Go Direct News - Cost of life cover halves in a decade

19 Apr 2024

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Cost of life cover halves in a decade

Research from moneyfacts.co.uk has revealed the extent to which consumers have benefited from the price war that has engulfed the term assurance market in recent years and warns that some premiums may have bottomed out.

Whilst consumers have seen the cost of other forms of insurance such as motor insurance and household insurance spiral, average term assurance premiums have in some cases halved over the last decade. Non-smokers have been the biggest beneficiaries with the average male premium down by 53% since July 1998 and the average female non-smoker premium plummeting 48% (see Table 1).
In monetary terms this represents a staggering £3,018 saving over a 25-year term for a male and £2,232 for a female.

Smokers have also benefited from cheaper cover with the average male smoker rate 48% lower (a cost saving of £3,780) and the average female rate down 45% (a cost saving of £2,724) since July 1998.

Table 1: A decade of change - Average level term assurance rates July 1998 – July 2008 - £100K sum assured, 25 year term, age 30 next birthday
	Non Smoker		Smoker
	Male	Female	Male	Female
July 1998	£18.85	£15.31	£26.00	£19.84
July 2008	£8.79	£7.87	£13.40	£10.76
Overall 10 year Change	-53.3%	-48.5%	-48.4%	-45.7%
Cost saving	£3,018	£2,232	£3,780	£2,724
Source: Moneyfacts.co.uk – 23.7.08

However, there are signs that for non-smokers the era of falling premiums may finally be coming to an end with premiums increasing slightly over the past 12 months (see Table 2). For a male non-smoker aged 30 next birthday the average premium for £100,000 of level term assurance has risen from £8.71 to £8.79 whilst for a female the monthly cost has increased from £7.34 to £7.87.

In contrast, smoker rates have continued to decrease, falling by an average 2.2% for males and 1.6% for females over the past 12 months. Nevertheless, smokers can still make considerable savings by kicking the habit, with rates for non-smokers around 35% cheaper.

Table 2: Last 12 months - Average level term assurance rates July 2007 – July 2008 - £100K sum assured, 25 year term, age 30 next birthday
	Non Smoker		Smoker
	Male	Female	Male	Female
July 2007	£8.71	£7.34	£13.71	£10.94
July 2008	£8.79	£7.87	£13.40	£10.76
1 year Change	0.9%	7.2%	-2.2%	-1.6%
Source: Moneyfacts.co.uk – 23.7.08

Richard Eagling, Editor of Investment Life & Pensions Moneyfacts commented: “Longer life expectancy coupled with increased competition in the term assurance market has driven prices down to all time lows, but for non-smokers there are signs that rates may have bottomed out. Consumers looking to take advantage of the huge savings on offer should proceed with caution as life insurance companies assess risk differently. Some policies are as much as five times more expensive – so why waste money needlessly?”

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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