Life & Critical illness question...

Madfish

I am currently paying a monthly policy of £41 per month to cover myself and the missus for Life & Critical illness, it was taken out in 2003 and expires in 2028. The cover was for £130,000 to cover our mortgage at the time but reduces over the cover period.

I was wondering how to work out how this is calculated? the nice lady at scottish provident could not work it out when I asked her!

Reason I want to know is our Mortgage has been reduced to 54k due to overpayments and i can get a guaranteed 100k policy for £34 on a recent search. If i were to drop dead tommorow I have no idea what the policy would pay out. I doubt this calculation is correct:

£130k / 25 years = 5,200 per year depreciation x 9 years = 46k , so currently the policy would only be worth 84k should the worst happen???

Anyone help please....:)

ACG

It will usually fall in line with your mortgage, if you have overpaid then there will be a surplus.
It wont drop by £5,400 each year, it will drop by a smaller amount in the early years and more in the latter years.

When you pay off a mortgage, you pay off mostly interest in the early payments and the mostly capital in the last few years.

Hopefully that makes sense.

OshayAway

If you call the insurer they will tell you the current benefit amount. It decreases roughly inline with a repayment mortgage balance but the percentage figure used varies between 6% - 12%.

It would be worth taking advice regarding changing policy as CI plans do vary and have changed significantly over the last 9 years.

A good adviser will be able to point out the important changes, checking things like cover for low grade cancers, angioplasty and silent heart attacks etc.

The other thing to bear in mind is if you are comparing reviewable premium plans with guaranteed. To say it's a minefield would be scaremongering but careful consideration is prudent.

Advisers have to justify their recommendations and can be held accountable for poor advice.

Madfish

Thanks I thought that would be the case but I cannot find any way of calculating this. It must be more effective to get a critical & life policy that would pay a guaranteed 100k for less than what i'm paying for a decreasing policy that if (hopefully not) I do need it could be only worth £30k at that time.

*edit* just saw your post OshayAway, it states 9% in the policy, and does seem to cover illnesses, I will phone them again. maybe I was just unlucky with who i got...

ACG

As Oshay says the insurance company have to be able to tell you the current sum assured... otherwise when a claim is made how would they know what to pay out? (im not asking you the question, just giving you a good question to ask the member of staff you may get). I used to work for a life office that had a system from the 70s even that had the figures on it.

Its not the sum assured thats important, its what it pays out for. Without going into too much depth as Oshay says cancer covered on 1 policy isnt the same as cancer covered on another, the same goes for the other illnesses.

OshayAway

Google "amortisation calculator" and enter the details there. That should at least give you a ballpark figure.

As I previously stated, and endorsed by ACG, comparison of conditions, features and exclusions is crucial when it comes to critical illness plans.

OshayAway

For what it's worth, Scottish Provident had one of the most comprehensive plans in the market in 2003.