Ian Marsh, a Director of investments at Lancaster-based financial adviser Peel Townsend Financial Services, counsels that it is very narrow minded of people not to have Life Assurance and/or Critical Illness Insurance as he maintains that life has two main dangers – either living too long and dying too early.  “Its absolutely vital to have some insurance in place – especially if youve got small childern,” he says. “In these unsettled times you must build your own little stronghold because no one else is going to do it for you.”

Paul Harris at Moneynet says now is the right time to purchase such plans as there are lots of very competitive premiums around owing to the intense competition for business within the market. “The cost of life insurance has come down – gone down by about 40% in 5 years. It has never been cheaper,” he states. “The critical illness insurance market paid out on 84% of claims in 2004 – up from 79 per cent  the during the last year.”

Check what cheap life cover you already have before you take out any more.  Do you have any investment policies or does your company pension fund give you any other cover?

The easiest way to estimate how much insurance you require is to work out how much you would need to retain the same level of living over a year and then multiply it by twenty six years.  The minimum amount required should pay off any outstanding debt and and leave a lump sum for your family.

Making sure you get the best deal

When deciding on your insurance policy it is very important to read the guide that most a lot of insurers have of the illnesses and conditions that they cover. It will record everything and should be clear-cut and simple to understand.  You will also need to review the documentation of the main points of the cover which will include all benefits and exclusions.

When people take on the responsibility of a mortgage they are normally counselled to take out critical illness protection but should shop around and not just take the first policy suggested.

If you begin paying these insurances when you are young they are noticeably cheaper, distinctly different to leaving it until you are older, when insurances rises quite considerably.

Insurance premiums can also be reduced by giving up smoking.  Fiona Jackson, head of protection at Thisismoney states “Giving up smoking can save people a significant amount of money as well as hopefully bringing a longer and better quality of life.”

If you quit smoking you can knock as much as a 1 3rd off life, critical illness  insurance and income protection insurance payments because the data that we now have indicates that smoking can bring about severe illness and exacerbates any other existing medical conditions.

You may have to change your policy if your circumstances alter.

By no means feel that once you have bought your policy that you can just continue with your life and disregard it. Always be very aware of the life assurance you have and make certain that, should your circumstances alter, or, is going to change your insurance policy must accommodate these ajustments.  Obvious examples are changing jobs, or perhaps you intend to increase your family; regularly consider everything that may raise your living costs and must be to be covered if you are too ill to work.

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Think about this question ‘Could you afford to pay your monthly financial commitments if illness prevented you from working?’ A large proportion of us would say ‘No’. So without doubt we need to consider taking out insurance against unpredictable events. A typical critical illness policy would settle a tax free lump sum if the insurance policy holder is diagnosed with a potentially life threatening illness. The lump sum can be used in numerous ways. For instance, you could pay off your mortgage, make alterations to your home to accommodate a wheelchair, or simply settle your bills.

The coming months will see a big price rise, so if you haven’t got any insurance cover at the moment, now is the time to sign up. The cost of life cover has come down over the past 12 years. There are various reasons why this has happened. First of all the Aids epidemic, that was expected in 1980-1985 never occurred and secondly the recovery rate of those undergoing heart attacks and cancer has radically improved. These facts have allowed insurers. Protection insurance is regularly reviewed by Insurance Companies, when the number of claims for certain conditions are examined. Following such a review Norwich Union will be amending payments shortly, with the cost of life cover dropping slightly and the premiums for critical illness insurance cover going up. The Insurance Company is unable to say by how much, as the client’s situation and the sum covered fluctuate from person to person, but the increase should not be huge is predicting that there could be a rise of between 30 and 50 per cent in critical illness insurance premiums in the next few months. It also fears that guaranted premiums may either become unaffordable for many, or even cease to exist as a result of the unsound marketplace.

Swiss Re has said that it will not underwrite critical insurance policies from the end of the year as the cover is costing them too much.

The cost of insurance has been put up by two major insurance companies.  A twenty to twenty five per cent risehas recently been broadcast by Scottish Equitable and Prudential. Nevertheless this is very little compared to the unbelievable price increases written into the covers now offered by Friends Provident and BUPA, which fluctuate between 50 to 60%.

It is plain that this trend will be followed by other re-insurers. Fixed rates where the monthly price is held for a specific period, typically ten years, may no longer be offered by insurersInsurance Companies.  In future, paymentswill be reviewed annually, just like motor and home insurance. The outlay for the customer will be much more in the long term. The message is crystal clear. Critical illness cover is becoming more costly so purchase it now to benefit from guaranteed rates and the moderately low premiums being givenat present. Let us wish that you will never have to claim, but statistics indicate that unfortunately many of us will.

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