Life Insurance-Living with Parents, No Children

eastender1234

Hi all

My partner has a life insurance policy. He is living with parents and has no dependents (this has been the case throughout the time he has had the policy).

The policy information we know is:

Level Term Policy taken out in 2004 and matures in 2019. His premium is only £6.50pm which covers him in the event of death for £50,000.

So my questions are:

a) Is there any point to him having this policy under his circumstances?
b) What does it mean by "maturing"?
c) Was he mis-sold this product?

Whether or not it's relevant, I believe he took out this policy at the same time as taking out a loan AND PPI with his bank. So if he was taking it out because of his loan (not sure that is even relevant in his circumstances?), surely he didn't need PPI and life insurance for the purpose of 1 loan?!?

Any advice would be appreciated. Thank you

dunstonh

If there is nobody going to be financially worse off in the event of your death then you dont need life assurance.

b) What does it mean by "maturing"?

Policies with an investment element (such as endowment) mature. Level term policies do not mature. They just cease at the end of their term.

c) Was he mis-sold this product?

With short term debts, he would be mis-sold. However, with long term debts, the FOS have been rejecting complaints similar to his as most adults will end up in a relationship and have dependants at some point.

surely he didn't need PPI and life insurance for the purpose of 1 loan?!?

PPI and life assurance do not overlap.

magpiecottage

In 2004, general insurance was not regulated and did not fall under the jurisdiction of he General Insurance Standard's Council. Therefore, a complaint would rely on whoever it was against voluntarily submitting to FOS jurisdiction.

This may have applied to a bank but almost certainly not an independent intermediary.

The lender would also have been within its rights to insist on life cover although if it was presented as compulsory when it was not that might amount to a missale.

eastender1234

dunstonh wrote: »

If there is nobody going to be financially worse off in the event of your death then you dont need life assurance.



Policies with an investment element (such as endowment) mature. Level term policies do not mature. They just cease at the end of their term.



With short term debts, he would be mis-sold. However, with long term debts, the FOS have been rejecting complaints similar to his as most adults will end up in a relationship and have dependants at some point.



PPI and life assurance do not overlap.

Unless his parents would have been responsible for paying for his loan, which was in his name only, in the event of his death (which I don't believe is how it works?), then no, nobody would have been financially worse off in the event of his death.

Scottish Widow used the term mature in their letter detailing what policy we have, but yes, I now understand that Level Term Policies just cease.

Surely the rep had a responsibility to ensure, like with PPI, that it was suitable at the time of sale? Surely they can't get away with selling on the idea that it might be suitable in the future, so we'll flog you it anyway? (which still to this day his circumstances haven't changed, so whether or not that is rare, it is evidence that assumptions like such shouldn't be made)

What I meant by my PPI and Life Insurance question is, he had no reason for them to sell him life insurance, so the only reason we can think of was to protect him with the loan being paid on in the event of his death (which of course was unnecessary in his circumstances). So my link with PPI was that he was simultaneously sold PPI, which is protecting him against that already.

I just thought that selling life insurance to a 23 year old, who was childless, single and living with parents, at the same time as he was refinancing a loan and being sold PPI, might have been mis-selling as I couldn't find a purpose for his life insurance with those circumstances. But I'm getting the idea I was incorrect?

eastender1234

magpiecottage wrote: »

In 2004, general insurance was not regulated and did not fall under the jurisdiction of he General Insurance Standard's Council. Therefore, a complaint would rely on whoever it was against voluntarily submitting to FOS jurisdiction.

This may have applied to a bank but almost certainly not an independent intermediary.

The lender would also have been within its rights to insist on life cover although if it was presented as compulsory when it was not that might amount to a missale.

It was Lloyds TSB that sold a Scottish Widow policy to him.

So does that mean even if they did mis-sell, they weren't regulated so can basically get away with mis-seeling?

dunstonh

Unless his parents would have been responsible for paying for his loan, which was in his name only, in the event of his death (which I don't believe is how it works?), then no, nobody would have been financially worse off in the event of his death.

Not then but maybe there is now. It would likely be a secured loan given the 15 year term. Lloyds personal loans dont go on for 15 years.

Surely the rep had a responsibility to ensure, like with PPI, that it was suitable at the time of sale? Surely they can't get away with selling on the idea that it might be suitable in the future, so we'll flog you it anyway? (which still to this day his circumstances haven't changed, so whether or not that is rare, it is evidence that assumptions like such shouldn't be made)

Financial planning is not just about now but also the future and maybes. If it was a short term loan then they wouldnt have a leg to stand on. A 15 year loan though is a different matter.

