As the name suggests, guaranteed means that your premiums will never increase throughout the term of the policy. Generally speaking guaranteed premiums will always be more expensive than reviewable ones initially since that guarantee is paid for by the plan holder at the outset.
A life insurance policy with reviewable premiums means that your insurer will review your monthly payment at regular intervals throughout the life of the plan. This can vary from one provider to another but reviews are usually carried out at intervals of between one and five years. At each review date, your insurer has the right to increase your premium and as you get older, these increases will become larger. As such, in the longer term it can often happen that life insurance policies with reviewable premiums work out to be more expensive than policies with guaranteed premiums.
On the other hand reviewable policies do have the advantage of allowing you to buy more cover now for a low start up premium and this appeals to many people, especially if budgets are tight.
The means by which insurers review premiums differs from one insurer to the next and there are many external influences that may lead to a change in the amount the policyholder pays. Factors such as the future level of claims the insurer pays out; the number of policyholders who give up their plans early; insurer’s expenses; and inflation, taxes and investment returns can all impact on how your provider will review your premiums.
The clear downside to reviewable premiums is that the cover might become much more expensive in the later years. Guaranteed premiums however, provide the absolute certainty that if the premium is affordable now then it will not change for the entire term of the plan.
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