When are reviewable premiums ever a better deal than guaranteed premiums when buying a life assurance policy?

Asked by naomi.shebah

7 Answers

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Answered by Darren Smith, IFA in Basingstoke, HAMPSHIRE
i'm yet to find an occasion in the current climate whereby the notion of renewable is better but having that if your medical or work issues are complex you might only be offered cover by a company that offers renewable as opposed to guaranteed.

given that medical inflation is always increasing and of course age of the policyholder is also increasing, a renewable premium is only a short term saving over guaranteed as it might only take a few years to meet the guaranteed premium and then overtake it!

by choice i will always recommend guaranteed for the above reasons. its not the same as comparing fixed to variable mortgages where you can possibly save on a variable. the only time we have seen significant reductions is in the decade that followed the AIDS outbreak as life cover rocketed before gradually coming down. | 12.14.10 @ 00:35
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$commenter.renderDisplayableName() — {comment} | 09.21.17 @ 12:07
Answered by Paul Ross DipPFS CII(MP&ER), IFA in Bourne, LINCOLNSHIRE
The only thing you are doing is saving premiums in the short term. I have seen people with reviewable plans who have reached the 5 year term, which is when most insurers review the premium paid against the plan taken out, and in nearly all situations, insurers hike up the premiums, so in the long term you lose out. | 12.14.10 @ 06:59
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$commenter.renderDisplayableName() — {comment} | 09.21.17 @ 12:07
Answered by John Stirling, IFA in Saffron Walden, ESSEX
I think it's worth clarifying here - a renewable premium is one where you initially take out cover for 5 or 10 years (typically) but have guaranteed insurability until a set age, so you can renew the cover at the expiry of the initial term, but it will typically be far more expensive as you will be 5 or 10 years older.

Reviewable cover is where you have cover set and assumed at a given premium for the whole term, however if general claims experience is different than expected the insurer can change the premium at particular dates based on their overall claims experience, but not based on your personal circumstances.

Historically premiums vary up and down, and whilst reviewable life cover is not really available now, when it was customers quite often got a reduction in premium rather than an increase, because life expectancy has generally increased beyond expectations. Health insurances on the other hand have had mixed experience as improved medical diagnosis means conditions get found earlier (so more claims on critical illness), but improved treatment means that they are cured quicker (so income payment plans have improved claims experience).

So to answer the question you have asked, sometimes, but it will depend on future claims experience. To answer the question you may have meant; sometimes, it will depend on whether you 'may' need cover after the initial term, but initially only expect to need it for a shorter period.

For renewable cover, a 10 year renewable policy will typically cost more than a 10 year non renewable policy - generally I find you can get around 15 to 17 years of non renewable cover for the same price as 10 years of renewable cover.

One final point to confuse the issue, you can have guaranteed renewable cover, and reviewable non renewable cover, but generally renewable cover is guaranteed for the initial premium period, so reviewable renewable cover isn't available. Sorry, that probably didn't help... | 12.14.10 @ 09:33
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$commenter.renderDisplayableName() — {comment} | 09.21.17 @ 12:07
Answered by D C, IFA in Bristol, DEVON
The best kind of policy to go for is a fixed-price cover for the entire term for which you expect to need cover - because you know exactly where you stand. If for some reason that is not available, or is too expensive, then consider one of the other options. | 12.14.10 @ 09:49
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$commenter.renderDisplayableName() — {comment} | 09.21.17 @ 12:07
Answered by Richard Salter, IFA in Trowbridge, WILTSHIRE
Reviewable premiums allow more cover to be purchased intially for the same premium than a guaranteed premium policy would typically allow. This is because the insurer can more accurately calculate his potential liability and price accordingly, knowing that he has the option to review and increase (or decrease) premiums for the same cover for the period to the next review.

If you think about it you will also be younger up to the plan review date and so, as younger lives are less likely to die, there is less risk being assumed by the insurer in the early days before any plan review.

However if you see comparison quotes for both reviewable and fixed (guaranteed) premium options for the same amount of cover for the same period you will typically see fixed premums are a fair bit higher. This can only indicate that a reviewable plan is very very likley to face a hike in premiums at the review date - possibly every plan review date - to bring it in line with - if not exceed (more likely) the fixed premium plan.

We were always trained that reviewable plan holders should typically expect to see a large hike at a review. The message has to be enjoy lower costs in the early days and then shop around again if your premiums are increased at a review or 'spread the cost' of your cover over its full term by overpaying for a guaranteed premium in the early days but probably finding that your cover would cost more than you are paying five or ten years in - if you were to take out the same cover for the remaining period under a fresh plan.

finally also bear in mind that your health could deteriorate over time and any fresh plan wouod therfore cost more - if you can get insurance at all. Whislt this could well rule out a fresh search of the market a plan review date a good reviewable policy should of course permit continuation of your plan on the same assumed health grounds as you presented at outset. In theory only the insurers claims expereince since you took out your plan and your age at the review point should influence the new premium (i.e. your actual health should not be taken into account). | 12.15.10 @ 13:47
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$commenter.renderDisplayableName() — {comment} | 09.21.17 @ 12:07
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Answered by benhfuller
Most of the important points have been covered already here. The only point to add is to be careful with reviewable premiums (for both life insurance and income protection) if budget is an issue. There is always a risk with the reviewable option that the plan becomes unaffordable a time in the future when the risk is highest. | 12.17.10 @ 13:21
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$commenter.renderDisplayableName() — {comment} | 09.21.17 @ 12:07
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Answered by mark
Wherever possible guaranteed solutions should be recommended before reviewable. This is to mitigate the risk for the client of rates increasing in the future following an unfavourable review (increased premiums). With a guaranteed term or critical illness plan at least you have a known cost for the whole of the term selected. | 02.03.11 @ 15:27
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$commenter.renderDisplayableName() — {comment} | 09.21.17 @ 12:07
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Answered by

Darren Smith
Darren Smith, IFA in Basingstoke, HAMPSHIRE

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