families whodesperately 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 insurancedoes 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 thrillto buy, there's no pleasurable window-shopping or sense of enjoyment
about it. The likelihood is that unless a financial advisor sits down infront 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 tohelp. The press is regularly full of stories about one company or
another that has turned down a claim. These stories make headlines asbehind them, there's always a sad story of personal tragedy and
distress. It all gives the industry a tarnished image and creates afeeling that they can't be trusted.
Then there are those who realise life insurance is needed but just can'tbe bothered or say they can't afford it. More realistically, for many
"can't afford" actually means, "I choose not to afford". They might behappy 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 theirfamily's future.
Of course, there is no disputing the fact that some people will haveapplied for life cover and found the final premium truly unaffordable.
Whilst for the majority, life insurance at normal rates is okay, overthe 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 seentheir application form. It's a result of the life insurance companies
making it increasingly hard for people to meet the insurers definitionof "healthy". Seven years ago half as many people were seeing their
premiums increased as a result of the insurance companies rating them asan above average health risk.
Even three to four years ago it was pretty obvious who'd have troublegetting 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 consideredacceptable are now only accepted with increased premiums. Take your
weight - insurers are clamping down when they judge a person's weight tobe 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 ameasurement called the Body Mass Index to identify weight problems. This
is a persons weight divided by the square of their height. Insurers nowwant 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 nowface 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 pageapplication form were not enough, some people are being faced with more
forms to complete plus medical examinations. The whole process can takeup to 8 weeks, even more, before the applicant knows precisely how much
their premium will be. If that works out more that they can simplyafford, they're often too fed up of the whole application process to
start again with a new insurance company. That leaves yet another familywithout insurance.
Despite these problems, the life insurance companies claim that thanksto more sophisticated underwriting procedures, premiums are lower today
that they were a few years ago. Furthermore, around 10% of lifeinsurance 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 peoplecovered by life insurance above the 50% mark.
Michael writes for Brokers Online who offer life insurance coverand most UK financial services including car insurance.Visit our finance blog for useful tips on uk finance
Written By: Michael ChallinerCopyright: 2005
Contact Email: Michael@andromedawebs.co.ukContact Phone: 01477 535919
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