Now Insurers Could Have Every One Take A Medical

Category: Finance, Insurance.

Insurers charge a premium and when they receive that premium they use it to build up a fund. In addition the fund must be sufficient to pay out claims( deaths) .

That fund then earns interest however the insurer incurs some costs not only on writing the business, selling the policies but also on administering the fund. The life insurance companies use mortality tables which help them estimate when a group of people may be expected to die. So if all people were the same then insurers could manage the fund and charge premiums to make certain that the fund always had enough money in it to pay the deaths that would be expected to occur that year. Insurers can not tell when any one person will die, but they often they can say with some level of certainty that of 100 people aged x next birthday one person will be expected to die within the next twelve months. However not everyone is the same. Some have illnesses. Some are fitter than other.

Some have had accidents. Some smoke whilst others drink. Some are over weight. To get a better idea how fit people are insurers ask medical and life style questions. Now insurers could have every one take a medical. From this information they can load( increase) premiums for those who they believe present the greater risk. However medical reports are expensive and would slow the process up.

These limits may be varied by answers given to the medical and life style questions. So insurers set a financial limit where customers who want a certain sum insurance and above have to have a medical and those below do not. Insurers also have to make certain that their premiums reflect the type of cover they give. Also each insurer will have different customers selecting that insurer. Including terminal illness cover may not increase the risk much more but over a period of years and over 1, 000 insured s it must increase the cost of the risk by a certain amount. Maybe one insurer will attract young people.

Some insurers may attract customers who live north of Watford whilst others those who live in the London area. Another might attract office workers whilst another might attract those in the medical profession. If you add enough diversification then you can see how it is easy for premiums to differ from one insurer to anther. Their customers may live in different locations, they have earned different investment incomes, use different mortality tables, have different administration costs, have different aged customers in their fund, have higher or lower administration costs and offer different cover options. They will attract different types of customer. Not only will each insurer differ in how profitable they are, they will also differ in how they calculate their premiums, at what point they require a medical, how much they think each additional cover option should cost and also which customers they want to attract and which they want to avoid.

The life insurance premium you get charged could vary substantially from insurer to insurer. The end result is a very sophisticated market which is also highly competitive. Why pay more for the same cover or even worse why pay more for less cover. So the first piece of advice I can give is shop around or better still let someone shop around on your behalf.

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