Critical illness cover mugging

caxia

Hello money savers
Could anyone advise us on critical illness cover?
Ten years ago we took out CIC with Scottish Provident which rose in line with inflation until we were paying a £39 monthly premium for £68000 worth of cover.
A renewal notice has just arrived saying if we dont do anything the premium will rise next month to £111 for cover of £70000. Obviously we arent going to do this,but what seems really outrageous is that hidden in the small print it says that the IFA who sold us the original policy 10 years ago (and who has had no contact with us since) will be paid £916!
Is this normal?
I feel that anyone who doesnt read the small print or check their statements might end up paying this.
We are going to cancel the whole policy but does anyone feel its worth taking out a new one?
We very luckily and through hard saving will be paying off the mortgage next month. Yey!! so is it worth having?

Thanks for looking

dunstonh

but what seems really outrageous is that hidden in the small print

Its not hidden in the small print. It would have been clear on the illustration that you had selected indexation. It doesnt matter if you do either as most plans allow you to cancel the indexation and move to a level basis.

Is this normal?

More likely its not indexation but a policy review as you have reviewable premiums. That would tie in with the 10 year date as many of these plans with reviewable terms only guarantee for the first 5 or 10 years.

I feel that anyone who doesnt read the small print or check their statements might end up paying this.

You mean anyone that buys reviewable premiums instead of guaranteed, ignores letters about the premium going up and ignores their bank statements might end up paying for it.

We are going to cancel the whole policy but does anyone feel its worth taking out a new one?

If you have a financial need for it then yes. If not, no. Also dont buy reviewable premiums on your plans otherwise you face the same problem again. Also, modern plans would not be as comprehensive as one from 10 years ago so adjusting the existing plan may be better.

caxia

Thanks dunstonh it is good to get another perspective on this. It just came as a bit of a shock.Thanks

dunstonh

Its why I always recommend guaranteed plans. Problem is that often the monthly payments on guaranteed plans start a few pound higher.

I bet you that most of the people that have followed Martin's articles on where to buy cheap have gone with reviewable premiums because they don't know the difference and face a similar event to you in 5 or 10 years time. They may get lucky and find no increase is needed or they may not. That is the risk or potential gain if you pick reviewable instead of guaranteed.

I think that until the early 2000s no company had ever increased a premium on review. However, since then they have as they have tended to lower new business premiums and make it more likely that an increase will be charged on the first or second review point. So, at the point yours was taken out, it would almost certainly have been on the basis that reviewable was cheaper each month and no-one had ever increased reviewable premiums. Thats a guess but it would be logical for that era.

OshayAway

dunstonh wrote: »

More likely its not indexation but a policy review as you have reviewable premiums. That would tie in with the 10 year date as many of these plans with reviewable terms only guarantee for the first 5 or 10 years.

You mean anyone that buys reviewable premiums instead of guaranteed, ignores letters about the premium going up and ignores their bank statements might end up paying for it.

If you have a financial need for it then yes. If not, no. Also dont buy reviewable premiums on your plans otherwise you face the same problem again. Also, modern plans would not be as comprehensive as one from 10 years ago so adjusting the existing plan may be better.

Are you sure you're not missing the point on this one dunstonh? The OP seem to be refereing to a renewable policy not a reviewable premium. I don't thing reviewable Critical policies where even around ten years ago? (I could easily be wrong about that though). In any case I don't believe they have had any significant increases (if any) on review. In fact, Legal & General reduced some reviewable premiums at their first critical illness review a few weeks ago.

Not to mention that the adviser would not be receiving additional £900+ would they?

dunstonh

I don't thing reviewable Critical policies where even around ten years ago?

they were. I was doing them back in 94 when I was a tied agent.

In any case I don't believe they have had any significant increases

HSBC did.

Not to mention that the adviser would not be receiving additional £900+ would they?

The only other thing it would be if it was an investment linked policy and had hit the 10 year review. I think the 10 year bit is the important bit. Not the index linking as that would be small increases each year.

OshayAway

dunstonh wrote: »

they were. I was doing them back in 94 when I was a tied agent.

I did say "I could be wrong"!

Actually, Scottish Provident confirmed this morning that they launched their reviewable premium critical illness covers in 1999 and to date they have not increasd their reviewable premiums.

So it looks like overall I'm not wrong after all :j

Wutang_2

OshayAway wrote: »

I did say "I could be wrong"!

Actually, Scottish Provident confirmed this morning that they launched their reviewable premium critical illness covers in 1999 and to date they have not increasd their reviewable premiums.

So it looks like overall I'm not wrong after all :j

I am sure the original poster is so pleased about your success story

OshayAway

Wutang wrote: »

I am sure the original poster is so pleased about your success story

lol, me too... I know I am!

Seriously though, it's a pet hate of mine. Advisers demonising reviewable premiums for an easy sell-up. I'm not suggesting for a moment that guaranteed premiums are not best scenario but the fact is that sometimes the difference in rates is vast and sometimes ceases to be affordable. Surely, each case need to be considered on it's merits to establish which is the best value.

Sadly, some advisers over simplify, exaggerate or outright mislead customers to squeeze out every last penny. Some are left feeling if they don’t take guaranteed premiums, they are better off not having any critical illness cover at all. On this site an adviser stated that reviewable premiums give the insurer cart blanche to put up premiums in future. Also it's been stated that an individuals health is taken in to consideration and used as a reason to inflate premiums.

As is often the case, some confuse renewable policies with reviewable premiums. I suspect that it what has happened here in the case of the op.

dunstonh

In this case there are only 3 things that can cause an increase

1 - reviewable premium increase
2 - investment linked review
3 - renewal.

I admit that I had discounted renewal as the policy was from 10 years ago and renewable plans were already on the decline before that. My feeling was policy review point due to reviewable plan or investment link

Sadly, some advisers over simplify, exaggerate or outright mislead customers to squeeze out every last penny. Some are left feeling if they don’t take guaranteed premiums, they are better off not having any critical illness cover at all. On this site an adviser stated that reviewable premiums give the insurer cart blanche to put up premiums in future. Also it's been stated that an individuals health is taken in to consideration and used as a reason to inflate premiums.

If you take on reviewable premiums you are taking on a risk. If the risk is ignored you may well get away with it but what if something happens and the risk event occurs? Any adviser that has not covered themselves by mentioning guaranteed premiums leaves themselves wide open.

OshayAway

dunstonh wrote: »

If you take on reviewable premiums you are taking on a risk. If the risk is ignored you may well get away with it but what if something happens and the risk event occurs? Any adviser that has not covered themselves by mentioning guaranteed premiums leaves themselves wide open.

That seems to me to be a very narrow minded and biased viewpoint. I would have thought that value for money should be paramount in every instance and the research based on the specific details of the client, their attitude to the risk and affordability. Not to mention telling them the truth about the way a premium would be reviewed and when.

If a Guaranteed premium was recommended over reviewable at an additional cost of £10 per month for a policy taken out in 1994 that would be an additional £1680 to date that they would be worse off! (unless they had a HSBC policy if what you say is correct... I'm talking about all of the major insurers). It's more money in the pocket of the adviser of course.

Again, I am not suggesting that reviewable premiums are the only or best option for all, I saying that it is too simplistic to make a blanket statement that you should only consider guaranteed premiums. With the FSA concentrating on a TCF culture, case-by-case consideration is vital rather than the most profitable path of least resistance.