How to review your insurance policies
From 21 December, new EU legislation will come into force that effectively bans insurers from taking sex into account when pricing policies.
But while some policyholders might see the cost of their cover fall slightly, the majority of us can expect to see costs rise. To avoid any nasty surprises, now is the time to review your policies.
CHECK WHAT YOU'VE GOT
It might be tempting to bury your head in the sand and deal with the changes when they actually come into effect but it's vital you sit down and review your policies.
You should list all the policies you have, and all those you are likely to take out in the next year. The most important areas to look at are income protection, life and critical illness cover, car insurance and annuities.
ARE YOU GOING TO LOSE OUT?
Next you need to work out how the changes will affect you personally. There is a lot of uncertainty in the market as to how much prices will change after the new rules come into effect, but broadly speaking it is worth looking into whether your rates will go up or if you would benefit from taking out a policy early.
Under the new rules, women are likely to experience higher premiums when taking out car insurance policies as well as on their life and health insurance.
GET SOME ADVICE
If you have been considering a new policy, it might be worth speaking to an adviser about taking it out before the changes come in to avoid the price hikes. It can take a while to arrange a policy so it's important to act fast.
But remember, don't rush into buying anything because you are worried you will miss out – choosing the right policy is more important than just opting for the one with the cheapest premiums.
Income protection insurance
If you can’t work in the event of sickness or illness, income protection insurance aims to give you an income, with the amount of income set by you up to 75% of your gross (before tax) income with the premiums varying by how much of your salary you want to cover, as well as your age and health and when you want to start receive any payouts. Any payouts from income protection insurance are tax-free and usually continue until you recover, reach your selected pension age or the period of cover specified in the policy comes to an end. Income protection insurance does not cover redundancy but you can buy it as a bolt-on.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.