A Guide To Life Insurance - Further Term Assurances Example ....

 

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Further Term Assurances Example...

John Brock took out a convertible term assurance over 15 years with a sum assured of £220,000 when he was aged 30 and in good health.

Ten years later he suffered a coronary thrombosis.

This meant that if he had had to take out a new policy in the ordinary way the company would have required a medical report and would have charged an increased premium for any policy he wanted. (It could even have refused to provide any further cover.

) For a 20-year with profit endowment this "loading" could have increased the annual premium for a £200,000 sum assured from £2550 to as high as £2700.

But by exercising his convertibility option, he is able to take out the policy at the normal premium rate.

There is usually a maximum age at which conversion can take place as well as a time limit within the term of the original contract itself.

The value of convertibility is greatest for the young married person who cannot now afford a with profit policy but would like to take one out when his or her earnings increase (possibly in connection with house purchase).

If one is sufficiently affluent to be able to afford both the protective life cover one needs and a long-term with profit policy, there is less benefit to be derived from conversion options. But the low cost of the option to convert makes it well worth having for many people, if only because of the eternal uncertainty of the future.


2015 - Guide To Life Insurance - Further reading ....

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Read On: click here for Pure Protection Policies


While it is a reasonable exercise to compare pure protective insurance policies in relation to benefits provided per £2 of premium, things are not quite so simple with convertible term.
Here the performance of any future with profit policy into which one converts is also relevant.
The cheapest convertible term policy in terms of benefits per £2 of premium may be issued by an office which does not do very well in investment terms and thus produces lower maturity values........ see: click here for Pure Protection Policies


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