Whole of life plan

bcrawf

HI,
I'm just looking for some pointers about life insurance. My wife and I have had a whole of life plan with legal and general since 1985.We have been paying £15 per month and the sum assured was £34160 managed but in the last 3 or 4 years we've had letters telling us that the premium we're paying would have to be increased to assure us of this £34160 cover. In the last few days we have now had phone calls from Legal & General asking us to take out 2 seperate policies , £18.56 per month for my wife who is a smoker and £14.04 for myself non smoker and that we'd both be covered at £27000 each and that we can cash in the old policy with a value of £4563.

We asked them if the new policies would be whole of life like the old policy and if they were managed funds , they told us no to both and that they are premium fixed to aged 80 so we told them we'd have to think about it and find out more information .

We don't know anything about life insurance and where to go from here so i'll tell you a little about our situation.

I'm 47 years old and my wife is 45 ,we are both in good health ,mortgage is paid of and we have no debts,we have 2 children ,son 25 and daughter of 12 . Our son has flown the nest and is married doin well for himself so our only dependant is our daughter . Look forward to hearing what people think ,and many thanks in advance .

kingstreet

I'm a great believer in keeping protection and savings separate as there are better ways of handling both issues. However, I assume you took out the L&G policy on a "maximum cover" basis?

This means you get the highest possible life cover for the lowest possible cost at the outset. Later in the life of the plan, the investment element is used to subsidise the premiums to continue the initial level of protection.

An increased premium may be required where the investment return has not been as great as anticipated.

You can however reduce the cover to maintain the investment value and the premium.

Looking at alternatives, you could look at an ISA for your savings needs and term assurance or family income benefit (FIB) for your protection.

For example, you could take out joint FIB, with a benefit of (eg) £15,000 per annum should either of you die, for the nine years upto your youngest daughter reaching 21. This would give the survivor an income to maintain their (and your daughter's) standard of living. This costs around £20 per month.

Taking the sum assured in instalments each year reduces the cost a little. A joint level term assurance for a lump sum of £100,000 over the same period would cost around £27 per month.

Bear in mind, term assurance is designed to meet a known need for a fixed period. At the end of the nine years, getting new cover will depend on your then age and state of health.