NEW Ireland has introduced a new life assurance aimed at people aged over 50 which guarantees whole of life cover without any review or increase of premiums. Up to now, say brokers, only one other company, Scottish Provident has offered such a guarantee of cover without review. Both Norwich Union and Guardian Life offer similar cover, with a caveat that if their declared bonus rates go into decline they may be forced to review the premium.
The New Ireland policy is aimed at those who find themselves without adequate cover at a time of life when premiums are becoming increasingly expensive. The policy is designed to address a fundamental weakness in some other whole of life policies - that without either regular reviews of the premiums, or a built-in guarantee - there is a danger that the policy will bomb-out, insurance jargon for an investment fund which no longer has sufficient value to meet the cost of the insurance cover.
Minimum premiums are set very low for this product and reflect the lower end of the price market: £20 per month will buy a 50-year-old £8,239 in life cover, the same amount will buy a 60-year-old £4,723 of life cover and a 70-year-old will purchase cover of £2,495 for a like sum. These modest amounts should provide an extra bit of security for dependents or in the case of older people who have not even made provisions for their funeral arrangements, some peace of mind about a dignified send-off.
Intermediaries will be pleased at the launch of this new policy because it offers them and their clients more choice when purchasing true, whole of life cover. With respect to value, we were told the New Ireland product is behind Scottish Provident which offers higher cover for the same premiums. Someone seeking £50,000 of whole of life cover at age 50, would pay Scottish Provident £80.40 a month while the same cover would cost £112.50 at New Ireland. New Ireland's position is that the product is quite a new one and that they are pitching it at a lower premium market. "It is early days yet for us," said the New Ireland spokesman.
Anyone who has a whole of life policy should take the time to review it, especially if you are under the impression that the premium you began paying when you took out the policy will be sufficient to maintain your cover, or the underlying investment fund (which can be encashed) literally until the day you die.
In recent years an increasing number of people have discovered that several years into their policy its underlying investment value is being reduced to support the life cover.
The reason for this is because the value of the monthly premium paid out by policyholders no longer reflects the increasing age and risk profile and investment units in the policy fund are being sold to pay for the life cover. Eventually, no money will be left in the fund and your life cover will be cancelled unless you agree to pay a new premium.
This effect can occur as early as 20 years into some whole-of-life policies and many people are faced with a new premium that is so expensive that they cannot maintain the policy. By that stage, ordinary term insurance (in which there is no underlying investment value) is also too expensive.
