What are the premium options when taking out a Critical Illness Policy?
There are three options you can choose from when deciding upon taking out a critical illness policy.
Firstly you could choose to take out the policy with a guaranteed premium. This would mean that your premium would stay the same throughout the term of the policy. You could always choose to increase your sum assured at any point throughout the policy if you wish, therefore this would then increase your premium or perhaps decrease your premium if you wanted to decrease the sum assured.
Another option is to choose a reviewable premium where the premium may change at certain points throughout the term of the policy. For example the monthly premium may increase, decrease or the stay the same normally on a five yearly review by the provider. The reason for this is that when you get an offer from the provider you choose for example you could choose from providers such as AXA, BUPA, Scottish Provident, Legal and General, Scottish Equitable, Friends Provident, Liverpool Victoria or Norwich Union they will make assumptions based on the future. Such assumptions could be claim costs or investment returns and if these were to decrease from their expectations then the premium may reduce slightly on the other hand if such factors were to be higher than expectations then premiums may increase slightly.
Finally the last option is renewable premiums where by the premiums could increase or decrease on each renewal throughout the term of the policy. This can change with no need to gather any further medical information based on your age and also the rate of the premiums at that moment in time. It is normally apparent that your premiums would increase at each renewal because you would be older than when you first applied. The provider will tell you typically 60 days before the premiums are due to change.When you decide to take on a critical care policy, there are generally three options that you can look into. Choose one that best suits your needs.
To begin with, you may think of looking into a policy that gives you a guaranteed premium. What this means is that the premium you pay will remain the same throughout the year. It will not be affected by the vagaries of the economy. The advantage you will have in this option is that you can choose to increase the amount assured in the event of an incident. If you decide to do so, this will be the only reason for the increase in your premium. The same principle works the other way round too. You could choose to reduce the amount assured at the end. This would mean a reduction in the premium that you are paying at present.
When you are shopping for a critical care policy, there is another option that you can look into. This is called the reviewable premium. What it means is that you can periodically look into the premium paid and alter the amount based on certain conditions. An example would be to look into a five-year review period. At the end of five years, you may choose to decrease, increase or continue with the premium that you are paying. The review will be done by your service provider. The reasoning is that when you agent offers you a choice of service providers, these providers give you options based on certain assumptions that they make. This could be in relation to various aspects such as the claim costs or even investment returns. At the end of five years, your service provider could review the conditions of the initial offer and accordingly increase or decrease the amount payable as premium.
Another option that you could look into is the renewable premiums. Each year when your policy is up for renewal, you could look into various criteria and increase or decrease the premium payable accordingly. These changes are accepted into the policy without the need to undergo additional medical tests. These tests are often conducted based on the age of the candidate, but will not be applicable in these cases. However, in this option you have to keep in mind that no matter what the revision, premiums tend to increase slightly as you grow older and this will reflect in your premiums.
Your service provider will essentially let you know two months in advance on the change in the premium payable when your policy is up for renewal.