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Many people are drawn to the cheapest monthly premium when they are searching for they are looking for insurance protection as it often seems affordable. However unlike car insurance and home insurance it is not always clear why one life insurance is cheaper than another, or why one critical illness insurance is so much cheaper than the next.

One reason for this can be simple to see.
Most insurance companied these days offer a reviewable and guaranteed premium policy for life insurance and critical illness insurance. Guaranteed premiums mean that the insurance company calculates the cost of the benefit you select for the term you require and set a premium that cannot go up or down. Once they set their price and you start paying you premiums if your health changes or there is an increase in claims for this type of insurance your premiums can not rise. With a reviewable premium the standard basis is that the insurance company reviews their risk every five years based solely on the number of claims being received and not your personal health. This means that unless there have been an increase in claims you premium is unlikely to rise.

However there are either types of policy that are different
Another type of reviewable premium is an annual reviewable premium, this type of premium is often the cheapest monthly premium for the cover when searching online for life insurance premiums. With this type of cover the premiums are calculated for the cover for a 12 month premium and each year they are recalculated based on your age at this time and the risk of a claim over the next time. In general these types of policy do not reassess your health but the premiums will rise each year, so although they will be the cheapest premium initially this figure will definitely rise. Most of these policies will provide a schedule of the expected premium rises and as inflation typically halves the value of money every seven to ten years these policies can be cost effective. It is also worth noting that industry figures suggest that less than half of all insurance policies are stopped within seven years of commencing so having a guaranteed policy for these people may not have been beneficial and in fact may have cost them money.

Where can I check at the difference in premiums between reviewable and guaranteed premiums?
There are many online life insurance price comparison websites that allow you to search the leading insurance companies for the best life insurance premiums. Alternatively you can speak to an independent financial advisor who will be able to provide you with detailed comparisons between reviewable and guaranteed premium insurances. It also worth remembering that many financial advisors now offer a phone based advice service so you will not even have to spend hours of your time visiting an advisors office.

Jason Haines is a protection and mortgage advisor at godirect.co.uk, one of the UK’s most trusted information site about personal finance. Here you can find details on the best mortgages and get details on cheap life insurance and an instant term life insurance quote.

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