Making a virtue out of your policy

Virtue is said to be its own reward, but it can also bring financial benefits when buying insurance. Those who abstain from such temptations as drinking alcohol, eating meat or smoking cigarettes are targeted with cut-price insurance by companies that share their values.

In July, vegetarians were offered their own life insurance policy by niche brokers Animal Friends Insurance (AFI). It offers a 25 per cent discount on premiums in the first year to vegetarians buying life insurance or critical illness cover.

"Around four million people are vegetarians. Research suggests their lifestyle is healthier, which should mean they live longer and suffer fewer serious illnesses," says AFI director Christopher Fairfax.

AFI is a non profit-making organisation, which means it can offer savings to policyholders by rebating its commission. After business expenses are deducted, all profits are divided among various animal-related causes.

Teetotallers can buy insurance-based investment products from Rechabite Friendly Society, set up in 1835 to provide financial support for working people who had signed the pledge of abstinence. It offers two policies, a single-premium investment bond and a with-profits endowment policy.

Endowment returns may have fallen lately, but this little-known society has maintained impressive performance, paying annual bonuses on its endowment policy of between 7 and 8 per cent this year.

"We have 22,000 members across the country and there are around 600,000 active teetotallers in the UK," says chief executive Bill Turnbull.

He says Rechabite can reduce premiums on its endowment policy because it can negotiate a higher sum assured, as non-drinkers are considered to be a safer life insurance risk.

Insurance company Ansvar, originally set up by the Swedish temperance movement, offers discounts on household insurance to teetotallers, non-smokers, active church members and those involved in charity or voluntary work.

"Many accidents in the home are caused by drinking, while fires can be accidentally started by smokers, so there is an underwriting justification for these discounts," says Mark Ingram, head of insurance operations.

Customers who clock up all three virtues, will see the saving stack up on Ansvar policies, which are sold through insurance brokers.

To a lesser degree, most mainstream insurance companies consider lifestyle factors when setting premiums for life, critical illness, household and motor insurance.

Non-smokers benefit most, because their life expectancy and propensity to illness is much lower than smokers.

A non-smoking man aged 40 buying £100,000 life cover over a 25-year term would pay £28.20 a month with Co-operative Insurance Society (CIS), but £44.60 if he smoked.

A non-smoking female aged 30 buying £100,000 critical illness cover over 25 years would pay £23.80 with CIS, but £41.40 if she decided to take up the dreaded weed.

Alexandra Lovesey of insurance brokers Hill House Hammond says insurers increasingly examine customers' lifestyles when they are setting their premiums.

"If you are married or living with a permanent partner, some insurers will consider you a lower risk for motor insurance, and cut premiums. This is particularly the case for young men, as insurers think they will drive less recklessly if their partner is in the car."

Women, seen as safer drivers, should get cheaper motor insurance. Specialist insurer Diamond only covers female drivers, while Ecclesiastical Insurance offers a motor policy called Careful Lady Driver, for those aged between 25 and 69.

One virtue that is rarely rewarded by insurance companies is loyalty. If you want the cheapest premiums it pays to check out the competition at renewal, as insurers often slash their rates in order to attract new business.

Contacts: AFI 0870 444 3438 or www.animalfriends.org.uk; Ansvar 01323 737 541 for details of a broker selling its policies; Diamond 0800 36 24 36 or www.diamond.uk.com; Ecclesiastical Insurance 01452 528 533 or www.ecclesiastical-in surance.co.uk; Rechabite Friendly Society 0161 832 4821