life insurance

addicted_to_plastic

Does anyone have any experience of life insurance companies writing to you about your bankruptcy ?
i've just had a letter from our joint life insurance company telling me i no longer have legal rights to any future claims these have been transfered to my trustee in bankruptcy, the same applies to my husband as we are both bankrupt.

Should i cancel this policy ?
When i phoned to clarify the details of when i regain legal right to the policy i was told that this would only be changed after they had received written instructions from my trustee stating they have no interest in the policy.
This policy does not have a redemption value.

Where would this leave my son if something happened to us? not just minus a parent/parents , but homeless and penniless too.
We have always thought we had this covered....enough insurance to pay off the mortgage and the remainder to deal with other expenses......looks like that was wrong too!

I'm not sure if it's worth holding onto this policy, how difficult is it to get life cover once bankrupt, we're due to be discharged in june 2009?
any advice?

peachyprice

Hi AtP,

The OR will have a right to it until you are discharged.

It depends how much the policy is worth as to whether you contunue to pay into it. The payout will need to cover all your debts included in BR and OR/IP fees, they cannot take more than this. The surviving partner gets to keep whatever is left.

addicted_to_plastic

Thanks peachyprice,
It would cover this but not much left.
WHAT A MESS.......OH WELL BETTER NOT NEED IT THIS YEAR THEN!

Richard_S

Hi Adp,

We were faced with the same problem during our bankruptcy. You can buy the interest back from the O.R but I can't remember how much it worked out at, but more than we were prepared to pay.

There is a life policy that is structured through a trust, and the O.R can't touch it in the event of your demise. Our children were named as the trustees, and we priced the whole thing up, and it was a much cheaper option than buying back our existing policies.

It was a relatively simple process, and once it was in place we cancelled the old policies. Quite surprisingly, it was with NatWest who are not the most bankrupt friendly bank.

Regards

Richard

addicted_to_plastic

thanks Richard,
i'll look into that , i can understand why they want the money but need the peace of mind the policy has given me (mainly due to knowing how deep in debt we were)
Thanks for your help

Richard_S

Hi Adp,

I just couldn't bear the thought of my wife, or our children being homeless in the event of one, or both of our untimely demise, so it was something that I attached a very high priority to putting in place.

I'm not quite sure how common they are, but if you have any problems finding a suitable policy, then send me a PM and I'll send you the details.

Richard

addicted_to_plastic

Thanks again

JCS1

Options on life assurance:

• Let the policy lapse and take out a new policy after discharge
• Continue paying the premiums, but if anything happens, even after discharge, the money goes to the OR
• Purchase the OR's interest in the policy for a one off payment of £50 (OR will check if any surrender value first, and if there is take that for your BR estate)

Let me know if you need anything else.

Richard_S

JCS1 wrote: »

Options on life assurance:

• Let the policy lapse and take out a new policy after discharge
• Continue paying the premiums, but if anything happens, even after discharge, the money goes to the OR
• Purchase the OR's interest in the policy for a one off payment of £50 (OR will check if any surrender value first, and if there is take that for your BR estate)

Let me know if you need anything else.

Hi JCS,

We were declared bankrupt just over two years ago and I'd forgotten that the regulations had changed with regard to purchasing the policies.

When we had our meeting with the O.R he said the purchase price was based on a %age of the policys "sum assured" which would have cost us several hundred pounds.

If it had been just a one off £50 I would definitely have gone for that option.

Richard

welshpaula

so can i just ask i was discharged 2 years ago my joint life policy what would happen if i died now and my partner had to claim ? we just carried on paying the premiums through my bankruptcy

JCS1

Richard_S wrote: »

Hi JCS,

We were declared bankrupt just over two years ago and I'd forgotten that the regulations had changed with regard to purchasing the policies.

When we had our meeting with the O.R he said the purchase price was based on a %age of the policys "sum assured" which would have cost us several hundred pounds.

If it had been just a one off £50 I would definitely have gone for that option.

Richard

It's changed a few times over the last few years, first to 6 months premium and recently to one off payment of £50. Really depends how long you've had the policy for, if less than a year maybe not worth it, but if several years, the £50 option is probably best for most people.