Life Assurance Loading Reasons and Solutions

Why does my mortgage protection cost so much?

So those scoundrels at Aviva, Irish Life, Royal London, New Ireland or Zurich Life have increased your premium, eh?

And you’re wondering why?

Let me explain:

There are a variety of reasons why your life assurance premium has been loaded/increased, such as

• Build – Body Mass Index outside the normal range.
• Physical or mental health – current issue or previous issue
• Family history – hereditary illness in your family.

The underwriters believe there’s a greater risk of you claiming on your policy than someone in perfect health.

You see, life insurance providers have access to massive amounts of data on all types of illnesses and how many claims each illness causes.

Don’t take it personally. You’re just a number with a certain set of characteristics that they slot into a certain risk category.

1. If you’re 45, overweight, and a smoker, the insurer will put you into one category.
2. If you’re 45, normal weight and a non-smoker, you’ll go into a different category.

On average, the chances of a claim (the risk) will be higher in the first group.

For this simple reason, people in this group will pay a higher premium to make up for this risk.

What does a +100% life assurance loading mean?

Someone in perfect health will pay the normal price or what’s known as the ordinary/standard rate.

If you get a life insurance quote on our website, we’ll show you this ordinary rate.

But if you have a health condition, the underwriting team at the insurer may decide to load your policy/increase your premiums.

The minimum permanent loading a life insurer will add to your policy is +50%; the maximum it will apply is +300%.

If the insurer believes that your health issues would result in loading of over +300%, they will decline.

In real terms, how do loadings work?

A life insurance loading of +100% means the insurer will add around 100% to the normal price.

So if the normal price is €31.87 and you receive a loading of 100%, you will pay €31.87 + (100% x €31.87) = €63.74

A 150% loading would mean a final premium of around €31.87 + (150% x €31.87) = €79.67.

What is a per mille loading?

Alternatively, the insurers add a per mille loading which is usually temporary but can be very high. The insurer will add a per mille loading for several years. Then the insurer removes the loading, and your premium reduces back to the ordinary rate. A recent example may help clear this up:

Sarah had a GIST (Gastro-Intestinal Stromal Tumour) with a total Gastrectomy four years ago. Sarah’s bank declined her application. However, three of my insurers could quote, but those quotes varied enormously:

• Insurer A: €7.5 per mille for three years
• B: €7.5 mille for five years
• And C: €10 per mille for three years

Sarah needed €300,000 cover, so her additional premium was €7.5 per mille / per thousand euro of cover = €7.5 x 300 = €2,250 extra per year for the next three years. In 3 years, her premium will reduce to the standard rate of €27 per month.

Are life assurance loadings fair?

My grandfather was a smoker and lived until 87.

If he had life insurance, as a smoker, he would have paid higher premiums all his life but, in the end, would have outlived his policy.

On the other hand a friend of his, who didn’t smoke, could have died at 60 paying lower life assurance premiums than my grandfather.

Is that fair?

No.

However mortality data will prove that my grandfather should have died at a younger age.

Statistically, smokers die at a younger age than non-smokers.

And insurers base everything on data but of course, there are outliers like my Woodbine smoking Grandad Pat!

It might not be fair that you’re classed as a bigger risk just because you have a certain illness, but for now, that’s the way it is.

What is a base monthly premium?

Can you avoid a life assurance loading?

If an insurer has increased your premium, make sure that the insurer is the most sympathetic insurer for your health issue.

For example, if you have a BMI of 35, one insurer will offer you the normal price, whereas other insurers will load your premium.

As always, shop around or use a specialist broker who knows which insurer is best for your health issue

I hope that’s cleared things up.

If you’d like me to discuss your particular case with my underwriters, anonymously, please fill in this short questionnaire and I’ll be right back.

Nick McGowan
lion.ie | making life insurance easier