Regulated UK Life Insurance Products

Which life insurance products are not regulated?

The Financial Services and Markets Act 2000 (FSMA), was set up in order to provide investor protection. Therefore, it will regulate contracts which provide some form of investment. This includes the majority of long-term insurance contracts such as whole life and endowment policies, whether regular or single premium, and personal pensions contracts

It may seem strange that whole life should be included in a category that is defined as 'investments'. Regular premium whole life assurance is more associated with protection on death. But since they have surrender values they are regulated. This also applied to term insurance and permanent health insurance with surrender values. In addition term insurance contracts over a particularly long term are also regulated, as they are commitments which involve more expensive premiums which can't be cancelled for any value and could be mis-sold.

So, regulated by the FSA are investment linked whole life policies, endowment policies, personal pension contracts, unit-linked term insurance, unit-linked permanent health insurance , term insurance policies lasting for 10 years or more which expire when the life assured reaches the age of 70 or later.

Not regulated by the FSA are any other form of term insurance and permanent health insurance that satisfy the following conditions:

a) Benefits are payable only on death or as a result of incapacity due to injury, sickness or infirmity.

b) All term insurance with a term of less than 10 years. Term insurance (with a term exceeding ten years) where cover ceases prior to age 70

c) The contract has no surrender value or consists of a single premium with a surrender value that is less than the premium.

d) The contract cannot be converted into an investment contract.

To take advantage of the above four conditions, quick thinking entrepreneurs have found a way to use the internet for an excellent selling opportunity.

Because basic life insurance policies aren't regulated, they can be sold to consumers on an 'execution only basis'. This means that they do not have to be advised on, and the insurance broker does not have to take responsibility for what the customer chooses.

With regulated insurance policies, sold on an 'execution only' basis, the broker would have to send the consumer a letter ensuring they understand that the broker is not responsible for the performance or the selling of the product. This is not the case with non-regulated products.

This, non-regulated life insurance can be bought over the internet. This offers a further advantage in that it cuts down the costs of selling the policies. With operating costs down, the broker can still make a profit on the premiums whilst charging less. They can pass this onto the consumer in the form of discounts. So you receive the life cover you need, but for a fraction of the cost.

Which life insurance products are not regulated?

© AskFinancially.com 2008

Life Insurance

Insurance & Loans

Copyright

Which life insurance products are not regulated?

© AskFinancially.com 2008

Life Insurance

Insurance & Loans

Copyright