Review Life Insurance Quote

Typically an insurance policy is taken out in case something happens to the item(s) insured. You can insure almost anything that you can think of from, cars, boats, and horses, pets to travel insurance, golf equipment and caravans and many more. An insurance company is a provider that offers cover in return for a small premium.

An insurance premium is generally based upon the item you are insuring value, the risks that come with it for example it being stolen, and the cost of fees such as veterinary costs and replacement values. Generally an insurance company provider takes into consideration the previous year’s claims statistics to come to the forthcoming year’s policy premiums.

Sometimes an insurance company is the underwriter of the policies that they provide and sell to the public but more often than not the provider of the insurance gets the policies they sell underwritten elsewhere.

Charges are taken in three basic forms. First there is the deduction from the premium to service the cost of life assurance cover and the office’s expenses. This will vary according to age because of the varying cost of the life cover. The amount left after this deduction is the amount allocated to units. It is usually expressed as a percentage - a contract may specify that 95% of each premium is allocated to units (so that of a £10 premium, 50p is being deducted). Then there is the initial charge on the units allocated. In most cases this is 5%, but it may in some cases be lower. Then there is an annual charge on the value of the units attributable to the policyholder. This may be as little as 0.5% or as much as 1.5% p.a.

In combination, these different charges can produce quite different effects. For example, one policy may allocate 82.5% of the premium to units in the first year and 100% thereafter, with an initial charge on units of 3% % and an annual charge of 0.5%. Another may allocate 95% of premiums to units in the first five years and 100% thereafter, with an initial charge of 5% and a yearly charge of 3.5%. Assuming the same 7.5% p.a. rate of growth in investment values, the former would produce a £3,000 maturity value after 15 years at £10 a month while the latter would produce only £2,700. As far as the life insurance policyholder is concerned, the lower the overall level of charges, the better.

A special type of unit, often called a capital unit, may be allocated for the first one, two or three years of a policy. A note tucked away in the literature may tell you that these units embody an extra management charge of 2% or 3%. Beware. This charge is not a once-for-all addition to the initial charge on units. It is an annual charge calculated on the value of the units for each year the policy is in force.