I wrote recently about how insurance premiums of all sorts will have to be harmonised for gender from 21st December 2012 following a European Court of Justice ruling. So from then on it will be illegal to charge different premiums for men and women for insurance.
But it will never happen!
As it turns out, 21st December 2012 is the day that the world ends. This is the day that the Mayan calendar ends and according to many highly respected sources, it will be the date that the world will come to an end. Google "End of World 2012" if you don't believe me. The internet never lies.
Oh those cunning Europeans.
Monday, 7 March 2011
Thursday, 3 March 2011
TRS online only...and Revenue on YouTube
I see that Revenue are no longer accepting paper applications for Tax Relief at Source (TRS) on new mortgages - TRS must be applied for online. That might prove troublesome for people who aren't that comfortable with the web, don't have unrestricted access to the web etc.
However, Revenue have produced a few snazzy new videos and published them on YouTube to help people through the process.
You can get more details of TRS in general by clicking here and watch their videos by clicking here.
Tuesday, 1 March 2011
Unisex premiums for insurance deferred
I blogged last week about today's European Court of Justice hearing in relation to whether or not men and women could be charged different premiums for various types of insurance. This includes life assurance, income protection cover, car insurance - any type of insurance where gender is a factor in the price.
Well the Court today decided that gender-based pricing is not in keeping with EU law. BUT they have permitted an extension such that the current pricing methods can continue to apply until 21st December 2012.
No doubt our insurance companies will be poring over the full text of the judgement in the coming days to see what needs to be done. But it's business as usual for now...
You can read the press release here.
Well the Court today decided that gender-based pricing is not in keeping with EU law. BUT they have permitted an extension such that the current pricing methods can continue to apply until 21st December 2012.
No doubt our insurance companies will be poring over the full text of the judgement in the coming days to see what needs to be done. But it's business as usual for now...
You can read the press release here.
Friday, 25 February 2011
Men and Women are different, you know
Insurance pricing relies heavily on statistics. Men pay more for life insurance than women because the statistics show women tend to live longer. Women pay more for Income Protection because the statistics show that women tend to suffer more medium and long-term illnesses than men.
However, last year the Advocate General of the European Court of Justice claimed that it is legally inappropriate to price insurance products according to a person's gender. Next Tuesday, 1st March 2011 the Court is due to rule on this issue.
Depending on the ruling, this could mean that males and females get charged the same for insurance and assurance products going forward. It could even mean that existing policies need to be re-priced to harmonise for gender, although that would be a massive and costly undertaking, with potential challenges from people who have fixed cost contracts.
My guess would be that in the short term, insurance companies are unlikely to bring prices down. What are the bets we see costs of life insurance going up for women and costs of Income Protection going up for men, if rates need to be harmonised for gender?
Saturday, 19 February 2011
Reviewable (me) Whole of Life
There's a particular type of life assurance product that has been on the market since the 1980s known variously as Reviewable Whole of Life Assurance, Unit-Linked Whole of Life Assurance and Make Extra Commission for the Salesman Assurance. Most life assurance companies have sold this type of policy at one time or another; some still do.
The basic idea of this type of policy is usually that you pay a premium, often monthly, and your premium pays for life assurance cover - a lump sum in the event of your death - and also buys units in a fund, providing you with a lump sum that you can cash in after some years. So far so good. The sales pitch usually focuses on the fact that it's whole of life, (meaning that the policy doesn't expire at any fixed date and you can therefore choose to keep your life assurance cover for as long as you need it) and that unlike other types of life insurace policies it acquires a cash value, so you can decide to stop the policy if you do decide you don't need the cover any more and can cash it in. The inference is generally that this is better than paying into a policy that only pays out on death and will expire at the end of the term if you're still alive - "dead money".
Here's a list of reasons why I don't like this type of policy and wouldn't sell one to an enemy, never mind a client.
(1) Review clauses. While the policies can theoretically continue for the rest of your life, there are always premium review clauses - often after 10 years, each subsequent 5 years and when you reach age 70, annually. At these reviews, the life assurance company can put up your premium to maintain the same level of cover or can ask you to reduce your cover if you want to continue paying the same premium. The older you get, the more frequent the reviews become so that eventually you'll be asked to pay so much to maintain your life cover that it just won't make any financial sense. That's not true "whole of life" cover.
(2) Variable cost of life cover. Aside from the periodic reviews, the cost of the life cover is not fixed. Let's say you start a policy paying €100 per month and at the outset €50 of this is paying for your life cover and €50 is buying units in the fund. This 50/50 split is not fixed and as you get older, the split internally will change without you being notified, so that it could be 60 life assurance/40 fund, 70/30 and so on, while you still pay the same €100 per month.
(3) The policy can eat itself. If the internal split between the cost of life cover and the amount diverted into your "savings" fund swings so far in the direction of the life cover that the life cover cost actually exceeds the monthly premium you're paying, the policy can perform a feat that even Hannibal Lecter would have baulked at - it can start eating itself. So going back to the example above, if you're paying a premium of €100 per month and the internal cost of life cover eventually exceeds €100 per month, the policy can start eating into the fund you have accumulated to subsidise the cost of life cover. Over time, the cash value of the policy gets eaten away and can eventually dwindle to nothing.
So my advice is to avoid these reviewable whole of life policies like the plague. There are alternatives. Several companies offer Guaranteed Whole of Life cover - life cover at a guaranteed, fixed cost for the rest of your life. It's expensive, but remember that at some point the policy WILL pay out the life cover and you have complete transparency and certainty around what you're paying, now and into the future, and what you'll eventually get.
