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| 1955: Run for Cover - Nicholas Ray |
The cost of new life assurance, critical illness and income protection policies is expected to rise. This is due to the European directive forcing insurance companies to hold more reserves (known as Solvency II). The planned implementation date is 1st January 2013, but it is widely expected that there will be a 12-month delay due to the current economic conditions. Premiums are expected to increase between 4% and 10%. So it would seem that reviewing any cover you have now may be cheaper than delaying a protection review.
Currently a £500,000 level term assurance policy lasting until age 65 for a non-smoker male aged 45 is quoted between £50.93 a month to £71.88 a month. A difference in cost of £5,028 over 20 years for exactly the same cover. This is for a policy without any commission (which is how we arrange protection policies). Alternatively another IFA - even an RDR compliant one, can still receive commission on these products. This would increase the cost on standard commission terms to a range in quoted premiums from £67.23 to £95.22 a month (32% more). In hard cash costs, that's an extra £3,912 - £5,601 for exactly the same thing. I take the view that clients would prefer to pay a fee, reduce the premiums and pay as little as possible for protection and use the savings more productively.
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