Level Term Life Insurance Guide Discussion

actd

I have a term assurance policy with Phoenix Life (I think it's also be Royal Sun Alliance and someone else in the past) which I took out in 2001. Over the past 3 years, the premium as increased by around 8% per annum, so I was a little shocked when I just received my latest review which has a new policy fee of £4 (never been listed before) and a total increase of 13.75% - I also received a note about the gender neutral pricing which says that the premium may actually decrease for men (which I am), and obviously hasn't done.

I rang Phoenix who said that due to a migration (I assume new computer system), the new policy fee is now listed separately, whereas it was included in the total premium before (I'm still puzzled why this is charged since this policy is not new). I then questioned why the increase was so large - the lady at the other end went away and came back and said that, although she couldn't guarantee this was the case, some premium reviews had been sent out with the wrong figure, and they'd write to me with a correct figure.

Now if they'd said that they'd review the figure and come back with a revised figure, I would have said that they are simply being competitive, but to say that the figure may have been wrong - but presumably wouldn't do anything unless anyone questions it - is more worrying. I'll see what they come back with, but I'm sure it won't be too much different. The problem I have now is that I'm in my mid 50s, so getting a new policy can be very expensive - this one was pretty good value at the time.

kingstreet

It's a shame you picked reviewable rates, rather than rates guaranteed for the whole term. It may have been cheaper at the outset, but you're seeing the downside now.

busicat

The gender rates change might help slow your premium rate increase, but at the same time a change in taxation of life companies (for the worse for policyholders) might have offset that. But still doesn’t seem to answer why a 50% rise in the rate of increase, after 3 years steady.

A typical glitch for this type of transfer to another system might be an inadvertent re-adding of the policy fee. If you took £4 off the new total premium would the remainder be nearer to an 8% increase on the previous year?

actd wrote: »

(I'm still puzzled why this is charged since this policy is not new).

The policy fee is always a part of the total make up of the premium throughout the life of a policy. It covers current ongoing costs of having staff, systems, kit and premises for administering all the policies, (including doing extras the regulators keep coming up with) not just the initial costs of setting it up. Even without the ongoing costs, the initial costs are a significant part of doing life insurance and it’s also standard for them to be spread evenly across the life of the policy.

actd wrote: »

presumably wouldn't do anything unless anyone questions it.

Giving them the benefit of the doubt, it can be a horrible job of hunting down a glitch when it happens and even worse to rectify and put everyone in the right position without causing more problems, then dealing with the mass communication. So they’re probably still at the earlier stages of this problem and working on sorting the whole thing out. People like you spotting and reporting the anomalies and front-line staff not having the ammo to be able to immediately say if the glitch is the answer or not indicates they’re still early days of collecting symptoms of the problem to diagnose its cause.

Anyway, cat’s out of the bag now, so they’ll have to rectify it for everyone. We can wait and see.

actd wrote: »

I'll see what they come back with, but I'm sure it won't be too much different. The problem I have now is that I'm in my mid 50s, so getting a new policy can be very expensive - this one was pretty good value at the time

Yep, very much swings and roundabouts on picking a reviewable rates policy. At least you can feel smug about all the money you’ve saved so far and that you may have been able to secure a higher level of cover than you might otherwise have afforded back when you took it out.

Other reasons to be cheerful. You’ve made it this far, unlike the poor souls whose cover has paid out. You’re still paying less than people of your age buying cover now.

Fingers crossed for a happy response in their follow up letter!

actd

Well latest letter from them was sent to my sister (she's a trustee) at a half correct address, so their new computer system isn't exactly inspiring confidence. About 5 years ago, I did look at replacing the policy with a level term (using Click - that was a mistake) but the premium was double what I was paying with a policy that wasn't as good.
I thought I'd try again when I got the review, using a link from MSE (Money adviser) and they've found a 15 year level term policy with the same benefits (including critical illness, and no exclusion for private aviation on the life part) for about £10 more than my current renewal premium, ie. less than what it will go up to next year, so all in all, that's an excellent result, and I'll be cancelling the policy from Phoenix - they have had a lot of money from me over the past 12 or 13 years, so they've made a nice profit, but they've lost out on the next 15 years, especially when, by all counts, I'm still a pretty low risk.

