Whole of Life assurance - big hike in prems

shorthdt

Hi,
I have had a reviewable WOL policy with Scottish Provident for 15 years, since my early thirties. The latest review is saying that to maintain the same cover I have had up till now my premiums need to increase by over 100% - or keep my premiums the same and accept cover of 50% less - which would be lower than the sum that I was originally covered for when the policy was taken out 15 years ago ! The policy was index linked for premium payments.
Fairly gobsmacked by this - can they reduce the cover to below that figure originally covered for - or does each review allow them carte blanche to reset the numbers to what they want ?
Any responses would be most welcome.
Thx

weighty1_2

Yes they can increase the premium by whatever amount they see fit or ask you if you wish to accept a much lower sum assured. Chances are your plan is a unit linked WOL plan (probably a Pegasus product) and the degree of premium change is all dependent on investment returns over the previous period and those which Scot Prov believe are achievable going forward, however, chances are the premium will increase again at the next review as historically investment returns have rarely been enough to cover the increasing risk you present as you get older.

There are providers who offer WOL plans which aren't investment linked and provide guaranteed premiums. PruProtect, Zurich, L&G and LV= if memory serves me correct.

It may be worthwhile speaking to an IFA to see if you could switch to another provider or even whether your really need a WOL plan in the first place.

dunstonh

I have had a reviewable WOL policy with Scottish Provident for 15 years, since my early thirties.

Key word is reviewable. Guaranteed plans cannot make changes. Reviewable plans can. Typically the first review comes at year 10 or 15.

Fairly gobsmacked by this - can they reduce the cover to below that figure originally covered for - or does each review allow them carte blanche to reset the numbers to what they want ?

Yes they can. Problem is that many of these plans are investment linked and the last decade has been one of the poorest for investment returns on record. If they over achieved target then the premiums would go down. If they hit target they would stay the same and if they didnt hit target then they would go up.

Another thing is that, with hindsight, the insurers set the premiums too low at the start. So, for 15 years they have been running a loss (in actuarial terms). So, the first review brings them in line with what they should be. So, for many people, they have actually had 15 years cheaper and if they are in good health still, they can use this point to switch to a more modern form of life assurance and not be any worse off.

These types of plans are quite obsolete now. That doesnt mean you should dump it but if you can get a better modern alternative, then it should be considered.

shorthdt

OK - disappointing to hear but the situation is now much clearer, can make a better decision based on those responses. many thx.