I just thought that selling life insurance to a 23 year old, who was childless, single and living with parents, at the same time as he was refinancing a loan and being sold PPI, might have been mis-selling as I couldn't find a purpose for his life insurance with those circumstances. But I'm getting the idea I was incorrect?

As lloyds dont retail 15 year unsecured loans, it would be interesting to know what lending product he actually has.

As I mentioned earlier, the FOS have been rejecting life assurance against long term debts because of what may happen in that 15 year period. Not what the situation is at point of sale.

Quote from a FOS decision about being single with no children...
I have considered the submissions Mr C has made about the need for the cover, including
that he did not have dependants at the time (such as children). Having dependant children
would certainly create even greater need for such cover but the fact that there were no such
dependants at the time does not make the recommendation unsuitable.

So does that mean even if they did mis-sell, they weren't regulated so can basically get away with mis-seeling?

If they were not regulated then they cant be mis-sold (from a regulated point of view). A mis-sale is a breach of regulations. So, its hard to breach regulations that were not yet in force. That said, a firm can volunteer to consider pre-regulation complaints. Bank's normally do.

The bottom line is that the bank may refund in the event of a complaint. It would not be difficult to reject and make a reasoned argument to the FOS if necessary. However, banks are very erratic in the complaint outcomes and sometimes uphold when you expect a rejection or vice versa.

magpiecottage

My understanding is that a loan was taken out by somebody living with his parents at the time. Presumably, then, the property was either his parents' or rented.

This means, in the event of death, a claim could be made against the estate by the bank but, even then, they would rank behind essential expenses such as a relatively simply funeral.

So, at the time, the product would seem to have been unnecessary.

Lloyds TSB voluntarily submitted to FOS jurisdiction in 2004 (they had both been members of the Banking Ombudsman Scheme before FOS came along - although not relevant in this instance).

A complaint would therefore seem reasonable in the circumstances but the outcome is far from certain.

eastender1234

Yes Magpiecottage, that is correct. My partner was (and still is) living with his parents at the time of taking out the loan, and it was his parents (rented) property.

Regarding your comment...
"This means, in the event of death, a claim could be made against the estate by the bank but, even then, they would rank behind essential expenses such as a relatively simply funeral".
Does that mean they could have made a claim against his parents for the loan, and therefore his parents would have in fact been financially worse off i the event of his death?

dunstonh

How was the loan 15 years then if it was not secured? (Lloyds unsecured loans have a maximum of 5 years)

eastender1234

dunstonh wrote: »

Not then but maybe there is now. It would likely be a secured loan given the 15 year term. Lloyds personal loans dont go on for 15 years.



Financial planning is not just about now but also the future and maybes. If it was a short term loan then they wouldnt have a leg to stand on. A 15 year loan though is a different matter.



As lloyds dont retail 15 year unsecured loans, it would be interesting to know what lending product he actually has.

As I mentioned earlier, the FOS have been rejecting life assurance against long term debts because of what may happen in that 15 year period. Not what the situation is at point of sale.

Quote from a FOS decision about being single with no children...
I have considered the submissions Mr C has made about the need for the cover, including
that he did not have dependants at the time (such as children). Having dependant children
would certainly create even greater need for such cover but the fact that there were no such
dependants at the time does not make the recommendation unsuitable.



If they were not regulated then they cant be mis-sold (from a regulated point of view). A mis-sale is a breach of regulations. So, its hard to breach regulations that were not yet in force. That said, a firm can volunteer to consider pre-regulation complaints. Bank's normally do.

The bottom line is that the bank may refund in the event of a complaint. It would not be difficult to reject and make a reasoned argument to the FOS if necessary. However, banks are very erratic in the complaint outcomes and sometimes uphold when you expect a rejection or vice versa.

Regarding which product he had, we are actually trying to find out more specific information as he refinanced that loan just under a year later.

But from what we know, he took out the loan in 2004, definitely over less than a 4 year term (more likely a 2 year term), for around £4000. We also know he took out PPI with this loan AND the life insurance policy.

So it all seems a little OTT for the loan amount and term time etc, which is what led me to thinking it was mis-sold maybe. However, I now understand what you say about "If they were not regulated then they cant be mis-sold (from a regulated point of view)"

So I'm still tied really between whether we should complain that we feel it's been mis-sold, or just cancel the policy and move on. But your replies are helping, so thank you for all of your advice

eastender1234

dunstonh wrote: »

How was the loan 15 years then if it was not secured? (Lloyds unsecured loans have a maximum of 5 years)

Sorry, I didn't say the loan was 15 years, or if I did I didn't mean to. The life insurance term was 15 years (2004-2019). Is that where the confusion has come from maybe? My apologies