Value of Life Assurance

Superdad

Hi all,

I hope this is the correct place to post this question.

Recently my mum passed away and we've had to sort out the life assurance. There were a total of six policies all with the same company.

Three of the policies were taken out by my grandmother in 1929, 1938 and 1939. The face value of these three policies combined is £29.70 but the insurance company have told us that their value today is only £15.35.

How can this be? I would have expected these policies to be worth a lot more than their face value, not less.

Is there any organisation that can advise us as to what they should really be worth.

Thanks in advance for any help that can be offerred,

regards

Brian

dunstonh

How can this be? I would have expected these policies to be worth a lot more than their face value, not less.

They will pay out the sum assured. Some will be sum assured with profits and some will be without profits depending on the options selected and paid for at the time.

From that era and the amounts involved, they are almost certainly penny plans.

Is there any organisation that can advise us as to what they should really be worth.

The insurance company itself or an IFA who can analyse the policy document to see if it matches benefits.

Superdad

Okay, thanks for that.

I would have still thought that they shouldn't pay out less than the face value.

regards

Brian

dunstonh

I would have still thought that they shouldn't pay out less than the face value.

What do you mean by face value?

Superdad

Hi there,

The policy documents have a value stating 'sum assured' which is what I mean by face value.

regards

Brian

dunstonh

They will pay out the sum assured whilst the premiums are being paid. If the premiums were not being paid the plan becomes paid up and the daily value would be paid out. This would typically be lower than that of the sum assured.

Superdad

Okay, I think I understand what you are saying and this is certainly the case with these three policies, they are paid up. However, it seems unfair that they should pay out less than the sum assured. How can they justify that?

regards

Brian

dunstonh

However, it seems unfair that they should pay out less than the sum assured. How can they justify that?

The sum assured is there if the premiums are paid. If the premiums stop then the sum assured goes. You cant keep the benefit if you stop paying. That is how they justify it.

Superdad

Okay dunstonh,

I think I'm beginning to get it now, sorry if I appeared a bit of a numpty on this.

On the basis that if you stop paying then the sum assured (the benefits) goes, would the opposite also be true? i.e. if the premiums had continued on these policies, would the sum assured have increased over time?

regards

Brian

dunstonh

On the basis that if you stop paying then the sum assured (the benefits) goes, would the opposite also be true? i.e. if the premiums had continued on these policies, would the sum assured have increased over time?

It depends on the plan terms when they were set up. Noting that these were old fashioned plans, you could typically get sum assured fixed at outset or sum assured indexed. You could also get with or without bonuses. Some had bonuses which you got the sum assured or the bonus whichever was higher (idea being that you could cease the premiums after the sum assured had been exceeded).

There were (and still are with modern plans) a number of ways these could have been written.

I reckon some were written with sum assured plus bonus and the other written as just plain sum assured. The latter is usually cheaper to take out.

Superdad

Okay dunstonh,

Thanks for all your help. I don't feel quite so bad about the issue now.

I suppose it's reasonable to assume they are paying out the correct amount based on the way the policies were set up. I didn't really want to believe that my dad was being ripped off but that is how I felt before your explanations.

Thanks once again,

regards

Brian