# Critical Illness - Sales Charges High or Standard???



## TurningGreen (15 Sep 2009)

Hi 

I have a critical illness policy covering my wife and I. In current climate decided to check if cheaper available so requested details of policy. The details show its a term assurance policy costing €320 pm for €255k cover and expires 2028 (started 2003). However it also showed sales remuneration of €2545 going to broker in first year and hundreds of € per year going to the broker for the remaining lifetime of the policy from the premium we pay. Is this a typical arrangement or are we been screwed. I rang the insurance company who snottily told me it is standard practice. Any advice appreciated.


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## j26 (15 Sep 2009)

Sounds normal enough to me for insurance type stuff.  That was the deal when I worked in insurance (a long long time ago) - a high percentage of the first years premium and then a small percentage of the ongoing premium.


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## Sumatra (15 Sep 2009)

The figures given are intended to assist you in understanding how the policy works!

With life assurace products (as opposed to ones with an investment or savings element) it is debatable if they are of any real value to the consumer. The figures are arrived at by complex actuarial calculations using hypothetical assumptions such as projected interest rates, projected administration expenses etc etc. 

Any changes to any of the variables used throws the whole illustration out of kilter. To assume all these factors will interact consistently as shown on your illustration is impossible. The only guarantee is that they will not. They cannot be used as a bargaining stance because they do not accurately reflect the renumeration actually paid to the intermediary. So why have them?


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## heritage (16 Sep 2009)

In general the main remuneration on these type of policies is 90% in the first year and 3% after that. This can also increase depending on the insurance company and the amount of business placed with a particular company or other schemes that may be in place. For terms shorter than 10 years this would be less usually10% per annum up to 90% initial.

This would be considered the standard I guess but you will also pay the same price (and sometimes more) if you go direct to the insurance company yourself. Some brokers will also work on a fee only basis and may in certain cases refund any commission to their clients depending on what arrangements they have in place. 

Either way there is still value to be got by shopping around in many cases. You should ensure that you are matching like for like if you are going to compare a policy on the basis of price and ensure that you are well covered for whatever you need. Your broker should carry out a quick "fact find" which should include information on salary, dependents, any loans, mortgages, other income, expenses etc. - a quick overview of where you are now. From this they can find out how much cover you (or indeed your dependents) need and make recomendations based on this.


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## Sumatra (16 Sep 2009)

It is folly to compare these products on price more relevant is to compare the serious illness definitions. Doctors have great fun doing this!


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