Benjamin Franklin once said "in this world nothing can be said to be certain, except death and taxes". If he had been an insurance adviser, he would have said "…death, taxes and insurance premium increases".
The majority of our clients accept their annual insurance premium increase without question (but often under duress!), occasionally, we get asked …. why?
The majority of cover we put in place is Rate For Age (RFA) structured policies. RFA premiums increase every year, in line with your advancing age (makes sense right?!). Obviously, the older you get the more likely you are to claim, so in turn, the more your insurance company charges you for your benefits.
Level Premiums do not increase with age for a set period (i.e. 10 years, to age 65 or to age 80). At the end of the level premium period you will encounter a very large increase.
Another consideration is the benefit indexation option - this increases your benefit each year to keep it in line with inflation. If your benefit amount increases, so does the premium - one way you can reduce your insurance costs is to decline the indexation at the policy anniversary.
So, let's put it into simple terms:
- Your insurance gets more expensive as you get older, because you are more likely to claim.
- You can lessen the annual increase with a Level Premium option, but be prepared for a large increase when you get to the end of a set time.
- Indexation increases your benefit, which also increases your premiums.
As always, get in touch with your adviser if you have any questions regarding your insurance cover.
