Life after death: the continuing importance of life insurance in the ‘credit crunch’

The Confederation of British Industry has pointed that the sector of life insurance has suffered a great decline from the credit crunch. Several reports have been given by the experts to support this fact. However people are still interested for making life insurances for multiple reasons.

The recent ailing fortunes of Britain’s life insurers make worrying news when one considers that the importance of life insurance cover is, in fact, made all the more vital by the ‘credit crunch’. Not only does the current financial climate make leaving a nest egg or two for one’s next of kin all the more important to their financial well-being in the event of one’s death or serious illness, but evidence suggests that it may also be making it more likely. A report from the Blood Pressure Association this month shows that as our bank balances have begun to suffer, we have turned from fruit and vegetables towards takeaways and snacks for comfort.

And so we are left with the question of why British consumers appear to disregard the importance of life insurance cover, and why those who have had policies might consider it expendable in the face of the current financial climate. Mark Jones of Friends Provident suggests that perhaps “understandably, none of us really want to think about our own mortality”. However, he goes on to argue that “we do owe it our families to ensure that we have made provision, be it to pay off the mortgage or provide a lump cash sum.”

Consumers’ reluctance to take out life insurance policies seems all the more puzzling in light of a recent report from moneyfacts.co.uk, which shows that the cost of term life assurance has roughly halved over the past decade. For non-smokers, keen competition has reduced the average male premium by 53% since July 1998, and for females by 48%. Yet a survey conducted Legal & General (L&G) suggests that 65% of Britons still believe they cannot afford cover, overestimating the price of premiums.

Accordingly, Richard Eagling, Investment, Life and Pensions Editor at moneyfacts.co.uk, suggests that consumers can benefit from the past 10 years of industry competition in order to secure a great deal when taking out an all-important life insurance policy. However, he does warn that - because of differences in the ways in which insurers assess risks - it is well worth shopping around for quotes: policies from one insurer can, in some cases, be up to 5 times cheaper than comparable cover from a rival provider.