There may be savings to be made when you review your old policies. Neil White reports

THE chances are that if you haven't reviewed your life assurance cover in the last few years then you could be paying considerably more than you need be.

Five years ago insurers were still very concerned about factors such as Aids and what impact this might have upon future death rates, and this concern was reflected in life assurance premium rates at the time.

With time these concerns have reduced somewhat and together with stern competition between insurers it has lead to a steep fall in life assurance rates.

These reductions cannot go on forever.

So now is an ideal time to review those old policies and see whether there are savings to be made.

To give you an idea of the scale of these reductions, five years ago the cost of £100,000 of life cover over 15 years for a non smoking male aged 50 was around £58 pm, today that cover can be purchased for around £30 pm. In this scenario if you were to keep paying the same premium of £58 pm you would get almost £200,000 worth of cover on the new rates. Obviously cover for younger ages is cheaper still.

Now your needs may well have changed over that five-year period, you may not need as much cover as before if the kids have left home for instance, or the more likely is you should probably have more to reflect increases you may have had in income and also to reflect the rise in the cost of living in general. One of the main reasons people take out life assurance is for the peace of mind that comes with knowing if anything happens to you your family will be able to use the sum paid out to replace some of the household income lost by your death.

However, whilst the cost of cover has come down steeply the amount of income you can generate from a given cash sum has also fallen sharply.

If the purpose of your life cover is to provide your family with a means with which to derive an income then the level of cover required needs to be increased to reflect the lower income it will produce.

Whereas five years ago you might have hoped to generate an income of £7,000 or so from an investment of £100,000, today it is more likely you may only generate around £4,000. Therefore the amount of life assurance needed now to provide your family with the same £7,000 per annum income has risen to around £175,000.

Having delved around under the stairs and finally found those old policies, how easy is it to review your cover? Start by asking an Independent Financial Adviser (IFA) to look into what you have and suggest the most appropriate amount and type of cover that most fits your circumstances. There are different types of cover available and your IFA is the person best placed to provide the cover that fits your needs at the most competitive of rates.

An application form will need completing and be submitted to the insurer, who will then issue terms in due course.

It is most important that you do not cancel your existing cover until you are sure your new cover is in place as any unexpected findings or alterations in your health since your original application may render your new application uncompetitive, or worse, leave you without cover at all.

So to summarise, it is important to review your life assurance cover regularly and you never know, it might actually save you money as well.

Neil White is a director of Kendall White Millar

Published: 30/01/02