Critical Illness, Self Assurance, etc

Tykelass

I took 3 policies out ten years ago. I used an IFA as I am an utter numpty when it comes to insurance. At the time, I was about to move house so I used this IFA to sort me a new mortgage and do a complete review of all my cover.

I've now had to sit and seriously consider whether I can afford to keep paying all these policies and have for the first time, tried to read every document I have and am now horribly confused. I seem to have:
1) Mortgage life insurance with integrated Critical Illness cover where the benefits decline over time as the mortgage outstanding becomes less and less, but the premioums remain the same.
2) A completely seperate CI policy with the same comany as my life insurance (now Aviva). The criteria for claiming are identical, I just get a fixed figure if it pays out which never changes over time and costs me about twice as much as the above.
3) A 'self assurance' policy with Scottish Provident which goes up every year and pays me an income after a fixed period if I'm unable to do my current job or if I'm unable to any job at all. The CI insurances above also covers me for disability within specified limits.

I remain mostly confused as to how it is sensible for me to have all 3 of these products - number 2) seems utterly useless and an expensive way to happen across a lump sum payment if at some point I become critically ill. 1) would pay my mortgage off so what is the point of 2)? I can't recall ever asking the IFA to make sure that I had more than just my mortgage covered.

Although I can see the benefits of 3) I am lucky in that I can take early retirement on the grounds of ill health if I am unable to work at all, and draw my pension straight away so I feel like I have more cover than I need but I was never asked about any provision within my works pension should I become unable to work at all.

I'm starting to feel like the IFA saw me coming and sold me way too much cover. I also feel like a complete idiot for not having tried harder to understand all this until now.

I seriously need to cut back on my outgoings and have already cancelled 2), but I'm wondering if I have any kind of redress to my IFA, or the product provider for having sold me something which I effectively already had and didn't want or need. I'm also wondering if 3) could have been costing me less if my IFA had asked about what my employer provides should I become unable to work at all due to ill health.

If anyone can offer an informed opinion or some advice it would be most welcome.

bigmatt1174

Hi,

My honest view of when I read your post was the the IFA did a superb job in providing you with the cover you need - I wish most people would have the level of cover that you have.

Policy 1 is a Decreasing Term Assurance policy with Critical Illness - this is designed to provide a lump sum on the earlier of you being diagnosed with a critical illness or dying so that there would be enough money to pay off your mortgage and leave the property to your estate. Good policy to have

Policy 2 (which I believe from your post you have now cancelled) this was a Level Critical Illness policy (may have had life cover as well) - however this would have paid out if you had suffered a specified and survived, the survial period from diagnosis (normally 28 days) of a specific criticall illness - common illnesses are cancer, stroke, heart attack.

This policy was a gem to have - lets say for example you had suffered a stroke and you were left with permanent symptoms of the stroke - first off your mortgage would have been paid off with policy 1, then the second policy (which has now been cancelled) would have provided you with a tax free lump sum to do whatever you wanted with it. Lets say you needed to make adjustments to your house - where would the money come from - the state wouldn't support you, but the money from this plan could do this. Or you could have had a heart attack and wanted were off work for a number of months - you could use this money to have an extended holiday to recuperate. I am not sure of your situation but say someone had to have time off work to look after you after an illness that was covered - you could use this money to provide or pay for this support.

As your name is Tykelass I hope I am not wrong in assuming you are female:D Critical Illness for females is more expensive than males as there are more aresa of illness that a female can contract therefore there is a high risk for the policy to pay out - 1 in 5 people are diagnosed with Cancer.

The reason the policy is about as twice as much as your first policy is because the cover is level - so you are covered the same amount on day 1 as you are on the last day - so again the risk is higher for the insurer so the premium is higher.

Policy 3

Permanent Health Insurance (PHI) - one of the most important plans that you can take out. The premium is going up more than likely because the benefit is going up - if you are off work with a bad back or stress or a broken leg then your critical illness plan will not pay out but this policy will! People do get Critical Illness and PHI plans mixed up.

Getting an ill-health pension is very difficult - they don't just pension you off from work - I have had a family member who was taken for a bit of a ride with early pension due to illness and this was from one the largest pension scheme providers in the country (a govt backed one) - it was only after another family member got involved that things got resolved so please do not think it would happen easily.

I would be surprised if the IFA didn't ask you about any benefits from work as this is a core question to make sure the deferred period on the PHI plan is set correctly - they wouldn't take into account you being in the pension scheme and looking at an ill-health pension as you wouldn't get a ill-health pension with stress or a bad back, so these questions are not asked.

The IFA has not seen you coming - he has done from what I can see a great job in protecting you against a number of events - it is a shame that you cancelled policy 2!

I hope this provides some more info!

Any more questions please ask!

Cheers

Matt

JDC14

In my opinion, that's good cover if you took it out on long-term or whole of life basis in your 20s and you had no medical conditions and you didn't smoke, as Policy 1 & 2 (depending on amount of cover) probably would've cost less than £30 a month, providing your IFA didn't stitch you up - and that they were single policies (i.e. Just for yourself and not someone else too).

