Women's insurance premiums set to soar

Katie Mundell is an Independent Wealth Manager with Pacific IFA Ltd

 We all know that there are many reasons why it's great to be female. Although advantageous rates on life assurance products may not be the thing that immediately springs to mind.

Because on average women live longer than men, life assurance is significantly cheaper. Recent research conducted by a comparison site showed that some insurers are charging men up to 35 per cent more than women for the equivalent life assurance.

However, the EU gender directive which comes into force on 21 December 2012 is about to change all that.

The directive makes it illegal for an insurer to use gender as one of the risk factors when determining an insurance premium. However insurers are more likely to raise premiums for women than decrease those for men. If women were to find their premiums moved in line with the levels currently offered to males, the increased cost could run into several thousand pounds over the term of the policy.

On the flip side women are currently paying more for income protection (IP), formally known as permanent health insurance (PHI). The insurer LV= recently concluded that on average women pay 65 per cent more than men for IP.

This type of insurance policy provides you an income if you're unable to work due to injury or illness and usually pays out until retirement, death or your return to work. IP payouts are usually based on a percentage of your earnings with 50 to 70 per cent being the standard amounts and payments are paid tax-free.

Income protection policies pay out once a pre-agreed period has passed, generally ranging from one to twelve months after you put in a claim. However, due to the gender directive the good news is that insurer (LV=) estimates that premiums for female applicants will fall by on average 28 per cent from January 2013.

To add to the overall confusion regarding protection polices, the cost of criticali Illness cover (CIC) will also soon be affected by another new rule in addition to the EU gender directive. This is known as the income minus expenses rule (or I minus E), life companies will no longer be able to offset costs of selling life assurance/critical illness cover against investment income.

This means that the cost of these types of cover will increase for both sexes by the early part of 2013 with some industry analysts predicting an increase in premiums for women of around 16 per cent.

So what is critical illness insurance? It's designed to ease financial pressures by paying a tax-free lump sum if you become seriously ill or totally disabled. Originally known as 'dread disease cover', critical illness insurance pays benefits on the diagnosis of certain specified critical illnesses.

The range of diseases covered has increased to more than 30, though contracts differ from one company to another. However all policies cover seven core conditions: cancer, coronary artery bypass, heart attack, kidney failure, major organ transplant, multiple sclerosis and stroke. They will also pay out if a policyholder becomes permanently disabled as a result of injury or illness.

I would suggest that with so many rule changes over the next few months affecting premiums across a range of protection policies, there has never been a more appropriate time to review both your personal and business protection requirements.

Furthermore, with a Daily Telegraph article concluding that one in every five claims for critical illness cover is breast cancer related, and about 46,000 people diagnosed each year, now is the time to make sure you have the right protection in place both personally and for your business.

On the personal front this could include both mortgage and family life assurance policies (either stand alone or those which have critical illness or income protection benefits built in).

In respect of business protection this could include shareholder protection, key person cover or life assurance set up to protect a commercial mortgage.

When reviewing your protection requirements I would always recommend you seek the advice of an Independent Financial Adviser (IFA). However, some women delay reviewing their life assurance and protection needs because part of the process will often involve them going through some medical questions (normally with a male financial adviser) which makes them feel uncomfortable or embarrassed.

If this is the case try and seek the advice of a female IFA. In my experience women feel the same about female IFAs as they do about female GPs; they can be more open and honest when discussing personal issues. To contact a female adviser I would recommend you visit our PacificFemale IFA website for details.