Demographic changes and life insurance cover

The demographics of the UK are changing very quickly. Much attention has been paid to those already approaching pension age, but the increase in life expectancy of the younger generation is even more startling.

Figures from the Office for National Statistics say that a third of babies born in the UK this year will live to at least 100. For girls born this year, 39% will see their hundredth birthdays while 32% of boys will blow out 100 candles on their cakes in 2112.

According to a report in the Daily Mail there are currently about 14,500 centenarians in the UK but by 2035 this will have reached 110,000. New babies born this year can expect to live well into the next century.

There has been much debate about the effect this will have on the age at which we can realistically expect to draw on our pensions. Working longer is never going to be a popular policy option, however necessary it may be, as people have become accustomed to the idea of long retirements at the end of a working life.

Research by accountants PricewaterhouseCoopers says that babies born this year will not get their state pension until the age of 77 – and their own children will have to wait until they are in their eighties.

One benefit that has, so far, been mostly overlooked, in addition to the simple fact that we are living longer, is that life insurance cover will cost less.

Life insurance premiums are based on life expectancy which is why men pay more for cover than women – but if both sexes can expect to live longer, premiums should fall for both.

However, there is probably a floor below which premiums could not fall: currently you can get around £30,000 of cover for £5 a month if you are a non-smoker in your twenties. Realistically, there is little scope for price improvement without a fall in coverage.

Potential life insurance customers should realise that price is not necessarily the best determinant of cover that is right for personal circumstances. Certainly if your family responsibilities grow you should expect to increase your life cover accordingly.

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