AA life insurance review
Originating in car breakdown cover, the AA has expanded into life insurance offering policies through established insurer Legal & General.
The AA now provides life insurance to both existing and new customers. (Previously the AA provided life insurance through Friends Life Limited).
With millions of members nationwide, the AA has built huge brand loyalty. However, regardless of whether you’re a new or existing member, is taking out AA life insurance a good option?
At Reassured we recently reviewed the AA life insurance, see our findings below.
Term-based life insurance policies from the AA
This type of life insurance involves paying a monthly premium for the duration of the policy term. If you were to pass away during the set term, a fixed pay out would be made to your beneficiaries.
The AA offers decreasing term life insurance cover too, which also starts from £6-per-month but again is dependent on your personal wellbeing and habits.
Like with level term, these policies involve paying a monthly premium and if you die during the term, provides a lump sum pay out to your loved ones.
Decreasing term is ideal for covering a repayment mortgage as unlike level term the pay out amount decreases over time. This means the lump sum can be set to mirror the remaining balance of a mortgage. Generally, this is a more cost-effective policy option.
The AA provides free life cover between the exchange of contracts and completion of your purchase if you’re in the process of buying a property.
All term policies are available with optional premium protection, where the AA commits to paying the premiums if the policyholder experiences non-self-inflicted injury or illness which prevents them from working for six weeks or more.
This will continue until the policyholder is deemed medically able to return to work, however, this waiver of premium option does come at an additional cost.
Like the majority of policies, AA life insurance includes free terminal illness cover, meaning that if you were diagnosed with a terminal illness and expected to die within 12 months, you could access the funds early.
Critical illness cover is also available for all policyholders aged between 18 and 54, although this will incur an extra cost which will be added to your premium.
Over 50s plans from the AA
Starting from £5-per-month, the AA also overs an over 50s plan which is available to UK residents between the ages of 50 and 80.
These policies offer guaranteed acceptance to those within this age range without the requirement for any medical information.
The upper age limit of 80 is lower than the average over 50s plan upper limit of 85.
However, unlike many life insurance policies which require a policy to be in effect for a 24-month period before a payout will be made, the AA only requires your policy to have been in effect for 12 months.
This means that if you die after 12 months, a full lump sum of the insured amount will be made to the beneficiaries upon death.
If death occurs before this 12-month eligibility period, the sum of the premiums paid will be reimbursed, unless death occurs due to an accident in which case the full pay out sum will be made.
Like a lot of over 50s plans, once you reach the age of 90, premium payments cease but your cover will remain in place until you die.
Increasing & fixed over 50 plans
AA life insurance offers both increasing and fixed plans 50 plans.
Increasing plans are designed to protect your sum assured from inflation.
Each year your sum assured is reviewed in line with changes to the Retail Price Index (RPI). This figure is then adjusted accordingly and your premiums altered to reflect this new level of cover.
With a fixed plan the sum assured remains the same and your premiums will not change. However, after a year you’re provided with the option to reduce your monthly premiums for a lower level of cover if required.
With both types of plan, like all over 50 plans, there’s the possibility that more will be paid into the policy than the lump sum which is paid out.
To avoid a diminishing ‘real terms’ pay out, the AA offers an increasing coverage option where the premiums and the sum assured increase by +5% each year the policy is in effect.
A funeral benefit option is available with all over 50s plans. This allows you to put the cash lump sum towards the cost of your funeral and receive an additional £300 bonus.
All of the AA over 50s plans come with a funeral benefit option. This means that after you’re gone, rather than the cash lump sum being paid to your loved ones, it’ll be charged directly to funeral plan provider Dignity to arrange your funeral.
Evoking this option will also mean that upon your death, your funeral fund will receive a £300 bonus to further help towards the cost of your funeral.
If the cash sum and £300 bonus are not enough to cover the cost of your funeral, your estate and loved ones will be required to make up the difference.
