Understanding life insurance - chapter three

The first element in the equation is the rate of mortality. In other words, the number of people in a demographic data that can be expected to die in a given period. Mortality tables are fairly standard with life insurance companies, to use the same base numbers. As an extreme example, 100% of people aged 20 to 40 in the United Kingdom can expect to die in the next 150 years. But what is for the next 10 years? There are several factors that will affect it, including the current health, family health history, occupation, lifestyle, sex, etc. If we look at a group of 100 men aged 39 years who are overweight, smoke and a stressful occupation, it would be fair to assume that more this group die over the next 10 years that a group of female aerobics instructors aged of 25 years. Historical analyses of these demographics result tables of mortality of the insurance life company that are used to assess the risk. The life insurance application forms ask lots of questions to determine what category you integrate rather than assess your individual mortality rates.
The insurance company will publish a premium standard for all men, say, 30 years, but will apply a "rating" if their occupation or medical history, for example, putting them in a higher risk category. This rating is only known to you after your application was evaluated by the life insurance company, underwriting Department. Although the subscription must be quite standard, in practice some life insurance companies may be more stringent than those in the evaluation of risks. Independent financial advisers will have experience of the different companies underwriting criteria and are best placed to recommend appropriate products if your personal situation is not "standard". Ratings to work in particular can vary considerably between life insurance companies,
The cost of life insurance company are an important factor. One of these expenses is the cost of the marketing of their products and will include advertising and running one for example sales force. These costs can be substantial and are included in the premiums from life insurance products. Companies that distribute their products through independent financial advisors will be tend to have costs of direct marketing lower than these companies dealing directly with the public. They tend to compete on a basis of cost leading to reduce premiums. The ability of the company to have effective administration and the optimum number of staff dealing with requests and claims is reflected in the supplements. Commission paid advisers recommending products, varies between business and it's an additional cost to be incorporated into the final premium.
In summary, price consists of the cost basis due to a mortality rate over the operating costs of the supplier, plus costs of advice. So if we take the advice of the equation, will save you money? Perhaps, but these companies to market their products without advice will have more marketing costs, which will compensate for the removal of the cost of advice. Without notice, you may find that the product is not the most appropriate to your individual situation. In the next article I will explore the issue of advice and whether it can add value.