Cancelling Insurance

Deru

Hi,

Can I cancel an insurance policy i.e. income protection if the term is 36 years? This is after the 30 day grace period. Reading the welcome letter, it seems to suggest it's NOT possible? Only to defer for 13 weeks.

This is something my IFA got me into signing up for 2 years ago. Well actually, 2 policies. 1 with Friends Provident and the other with BUPA, each one covering me for £1K a month should the worst happen.

This is Critical Illness w/ Life and Income Protection, which totals over £60 a month. I can afford it but over £720 a year, I'm now having second thoughts.

Looking over paperwork, I'm sure the IFA is getting a steady commission each month from each as well.

Initial commission £483.91 for FP. Initial commission £1029.37 for Bupa!!! These supposedly came out of my premiums so I didn't see them until I looked over the paperwork. Then probably 2.5% trailing commission.

Any advice? Sure, there's better deals out there if I searched around like for Car insurance but IFA suggested that these were the best and that starting early, I don't pay as much as if I did the same thing when I'm older (I'm 26). Oh and the premiums increase 5% each year.

dunstonh

Can I cancel an insurance policy i.e. income protection if the term is 36 years?

yes. It is the providers who cannot cancel permanent health insurance plans (unlike PPI plans where they can).

Looking over paperwork, I'm sure the IFA is getting a steady commission each month from each as well.

I hope so. If he isnt then that would make him a poor businessman and therefore a bad adviser. I mean, who would advise someone to do work for nothing?

Initial commission £483.91 for FP. Initial commission £1029.37 for Bupa!!! These supposedly came out of my premiums so I didn't see them until I looked over the paperwork. Then probably 2.5% trailing commission.

If if he is taking it on indemnity basis (up front) then he wont be getting it on non-indemnity (monthly for a period of around 4 years) or level (on drip as each premium is paid)

Sure, there's better deals out there if I searched around like for Car insurance but IFA suggested that these were the best and that starting early, I don't pay as much as if I did the same thing when I'm older (I'm 26). Oh and the premiums increase 5% each year.

The policies in question are PHI plans. You wont find much, if any, coverage of those on the internet. And yes, the earlier you start the better. Once you start getting into your 30s the premiums then it starts increasing quite rapidly. By the time you are 40, they are often too expensive to take out a comprehensive plan and you have to go with a budget plan instead.

Deru

Thanks for the reply.

Obviously, you're on the IFA's side.

I hope so. If he isnt then that would make him a poor businessman and therefore a bad adviser. I mean, who would advise someone to do work for nothing?

Poor SALESMAN for the IFA firm maybe. Whether he's a good or bad adviser depends on whether the advice is any good for the client, not how much it lines their pockets IMO. No one's advising anyone to work for nothing or to do any work so that made no sense to me, but anyway...

With policies costing £27 and £33, am I better of looking elsewhere? I don't even need 1K cover a month so could say find something that'll give me half.

If if he is taking it on indemnity basis (up front) then he wont be getting it on non-indemnity (monthly for a period of around 4 years)

so he won't get it if I don't stick with the policy for 4 years?

dunstonh

Obviously, you're on the IFA's side.

Didnt realise this was a case of picking sides.

Poor SALESMAN for the IFA firm maybe.

Is it an IFA or a salesman?

Whether he's a good or bad adviser depends on whether the advice is any good for the client, not how much it lines their pockets IMO. No one's advising anyone to work for nothing or to do any work so that made no sense to me, but anyway...

You were critical of him earning a living. At least that is how I interpreted your exclamations of the amount.

With policies costing £27 and £33, am I better of looking elsewhere? I don't even need 1K cover a month so could say find something that'll give me half.

If that is what you want then you dont have to have the full protection. Obviously less protection will cost less money.

so he won't get it if I don't stick with the policy for 4 years?

Nope. It varies with some companies but 4 years is typical.

Deru

Is it an IFA or a salesman?

From my experience, same thing even though mine call themselves IFAs. Seems to want to sell you policies that earn them the most commissions even when you're paying them a fixed amount each month for their services.

You were critical of him earning a living. At least that is how I interpreted your exclamations of the amount.

I'm fine with him making a living but not if the advice I'm given turns out to be useless, then I'm going to be critical of the amounts I'm seeing. To me, the amounts are a lot of money. This is not just to do with these 2 insurance policies. There's more to it but I've not brought up the other issues as they fall under different topics of the forum.

That's not to say all IFAs offer poor advice but just my experience with this one. Sorry if I seem like I am branding all IFA's the same.

Deru

yes. It is the providers who cannot cancel permanent health insurance plans (unlike PPI plans where they can).

What is a Permanent Health Insurance Plan? Is that what I have?

...and by provider, you mean the IFA?

Thanks.

dunstonh

From my experience, same thing even though mine call themselves IFAs. Seems to want to sell you policies that earn them the most commissions even when you're paying them a fixed amount each month for their services.

If you are paying for servicing then you ought not be paying anywhere near as much for setting up contracts. Usually its a case of one or the other unless the transaction cannot be covered by the servicing. There is a clear difference between sales and advice. If yours feels like sales (and the way you use "themselves" to indicate more than one) suggests you may well be using a salesforce rather than a professional adviser.

To me, the amounts are a lot of money.

