Whole of Life insurance can it be "cashed in"?

Mrs_Money

I've just found out today that my elderly parents have been paying for a whole of life insurance with the Phoenix Group (for 17 years at a monthly premium of £12 each) that is only going to pay them £1801 upon their deaths. Each of them has, of course, paid in way more than this (£2448) and the reality of all this has only just hit them. Unfortunately, I am aware that these life insurances often come with a warning that the insured may pay more in premiums than they ever get back but I'm sure that they were not at all aware of this and 17 years ago they never asked my advice!
This has just come up because their provider has written to offer to "charge" their policy to Dignity (a funeral provider) an offer which would enhance payout by £250 and so have written to them today to ask them to sign for this and part of the letter states the sum assured.
They are in their late 80s and are, understandably, distressed at how little this policy will eventually pay out (not enough for a funeral) and wondered if there's any way of getting back what they've paid in and cancelling the policy? They are only on a state pension and are still paying out for this insurance.
I think it's unlikely that they can get anything back, but someone out there may know something I don't!

Mrs_Money

Anybody have any advice?

GhIFA

They won't be able to get back the premiums paid.

There is likely to be a surrender value after 17 years, but depending on what basis the cover was set up (there are generally different "levels" of cover in a Whole of Life plan, which determine how much of the premium funds the life cover and how much is invested), this could be almost negligible - this will be the only money they can get back if they cancel the cover.

With regards to the sum assured that will be provided on death, it may well have been higher when the plan was set up - the plan is likely to have had a couple of reviews by now. At these reviews, if the premium was no longer to sufficient to cover the sum assured then your parents would have had the option to either increase the premium to meet the new level required for the sum assured, or retain the same level of premium and have a reduced sum assured.

Hope that helps

bigmatt1174

Phoenix Group have took a myriad of companies over and 17 years ago a WOL plan may well have been sold by a Home Service company and the plan may be a traditional with profits. I started in the industry in 1998 and I was able to sell a traditional WP plan. There was a point in which these plans would also be made fully paid up, i.e. the policy was still in force (i.e. cover was still valid) but the policy holders paid no more premiums and if it was a traditional WOL WP plan they would still partake in any future bonuses.

You need to find out who the plan was originally sold by - it wasn't Phoenix.

Is the plan unitised or traditional With Profits?

Can the plan obtain a fully paid up value?

Mrs_Money

I'd have to check the paperwork again (not easy when it's your parents!) but I think it was without profits.
Now these kind of life insurance schemes that are advertised in magazines targeted at the over 55s, do come with warnings that they may not keep up with inflation and that it could be possible to pay more in than you will ever get out - I doubt that this was ever pointed out to my parents when they took the policies out.
I would have to see all the old paperwork to find out who the policy was originally with - although I'm not sure how that will help.
This looks like they have no choice but to go on paying £24 per month, knowing it won't even cover the cost of their funerals.
Grim.

bigmatt1174

I would be surprised if a policy now being administered by Phoenix Group is an over 55 plan - these are totally different to a Whole of Life plan.

Once you get the paperwork put the details on here.

Mrs_Money

No, you're right this wasn't an over 55s plan, but the point I was making was that with all the claims for "mis-selling" nowadays, those disclaimers are more often seen - 17 years ago I guess no such warnings were in evidence- of course it doesn't help that they can't remember where or how they purchased this plan!

dunstonh

17 years ago I guess no such warnings were in evidence

Yes they were.

Now these kind of life insurance schemes that are advertised in magazines targeted at the over 55s, do come with warnings that they may not keep up with inflation and that it could be possible to pay more in than you will ever get out

As a totally different type of plan that rarely is good value for money they have to. Whole of life assurance plans are very different and its unsusual for people to pay in more than the amount paid out but it possible with a long life. Although many stop collecting premiums around age 80-90 but allow you to keep benefits.

Are they sure on their figures? These plans were typically the sum assured PLUS bonuses (or value) or the sum assured OR bonuses whichever is higher.