>Other reasons to be cheerful. You’ve made it this far, unlike the poor souls whose cover has paid out.

Yes, that's definitely a good way of looking at it - hopefully, I won't be claiming for the next 15 years either.

actd

Had a reply from Phoenix - my premium has now gone down by about 3% - however, as I'd already got a quote for level term, I've accepted that and will be cancelling this policy - it will cost me about 21% more this year, but with the average annual increase at around 8%, within 3 years I'll be better off.

vgsbh

As a 41-year-old stay-at-home mum looking after 3 children with a husband who brings in the whole family income, what are our best options for life and critical illness cover? He can get income protection, and we can both get critical illness and some form of life assurance. Is it a good idea to have one joint policy and then a separate policy for income protection? It's certainly quite a challenge trying to work it out!

busicat

vgsbh wrote: »

As a 41-year-old stay-at-home mum looking after 3 children with a husband who brings in the whole family income, what are our best options for life and critical illness cover? He can get income protection, and we can both get critical illness and some form of life assurance. Is it a good idea to have one joint policy and then a separate policy for income protection? It's certainly quite a challenge trying to work it out!

Hi, yep, not the easiest...so the simplest answer is to get a (recommended) independent financial adviser to work it out with you. It might go against the grain to feel you're paying some for that stuff (but pain-free if just paid through commission on your policies) but well worth it and cheaper in the long run than jumping the wrong way.

But just about the joint policy bit, apart from just clearing the mortgage which only needs doing once, I'd usually vote for separate policies for everything. Used to be almost as cheap as joint for just life cover, weirdly, (am not sure if still is) but cover stays in place for survivor (or non-ill person) unlike joint. If you do 2 life policies though, important to make each other trustee and beneficiary of the policies. But also what's ideal and what's affordable comes into it...again where an adviser can really help (eg you could look at Family income benefit style CI/life cover).

Hope that helps!

vgsbh

Good advice, thank you, and probably the only way to navigate the minefield of different insurance options. Any idea where you would go to get a good recommendation?

busicat

[FONT=&quot]Well this would be my strategy:
1. Ask friends/family/colleagues if they've used one they'd recommend, and you can put together your own short-list of possibles near you from unbiased.co.uk. [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]There's a good refining search tool so you can be pretty specific about who you're looking for. Amongst other things you need to specify advice area: Protection, All, then de-select long-term care. (Also you can filter to see if any have testimonials on there - not obvious then to see them – you need to select the adviser then select their “About Us”.) Keep checking top right that the results are not showing sponsored listings only[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Then it's a pretty quick list to slim down ignoring firms calling themselves wealth managers, portfolio managers or who are accountancy firms, as I expect their fee levels to be higher. (Though could be wrong!)

2. Do a bit of Googling of your shortlist for "reviews" and also "complaints", "rip-off" etc

3. Or if life's too short for all that, and not bothered about getting a local face to face adviser, you might just consider Lifesearch who are protection specialists who seem to have a generally good reputation in the industry...not that I've used them myself.
[/FONT]

[FONT=&quot][/FONT]
[FONT=&quot]It'd be interesting to hear how you get on.
[/FONT]

bianchigirl

Hi, I have been reading up on life insurance since a phone call from an existing insurance provider.

I currently have 2 mortgages both with 35 years left but as I overpay I am expecting to pay them off earlier. Currently I am single with no children although (hopefully) I plan to have a partner and children in the future. There is no history in my family of critical illness so I don't think this is something I need.

Any advice on which way I should go would be great, mse seemed to say I don't need it, as I'm single, but I heard the monthly payments would be higher if I waited to take one out when I'm older.

Thanks