You are just looking at that amount as pure income. That is not the case. In theory, IFAs should have limited costs. However, the cost of regulation and compliance is staggering. You can kiss goodbye to around 1/3rd of your income in that respect. Then you have the research providers and software providers. They all retail their products and services to IFAs on ongoing contracts. So, every month and year we pay out tens of thousands of pounds there as well. If you have an office then the costs just keep going up there as well.

That's not to say all IFAs offer poor advice but just my experience with this one. Sorry if I seem like I am branding all IFA's the same.

There are 30,000 IFAs. If you dont have confidence in the one you are using then there are plenty out there who will be more than happy to offer their services. You need trust in your adviser and it appears you have doubts. What frustrates me more is not what you are saying but their actions which have made you feel that way. Yes, IFAs have to disturb and recommend products that people would not normally buy without thinking about it. However, there are ways of doing that without making you feel you are being sold to.

What is a Permanent Health Insurance Plan? Is that what I have?

That is the form of income protection that pays out until around retirement age (or thereabouts). Unlike PPI versions who only pay out for 12-24 months. PHI is the best form of income protection. PPI is budget and is often a complete waste of money.

...and by provider, you mean the IFA?

Provider = insurance company. They are providing the contract of insurance.

Deru

If you are paying for servicing then you ought not be paying anywhere near as much for setting up contracts. Usually its a case of one or the other unless the transaction cannot be covered by the servicing. There is a clear difference between sales and advice. If yours feels like sales (and the way you use "themselves" to indicate more than one) suggests you may well be using a salesforce rather than a professional adviser.

You may be right there. Depending on the product, they call in different advisors / specialists.

There are 30,000 IFAs. If you dont have confidence in the one you are using then there are plenty out there who will be more than happy to offer their services.

Yeah, was thinking of leaving them very soon. Do you pop over to the Pensions / ISA (stocks & shares) forums too? Got a bunch of questions on those too. More stuff recommended by the IFA which all made sense at the time.

You are just looking at that amount as pure income. That is not the case. In theory, IFAs should have limited costs. However, the cost of regulation and compliance is staggering. You can kiss goodbye to around 1/3rd of your income in that respect. Then you have the research providers and software providers. They all retail their products and services to IFAs on ongoing contracts. So, every month and year we pay out tens of thousands of pounds there as well. If you have an office then the costs just keep going up there as well.

I'm sure they have running costs to consider but didn't expect such high charges when I'm also paying a fixed fee each month but anyway, thanks for your time.

Deru

Am I right in thinking, if I buy it directly through a provider rather than through an IFA, it'd be a lot cheaper as I wouldn't be paying for the IFA's commission?

Obviously, I'd have to check what the thing covers first rather than have it all done for me.

What are some good companies to consider?

At the minute, I don't have any dependents. Living at home with parents and still saving for a house. Do I even need it? hmm..

dunstonh

You may be right there. Depending on the product, they call in different advisors / specialists.

That in itself is not unusual. Advisers often have specialist knowledge in certain areas. Most common of all is mortgages being done by a mortgage adviser rather than the IFA. However, pension transfers, long term care, corporate etc are often other areas are done by specialists. Insurance can often be left to the mortgage advisers as well.

Yeah, was thinking of leaving them very soon. Do you pop over to the Pensions / ISA (stocks & shares) forums too? Got a bunch of questions on those too. More stuff recommended by the IFA which all made sense at the time.

I do. I just realised I posted on another of your threads.

Am I right in thinking, if I buy it directly through a provider rather than through an IFA, it'd be a lot cheaper as I wouldn't be paying for the IFA's commission?

Not always. In some areas you can save a bit. In some areas it can cost you more. For example, a modern pension contract through an IFA can be cheaper than a nil commission stakeholder. If you went direct to Scottish Widows, for example, their annual charge is 0.8%. Yet its normal now for non-serviced pension contracts through IFAs to come in at 0.2 to 0.5% p.a. A lot of the providers still keep some or all of what the IFA is paid for themselves. An IFA can take a £1500 fee and still beat a nil commission stakeholder.

What are some good companies to consider?

The problem you have with PHI is that there are virtually no providers that retail direct to public.

At the minute, I don't have any dependents. Living at home with parents and still saving for a house. Do I even need it? hmm..

Technically, everyone needs PHI. However, most people don't have it. Those that suffer a claimable event end up wishing they did have it (if they didnt). You see plenty of sob stories on this board in other sections where people have suffered an event that could have been insured. Insurance is a pain in the neck cost that you can often think of as a waste of money until such time that you make a claim and it becomes one of the best things you ever bought.

Deru

If you went direct to Scottish Widows, for example, their annual charge is 0.8%. Yet its normal now for non-serviced pension contracts through IFAs to come in at 0.2 to 0.5% p.a. A lot of the providers still keep some or all of what the IFA is paid for themselves. An IFA can take a £1500 fee and still beat a nil commission stakeholder.

Funnily enough, I already have a Scottish Widows Pension via the IFA. Not reviewed the fees yet but maybe that ones a definite keeper.

That in itself is not unusual. Advisers often have specialist knowledge in certain areas. Most common of all is mortgages being done by a mortgage adviser rather than the IFA. However, pension transfers, long term care, corporate etc are often other areas are done by specialists. Insurance can often be left to the mortgage advisers as well.

Bit off topic but do IFA's do cold calling? That's sort of how I signed up with the current one.

The problem you have with PHI is that there are virtually no providers that retail direct to public.

Hmmm...fair enough. Guessing all the ones I've come across are PPI on comparison sites, etc.

Thanks for the info.
Thanks