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Life insurance – high risk: high cost

By: Michael Challiner

Life insurance is a requirement for anyone with a family, to ensure that when you are gone they are not left destitute and relying on government handouts. If however your job can be classed as ‘dangerous’ then life insurance is a must from the outset. Who decides whether your job should be classified as taking you beyond ordinary risk levels? Well, it seems reasonable that the insurance company who are going to provide your cover should be the ones to decide, and that is the usual case.

However, different insurers will have different ideas as to what constitutes danger, but they all have one thing in common. If your job does appear to them to have factors which take the danger level beyond what they consider to be ‘normal’, then your premiums will also be taken beyond normal. In fact whilst they will do their best to provide you with cover and will need to increase the cost accordingly, there are areas into which they will not go

For example a member of any of the three armed forces could normally expect to get cover, albeit at a surcharged cost. They can expect though that their policy will carry a clause that in the event of their being posted to a war zone, their cover will be suspended.

A spokeswoman for Standard Life made the point that whilst cover may be given for a particular occupation, it is likely that any increase in risk would result in increased premium cost or even refusal of cover. She gave an example that a tightrope walker could expect a refusal if they intended some action outside their usual parameters with a heightened risk factor, like an attempt to break a record.

Contemplation of risks taken in doing a job are very likely to lead to thoughts of Steve Irwin, the Australian crocodile hunter and general animal lover and investigator, who spent his working life taking chances with a variety of creatures. He died as a result of an encounter with a sting ray, a fish not usually closely associated with undue risk; that the apparent danger of his work with crocodiles did not cause his loss of life is a source of surprise to most people.

It is reported that he had told his wife that he expected to die young; with his penchant for dangerous situations his need for insurance cover as support for his family was obvious. Would cover have been available for such a dangerous occupation, and if so at what price? Would any underwriter have been prepared to provide cover? The answer is more than likely ‘yes’. A look at the insurance market shows that cover has been provided in the past for some extremely hazardous enterprises, and the level of premiums can account for this. High premiums for high risk are a temptation for any underwriter with a ‘calculating gambler’ mind who can collect huge returns if the enterprise in question is successful.

Despite his showmanship, Steve Irwin must have been a very careful type, more than likely taking only calculated risks, and fairly certainly a company could have been found who would provide cover. It is not likely to have been provided by a ‘conventional’ insurance company, and an Association of British Insurers spokesman is of the opinion that such a specialised policy would have been obtainable from an Australian company with the outlook and the experience to handle this. In fact what would have been needed is a firm similar to Standard Life or Lloyds of London (although most likely based in Australia), both being insurers with experience of specialised policies.

Such insurers have to keep very much up to date with new technology, to ensure that they ask the right questions and are well able to assess the risks involved. With new job titles being coined as technology advances, they cannot depend on those to provide them with an accurate picture. Instead they have to evaluate the materials used and the working conditions, to enable them to arrive at an answer.

It is no surprise then that different insurers produce different quotations, when the basis for the decisions probably has to be based more on instinctive reaction than intimate knowledge of the job proposed.

So as always it pays to shop around, more so in this case than in the ‘run of the mill ‘ jobs. Finding a broker on line may be an easy start in your enquiries, but you must ensure that he is absolutely clear with regard to your needs; your dependents will not appreciate finding that an unnoticed or overlooked clause renders the cover invalid.

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