Poor Alf Roberts. As every fan of Coronation Street knows, Alf dropped dead at eight minutes past midnight on New Year's Day - January 1st, 1999. If that wasn't bad enough for his wife Audrey, his family, friends and fans, Alf also died without renewing his life insurance policy, which just happened to expire at midnight on December 31st. Kay Roche is a Street fan, but she also happens to be a manager in the personal financial services division of consultants KPMG. Alf's untimely demise should serve as a warning to everyone who has life insurance, says Ms Roche.
"You need to find out what your life company's policy is regarding contract renewals and how long they give you to pay over new premiums before they take you off cover," she says. But even more importantly, Alf's circumstances really support the view that people should pay that little bit extra and arrange their term policies on a convertible, or "guaranteed insurability" basis. Alf Roberts was a retired shopkeeper who was in his early 60s and had had a couple of serious heart attacks. Even if he had not died in the middle of the New Year's festivities, "he probably wouldn't have been able to get any more life cover because of his history of heart disease," says Ms Roche. "But had Alf's policy been a convertible one - and had he remembered to renew it on time - he could have taken out a new contract without any medical examination. The company could not have refused him cover because of his previous heart attacks."
Convertible life cover costs about 10 per cent more than ordinary term assurance, but is well worth it, she reckons. But how do the leading companies notify customers that their policies are about to expire, and what is their policy about paying out benefits if a customer happens to die just after the expiry date?
"The situations differ between companies. If you haven't paid your premium, Irish Life will write to you and give 30 days' notice to pay it by cash and 10 days' notice to renew a direct debit before you are taken off cover. But they also send out reminders over this period. Norwich Union also provides 30 days' cover before cover expires and it sends one reminder. CGU Life gives 30 days' cover and also sends out reminders that you are about to go off cover.
"In Irish Life's case, at the end of the contract term no one sends out a letter to tell you that you will have no more insurance from then on, but they told me they are reassessing this. CGU Life writes to everyone before a term policy matures to ask them if they want to renew their cover; it you have a convertible policy they write to you two months before the original policy matures."
Even if Alf had been able to start a new life policy, or convert an existing one, the premiums would have been relatively high, because he was over 60. But as the accompanying table shows, the cost of £100,000 of term assurance over 20 years for a younger person is very reasonable. You should add about 10 per cent to the premium for the option to continue the policy at maturity without having to undertake any further medical examination.
