Life Assurance

Evo247

My husband & I took out a Maximum Investment & Protection Plan (joint life assuarance with investment plan) in May 1990 it was for a period of 25 years. For the first 5 years the premiums went up every year & for the next 20 years the monthly payments were to stay the same. We have now received a letter to say that we either have to more or less double our premiums for the same amount of cover or get less of a pay out if one of us dies. If neither of us dies at the 25 year point we will not be getting much of a payout either under the current premiums - how can they change the terms of our contract like this, it just seems wrong? :mad:

Annisele

I doubt that they are changing the terms of your contract - if you still have the terms and conditions, have a look to see if there's a section on 'premium reviews' or similar.

It's likely that it was a 'reviewable' policy, with premium reviews every ten years and then maybe annually in the last five years (on top of the increases for the first five years). The policy might well have 'passed' a review in 2000, but failed its 2010 review.

dunstonh

how can they change the terms of our contract like this, it just seems wrong?

They are not changing the terms of the contract. They are enforcing the terms of the contract.

These plans do not have guaranteed premiums. The premiums are set based on the current value and investment projections to cover the cost of the life assurance. There are periodic review points on the policy which tend to kick in after a specified period (often 10-15 years and then 5 yearly thereafter). If the investment returns are not sufficient to cover the cost of the life cover then you are given the opportunity to reduce the sum assured or increase your premiums or a combination.

These plans were largely obsolete by around 1994 with pure life assurance taking over and investment options being separated (PEPs being one of the alternatives). A few insurance companies kept them on longer than the average but when you took yours out, this sort of plan was not uncommon.

If neither of us dies at the 25 year point we will not be getting much of a payout either under the current premiums

They were never going to pay out large amounts on the lump sum unless you had the life assurance amount set very low. If you had the sum assured set high, you could find little or no value in the policy at the end if you survive and you may have ended up paying a lot less over the term than you would have done with other alternatives. Part of the problem with these plans though is that they were designed to work in a boom/bust economy with high inflation. We had 15 years of steady, unspectacular growth and low inflation. So, theses types of plans became quickly obsolete as mentioned.