Friday, May 1, 2009

An Insurance Product of Last Resort

Every now and again an insurance product is introduced to the market that causes me to scratch my head and ask, "Why bother?". One such product is the new '50+ Easy Life Cover' from Irish Life.

This product is aimed at the age 50+ market and is designed to provide a limited amount of 'Life Insurance' for a fixed regular premium. There are no medical questions so you are guaranteed to be issued with a policy irrespective of your state of health. The premium is payable until a claim arises or age 90, whichever is the earliest. Smokers and Non-Smokers are charged the same premium.

Sounds great, as long as the premiums charged offer good value for money. Right?

If you die in the first two years of the policy, the sum insured would not be paid out unless it's as the result of an 'accidental' death. If you die from anything other than an accident in the first two years, your estate would receive a refund of the premiums paid.

A typical example of the cost of this product would be as follows. A Female aged 60 would pay €30 per month for a Sum Insured of €7,343. At first glance that looks okay, but when you consider that the average life expectancy of an Irish Female is 81.6 years, I'm not sure where the value lies ie. €30 X 12 X 21.6 = €7,776

In my opinion it would be more prudent to apply for a 'Guaranteed Whole-Of Life Insurance' policy by completing a full proposal form. If further medical evidence is required by the insurer it is not going to cost you anything for a Medical Attendants Report or Full Medical Report. The insurance company pay for these.

A relatively healthy, non-smoking female aged 60 would expect to pay a premium of about €18 per month for a sum insured of €7,343 with this alternative type of policy. The cover would apply from the date the policy is issued.

In summary, if you have to buy the '50+ Easy Life Cover', buy it as a last resort and pay particular attention to the exclusions that go with it.


Liam D. Ferguson said...

Hi Gerard,

Surely the target market for this product is people who have some form of illness or ailment that would make it difficult for them to get cover if fully underwritten.

I don't really agree with your point about value for money. It's not a savings plan, so the premium is for insurance. I have Term Assurance policies on my life and if I survive, I get nothing back. But I don't consider that poor value for money. I paid an agreed amount for the insured sum.

Pat Quirke said...

Same old story, if it looks too good to be true, it probably is.

Gerard said...

Hi Liam,

I would be more inclined to think that the target market are the financially illiterate. That said, I have no idea why ILAC have deemed it a "non advise" product and then send it to Advisors to sell it. I think that they wanted to do a solo run with it but were afraid of offending the advisor market.

IMHO, there comes a point when a premium for an insurance policy does not represent value for money, in terms of the sum insured. I just feel that the policy is weighted heavily in favour of the insurance company.

Would you pay for a Term Insurance policy where the premiums amount to the sum insured over the term of the policy?

Like I said, if you have to buy it, do so as a last resort and even then you should look at the alternative from An Post as it may offer 'better' value for money.