93 days, and counting!
In 93 days, the world of insurance will change significantly due to new gender equality legislation from the European Court of Justice (ECJ).
On 21st December, new rules will come into play which prohibit insurers from taking gender into account when pricing up an insurance quote. And this will make a big difference.
Life expectancy
When you take out a life insurance policy, you are getting cover which will pay out a lump sum to your loved ones should you die within the term of the policy. So a big factor for the insurer to consider when working out your premiums is how likely it is that you will pass away before the term comes to an end.
In other words, how likely it is that they will actually have to pay that lump sum.
There are lots of different factors to consider. Perhaps you drink a lot – that makes it more likely that you will have some sort of organ damage, which could lead to you dying early, so up go the premiums.
Similarly, your physical fitness plays a part. If you’re overweight, you’re more likely to suffer health issues, so naturally you’ll face higher premiums.
One other factor that has been considered up to now is gender. After all, women have a higher life expectancy than men. The average girl born today will live to be 82, compared to the average boy who will live to 78.
That’s why women, on average, enjoy cheaper premiums – they are simply less likely to die within the term of the policy, making it less likely that the insurer will have to pay out.
An example
If a man wanted to take out a 30-year, £200,000 level term policy (meaning his family would get the same lump sum payment whether he died in year one or year thirty of the policy), one of the cheapest deals he could get would cost him just £10.09 per month from Legal & General.
For a woman, that exact same policy would only set her back £7.69 a month from Legal & General. That’s £28.80 a year difference. Over the course of the policy, he'd spend an extra £864 because he's a male.
What’s changing?
In March of last year the European Court of Justice, in their wisdom, ruled that it was unfair that insurers took gender into account in this way, saying it was a form of discrimination and went against European equality principles.
In theory, that should be good news for men. After all, if gender can’t be taken into account, they should be offered the same premiums as a woman with the same age and risk profile, right? In reality, it’s more likely that women will see their premiums jump, and some industry experts reckon that men’s premiums will rise too!
Get a move on
So if you’re considering taking out any form of protection insurance, whatever your gender, it pays to get a move on, particularly as underwriting can take anything up to 3 months and the policy must be started (on risk) by the 21st December, 2012.
Life insurance is an incredibly cheap piece of cover – just how cheap it will continue to be remains to be seen.