If the amount within your plan plus £300 bonus exceeds the cost of your funeral, this excess will be added to the value of your estate, although may be subject to inheritance tax.
Single or joint policy
With the AA, it’s possible to take out either a single or joint life insurance policy depending on who it is you’re looking to cover.
Whilst a joint life insurance policy is likely to be cheaper than purchasing two singles, it’ll only pay out once upon first death, leaving the remaining partner uncovered and seeking life insurance cover at an older age which is likely to result in significantly higher premiums.
£50 M&S gift voucher
Upon taking out term-based life insurance or an over 50s plan with the AA, all new customers will receive a £50 M&S gift card.
The gift card will be received after the 4th month of your policy providing all payments have been kept up.
Unfortunately, because AA life insurance policies are provided through Legal & General, if you’ve previously had a policy with them and cancelled, you’ll not be eligible for this offer.
Gift cards are limited to 2 per household in any 12-month period.
NB: Gift cards detailed within this post are only offered with life insurance policies provided by the AA and not those taken out through Reassured.
Existing AA members can benefit from a 2% discount on the cost of their monthly premiums as well as receiving the £50 M&S gift card.
Existing members taking out an over 50s plan will benefit from a £75 gift card as opposed to £50.
An AA member is defined as a holder of Breakdown Assistance with the AA. It doesn’t apply to anyone with any other type of cover with the AA, for example, home/car insurance.
However, monthly premiums differ significantly between insurers, therefore, it’s important to compare quotes to determine whether or not a further saving can be made by using a different insurer.
As far as we could tell, taking out breakdown cover if you have an existing life insurance policy with the AA doesn’t entitle you to any discount or benefits.
Pros & Cons
Like the large majority of life insurance policies, the AA life insurance policies come with both pros and cons:
- Free legal advice line
- Optional waiver of premium
- Terminal illness cover as standard
- Critical illness cover available
- Over 50s plan only has 12 month eligibility period as opposed to 24
- Full pay out will be made if you die within the first 12 months of an over 50s plan if death is caused by accident
- £300 bonus if you choose to use the sum assured to cover your funeral
- £50 for new customers (£75 for existing AA members on over 50s plans)
- 2% discount on premiums for existing AA members
- Upper limit of over 50s plan is only 80
- 4 month waiting period for gift card
- Not eligible for gift card if you’ve previously cancelled an L&G policy
- No benefits to taking out breakdown cover if you have an existing life insurance policy
When arranging your life insurance cover, it’s important to ensure not only the price but all aspects of the policy suit your needs.
Is the AA right for you? (Always compare life insurance quotes)
Whilst the AA has a well-established brand and offers great customer service, what’s right for one is not always right for another.
The cost of life insurance can vary significantly between insurers, therefore to ensure you obtain the right life insurance at the most cost-effective rate, it’s essential to compare quotes.
There are 3 main methods for carrying out this comparison:
- Carry out the research online yourself – although this can be very frustrating and often time-consuming
- Use a comparison website – usually consists of a smaller panel of select insurers, meaning the number of quotes compared can be minimal
- Contact an FCA registered broker – consists of a large panel of life insurers, offers a number of additional services and is usually free to use
As mentioned, using an FCA independent life insurance broker will not only save you time and allow you to compare a huge selection of insurers, but they also offer an array of additional services (completely free!)
- Our agents will guide you through the application process, filling in all the necessary documentation on your behalf and helping to decipher any jargon
- Should you wish to avoid inheritance tax on your pay out, Reassured offers a free trust guidance service, ensuring a protected, fast pay out to your loved ones
- 45% of customers who were declined elsewhere found life insurance through Reassured due to our impaired risk team
So before making a final decision, why not get a full comparison of the options available. Allowing you to make a fully informed decision on the best solution for you.
AA life insurance may be a good option for you, but to ensure you’re not paying unnecessarily high premiums each month why not compare quotes?