We get this question a lot: "why did my premiums increase?". It can be frustrating seeing your premiums go up each year. As financial advisers, we have no control over your insurance premium as it is set by the insurance company. That said, we can help you understand why premiums go up and manage the cost.
Typically, there are two main factors that determine an increase in insurance premiums; these are whether you have cover based on rate for age premiums and if you have selected to have your cover linked to the Consumer Price Index (CPI).
Rate for age premiums
A rate for age premium option means that your premium increases each year in line with your age i.e. the younger you are the cheaper your premium will be, as from the insurers point of view, the chances of you making an insurance claim is lower when you are younger. On the other hand, as you get older the risk to the insurer increases and this is reflected in your premium.
An alternative to a rate for age premium is a level premium, where your premium remains the same for a specified duration. With level premiums you often pay a higher premium initially when compared to a rate for age premium, but you can save money throughout the life of the policy. If you are interested in finding out more, please contact us.
If your policy is CPI linked, your sum assured will increase every year to keep pace with inflation. For example, if you had cover of $100,000 and inflation was 3%, your sum assured would increase to $103,000. This option ensures that the purchasing power of your sum assured is not depleted. Your premiums will increase to reflect the new sum assured each year.
So how do I manage my premiums?
For clients that are wanting to manage the cost of their premiums, there are various options which can help with costs in the short or long term. These options can be discussed with your adviser to ensure they are right for you. Please email us on firstname.lastname@example.org or call us on 0800 500 510.