16:47 31 October 2012
The cost of most protection policies for women will shoot up when the European Court of Justice Gender Directive comes into effect on December 21, 2012.
This is because insurers must overhaul the way they set premiums once the controversial ruling bans the use of gender in such calculations.
Protection providers are therefore urging their female customers to take out life and critical illness insurance now, before prices increase.
Male customers, on the other hand, are being advised to avoid higher income protection premiums by applying before the December deadline.
Here, we explain what is happening, how it will affect you and what steps you can take to ensure you get the protection you need for the lowest possible price.
What are protection policies?
Three types of protection policies are affected. In addition, the pricing of annuities (which pay a guaranteed income for life) and motor insurance will also change, as insurers currently use gender when setting their premiums for these contracts. You can read more about this here.
With regard to protection policies, life insurance pays a specified sum when the policyholder dies, making it a must for anyone with dependents, such as parents keen to protect their children or spouse from financial hardship in the event of their death.
Critical illness insurance will pay out on the diagnosis of a range of serious conditions during the term of the policy.
It could therefore help to cover the cost of any treatment, as well as allowing the policyholder to ensure his or her loved ones are financially secure.
Income protection insurance pays out if someone is unable to work due to accident or illness. If you have a mortgage to pay, for example, it could therefore prove a godsend should you need to be off work long term.
What factors determine the amount I pay for protection policies?
When pricing a protection policy, insurers look at a range of factors. These include your age, your current state of health and your medical history, as well as your gender (until December 21, of course).
Lifestyle indicators such as your weight and whether you are a smoker also affect the eventual quote you are offered.
Ways to lower the price you pay therefore include giving up smoking and going on a diet if you are overweight.
Other elements that have an impact on your premium are the length of time you want the cover for and the amount you require should you die, have a serious health condition or become unable to work.
Unsurprisingly, premiums also rise in line with the size of the potential payout.
Why will women's life and critical illness insurance premiums rise in December?
Traditionally, women have paid less than men for both life and critical illness insurance because statistics show that they have a longer life expectancy and make fewer critical illness claims.
Their policies are less likely to pay out as a result.
However, the EU Gender Directive will prevent insurers taking gender into account when calculating their premiums.
Protection policy premiums are also expected to jump in 2013 due to providers having to pay more tax, and being required to boost the capital they hold in reserve to protect against any future financial crises.
Combined, these factors could force up women's life insurance premiums, for example, by between 15% and 33%. LV=, the insurer, is expecting women's critical illness premiums to leap by around 16%.
Even men will see an increase in critical illness premiums because the tax increase borne by insurers will more than offset any reduction from the gender ruling. Male premiums could rise by 6%.
When it comes to income protection premiums, men are the ones expected to see higher premiums.
This is because statistics show that women are more likely to claim on an income protection policy, meaning they currently pay more than men for an equivalent contract.
The Association of British Insurers said: "When the gender discrimination rules come in at the end of 2012, women's income protection premiums should fall, while men will probably pay more."
But once again the change to the financial regime governing insurers is likely to have an impact, pushing up premiums for both sexes, so the message to anyone who thinks they could benefit from this sort of protection is to buy now.
Is there anything I can do to avoid being affected?
Most people only buy protection policies once.
The best way for women to evade the life and critical illness insurance price hike - and for men to avoid paying more for income protection - is to take out their cover well before December 21.
Most of the large providers have set up special systems to ensure that all those who apply now benefit from 'gender specific' rates (that's rates that still, quite legitimately, take gender into account - as opposed to 'gender neutral' prices, which will be the norm after December 21).
Aviva, for example, is asking for completed applications and set a policy start date before 21 December 2012 to benefit from gender-based pricing.
AEGON has also set up a dedicated team to help beat the deadline, while LV= is offering a 5% discount on all income protection applications made before its own gender neutral rates come in on December 1.
Mark Jones, LV= head of protection, said: "Our discount is an added incentive for men in particular to take out income protection now before prices rise in 2013."
It can take several weeks to push through a protection application, especially if medical evidence is required. With demand expected to be high over the coming months, and with insurers busy as a result, it makes sense to apply now to avoid disappointment.
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