I'm not going to claim to know as much as the IFA, or the former IFA who posted before me. But from my experience, working in Life Insurance (admittedly not for that long). A simple, Life Insurance Policy, with Level Cover, with CIC built in could have been a suitable option.

I wouldn't recommend just talking to an IFA or bank though, independent Insurance Brokers (most of whom can't work on an advisory basis, so can literally just lay out the facts for you) may be a worthwhile option to review what cover you have in place.

kingstreet

I agree with the comments that a complete job has been done on correctly advising the OP. However, that doesn't mean the cover she has today matches her current needs.

It's important that protection be regularly reviewed to ensure it continues to meet current needs and that it doesn't fall out of date.

I would suggest if the OP does plan a review, she does it quickly as rates for females will rise when the EU gender directive becomes effective in December. There's a short window in which she can replace any outdated cover at "today's" prices.

dunstonh

the cover set up seems spot on with what you would expect. Cant see any wrongdoing.

_Andy_

Presumably if you'd needed to claim you wouldn't feel there was any wrong-doing.

weighty1_2

It appears from what you've written the IFA did a sterling job of ensuring you were well protected, as Bigmatt pointed out.

You've obviously been happy paying the premiums for the last 10-years but a change of circumstances has not led this to be unaffordable. This happens! It's simply a case that you now need another review based on your new situation and affordability issues.

Taking into account you are now 10-years older the plan which was cancelled could have been cheaper than what you can now arrange cover for and if I was you I'd consider reinstating it (if possible) until you can at least get a full review and assess your options fully. It may even have been a more astute move to cancel the mortgage plan (if the level plan included life cover also) since the value from a decreasing plan becomes less and less in the latter years as the speed at which the plan decreases speeds up - an IFA could look into this and discuss the pro's and con's of doing so.

Why not go back to the original guy? Sounds like he did a good job to me.

magpiecottage

I do think a review is worthwhile. It seems counterintuitive but actually the cost of cover may come DOWN not up. There are two reasons for this.

The first is that the gender equalisation in December means that although the cost of life cover is likely to go up for women, the cost of ill health cover will probably come down - because women tend to live longer than mean but while they are alive mean enjoy better health. Once insurers cannot consider gender based data this is likely to work in the OP's favour.

The second is that, at least for the fixed premium policies, the monthly cost of insuring a risk to, say, age 60, is less for a 50 year old than a 25 year old. This is because although the 50 year old is more likely to die in the next 10 years, they can categorically guarantee they will not die before they are 50 whereas the 25 year old might - so that has to be costed for.

If you do review, though, look carefully at what any replacement cover provides. Critical Illness, in particular, can have quite different definitions on modern policies to those taken out a long time ago.

And if you do replace it, do not under any circumstances cancel the old policy until the new one is actually in force. Even if your application has been accepted by the insurer, until the policy is "on risk" the insurer can withdraw that acceptance.

Once it is in force and the first premium has been paid, it cannot cancel the policy unless you stop paying the premiums.

opinions4u

I had a friend diagnosed with cancer just this week.

A colleague of mine went off work with a serious illness two years ago and hasn't been seen since.

And another friend died quite young a couple of years ago.

It does happen.

weighty1_2

magpiecottage wrote: »

The second is that, at least for the fixed premium policies, the monthly cost of insuring a risk to, say, age 60, is less for a 50 year old than a 25 year old. This is because although the 50 year old is more likely to die in the next 10 years, they can categorically guarantee they will not die before they are 50 whereas the 25 year old might - so that has to be costed for.

Magpiecottage, I've noticed you say this on numerous occasions and it simply isn't correct. If you run a 25yr term quote for a 25yr old and then a 10yr term quote for the 40yr old the older person will be far more costly to cover. If you don't have access to Assureweb or The Exchange then try it via an aggregator, it just won't come back cheaper for an older individual.

Tykelass

Thank you everyone, I really do appreciate the time you have taken to help me out. As I say, I just have this fear/blackspot when it comes to Insurance and struggle to understand it all. I'm not embarrassed to confirm that I was in my late 30s when i took these out.

I just want to clarify one point.The 'Self Assurance' policy only pays out for exactly the same reasons as the CI policies. For exampke I had 3 months off work a couple of years ago following a big operation and none of the 3 policies covered me for that. It didn't matter as I'm lucky enough to receive full pay when I'm off sick for less than 6 months in any 12.

I just want to be sure that 2) and 3) are not basically the same thing. Sadly, something has to give as the current climate and my lack of a payrise for God knows how long, with no prospect of one anywhere on the horizon means I need to cut back and right now, £90 a month on these three policies is just not happening for me any more. I've had to cash part of one of my ISAs in already and don't want to eat into my savings any further.

Such is life in these austere times :think:

The thing that still niggles re this IFA was his instruction to me to not declare when taking out these policies, that I'd had a restriction placed on a similar policy I'd had in the past. I honestly thought this was wrong but went with his advice. It still niggles at me now - what if I needed to claim and they refused because I'd not declared this? I've been tempted before to contact the providers and discuss this with them but never never end up doing anything as it just seems like a load of hassle which could potentially end up having an even worse effect, like nodody every giving me cover again.