Anyway, most of us don't need Whole of Life cover. For many people, the need for life cover diminishes over time - the mortgage and loans get paid off, the dependent children leave the nest and become financially independent, we build up pension funds, savings and investments so that our death is no longer a financial burden on anyone. For anyone in that position, it's far more cost-effective to take out life insurance cover to fulfil a need for a fixed period of time - Term Life Insurance is invariably cheaper than Whole of Life.
If you still can't get past the "dead money" idea - that premiums paid into Term Life Insurance are dead money if you survive to the end of the term, consider two things: - (a) you'd pay extra for a horrible reviewable Whole of Life policy. Do a cheaper Term Life Insurance policy and put the difference into a savings account every month. You'll know exactly what you're paying for life cover and what you're saving and you'll still have a lump sum to draw on when you want. (b) You pay for insurance on your home and car and don't expect to get a return from either if you don't claim. Life insurance is no different.
The basic idea of this type of policy is usually that you pay a premium, often monthly, and your premium pays for life assurance cover - a lump sum in the event of your death - and also buys units in a fund, providing you with a lump sum that you can cash in after some years. So far so good. The sales pitch usually focuses on the fact that it's whole of life, (meaning that the policy doesn't expire at any fixed date and you can therefore choose to keep your life assurance cover for as long as you need it) and that unlike other types of life insurace policies it acquires a cash value, so you can decide to stop the policy if you do decide you don't need the cover any more and can cash it in. The inference is generally that this is better than paying into a policy that only pays out on death and will expire at the end of the term if you're still alive - "dead money".
Here's a list of reasons why I don't like this type of policy and wouldn't sell one to an enemy, never mind a client.
(1) Review clauses. While the policies can theoretically continue for the rest of your life, there are always premium review clauses - often after 10 years, each subsequent 5 years and when you reach age 70, annually. At these reviews, the life assurance company can put up your premium to maintain the same level of cover or can ask you to reduce your cover if you want to continue paying the same premium. The older you get, the more frequent the reviews become so that eventually you'll be asked to pay so much to maintain your life cover that it just won't make any financial sense. That's not true "whole of life" cover.
(2) Variable cost of life cover. Aside from the periodic reviews, the cost of the life cover is not fixed. Let's say you start a policy paying €100 per month and at the outset €50 of this is paying for your life cover and €50 is buying units in the fund. This 50/50 split is not fixed and as you get older, the split internally will change without you being notified, so that it could be 60 life assurance/40 fund, 70/30 and so on, while you still pay the same €100 per month.
(3) The policy can eat itself. If the internal split between the cost of life cover and the amount diverted into your "savings" fund swings so far in the direction of the life cover that the life cover cost actually exceeds the monthly premium you're paying, the policy can perform a feat that even Hannibal Lecter would have baulked at - it can start eating itself. So going back to the example above, if you're paying a premium of €100 per month and the internal cost of life cover eventually exceeds €100 per month, the policy can start eating into the fund you have accumulated to subsidise the cost of life cover. Over time, the cash value of the policy gets eaten away and can eventually dwindle to nothing.
So my advice is to avoid these reviewable whole of life policies like the plague. There are alternatives. Several companies offer Guaranteed Whole of Life cover - life cover at a guaranteed, fixed cost for the rest of your life. It's expensive, but remember that at some point the policy WILL pay out the life cover and you have complete transparency and certainty around what you're paying, now and into the future, and what you'll eventually get.
Anyway, most of us don't need Whole of Life cover. For many people, the need for life cover diminishes over time - the mortgage and loans get paid off, the dependent children leave the nest and become financially independent, we build up pension funds, savings and investments so that our death is no longer a financial burden on anyone. For anyone in that position, it's far more cost-effective to take out life insurance cover to fulfil a need for a fixed period of time - Term Life Insurance is invariably cheaper than Whole of Life.
If you still can't get past the "dead money" idea - that premiums paid into Term Life Insurance are dead money if you survive to the end of the term, consider two things: - (a) you'd pay extra for a horrible reviewable Whole of Life policy. Do a cheaper Term Life Insurance policy and put the difference into a savings account every month. You'll know exactly what you're paying for life cover and what you're saving and you'll still have a lump sum to draw on when you want. (b) You pay for insurance on your home and car and don't expect to get a return from either if you don't claim. Life insurance is no different.
Wednesday, 29 September 2010
Get Your Affairs in Order
The title of this blog piece has nothing to do with Tiger Woods, Wayne Rooney or any of their ilk. I came across this checklist on Chartered Accountant Tommy McGibney's excellent tax blog.
Like most good ideas, it's a simple one. While most of you have already made a Will (haven't you?), this is a simple checklist detailing where various important documents, bank accounts, life assurance policies are held and who the relevant contacts are.
I'd strongly urge everyone to take an hour or two to complete this, make a few copies and let a few trusted people know where your checklist is kept. In the event of your death, it could make matters so much easier for those you leave behind.
Like most good ideas, it's a simple one. While most of you have already made a Will (haven't you?), this is a simple checklist detailing where various important documents, bank accounts, life assurance policies are held and who the relevant contacts are.
I'd strongly urge everyone to take an hour or two to complete this, make a few copies and let a few trusted people know where your checklist is kept. In the event of your death, it could make matters so much easier for those you leave behind.
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