All of Life Policy

Ramornie

ALL OF LIFE POLICY. MISSOLD?
Do I have a claim? If so, what is my loss? Can anybody advise.

In 1993 I bought a Midland Bank “All of Life” Navigator Policy. The monthly premium was £200 and has not risen since. The assured sum if £400,000.

I bought it to secure, in the early years, my family's security if anything happened to me. It was a big chunk from my income in those years but it would have given them a substantial sum. I opted for an All of Life Policy so that, in the event that I lived to a ripe old age, whilst I would have to keep contributing for many years it would provide a sum to my estate to cover estate duty. I was advised to write it into trust for that very reason. I maintain that had I merely wanted to secure the medium term I would have opted for term assurance. Had I simply wanted to save I would have put the sum into my pension pot. Or split it between the two.

It was explained to me that the premium had been set at the level that I have now been paying for over 20 years because the actuarial and market calculations made at that time indicated that they would hopefully be sufficient – until my dying day. However I was warned that in later years, if those actuarial calculations (including market assumptions) were not borne out then premiums might have to increase. Might. However I was specifically assured that my health would not affect premiums (if it deteriorated) – and I was certainly never given the slightest inkling that "age" would become a factor. I was specifically told – (no doubt as a passing incentive to buy the policy) – that if I lived to a very great age – premiums might be waived until my demise, the policy treated as fully paid up, relieving me of the burden on continuing monthly payments.

I have now received a letter telling – in essence – that once I pass 70 the premiums will start to increase dramatically. The older I live the more cripplingly expensive they will become. Eventually the premiums required to maintain the £400,000 cover will be so high that I will likely have to start spending the “accrued sum” to pay the life insurance element. Hardly what I understood as an All of Life Policy I maintain. Indeed, once the entire accrued sum has gone to pay premiums the policy will be “exhausted” – in other words a worthless All of Life Policy.

It is my position that I was stunned to receive this information last month, just ahead of my 64th birthday. However the premiums are currently still at £200 – and if I pop my clogs tomorrow the £400,000 will still be paid. However if I live to 80, 90 or 100 – presumably I will have nothing whatever to pass to my children from this so called All of Life Policy. So, can anybody help? Do I have a claim – if so what is my loss?

Nearlyold

Why not reduce the £400,000 sum assured or do you still need that level of cover.
TBH the explanation you were given of the policy seems pretty much what I would expect you should have been told. You need to bear in mind that fund growth has been a lot lower than would have been expected at the time the policy commenced. Age will always be a factor in these reviewable policies in that as you get older more is required to cover the risk of you dying, the extra can come from either an increase in the premium following a review or from the fund you have built up. The amount the insurance company has at risk is the difference between the fund value and the sum assured.The policies were originally designed so that the fund would be sufficient to cover the increased risk of death by gradually closing the gap between the fund value and the sum assured but sadly this has proved not to be the case.

dunstonh

In 1993 I bought a Midland Bank “All of Life” Navigator Policy. The monthly premium was £200 and has not risen since. The assured sum if £400,000.

That is pretty good. You would have expected a premium change or a reduction in sum assured by now. To be 23 years without one is impressive.

It was explained to me that the premium had been set at the level that I have now been paying for over 20 years because the actuarial and market calculations made at that time indicated that they would hopefully be sufficient – until my dying day.

That is normal. The assumptions used are those that are typically similar to best available stats at the time along with regulator guidance and actuarial data. Like any estimate, they are statistically more likely to be wrong than right but they are the best you can do at the time.

However I was warned that in later years, if those actuarial calculations (including market assumptions) were not borne out then premiums might have to increase.

Good. That verifies the compliance standards were met.

However I was specifically assured that my health would not affect premiums (if it deteriorated)

I'm not aware of a whole of life plan that has that issue.

and I was certainly never given the slightest inkling that "age" would become a factor.

it is usually a factor on reviewable premium plans. Not so on guaranteed plans. The pricing is based on age. The hope is that the investment returns built up during the earlier years would be sufficient to cover later increases.

I was specifically told – (no doubt as a passing incentive to buy the policy) – that if I lived to a very great age – premiums might be waived until my demise, the policy treated as fully paid up, relieving me of the burden on continuing monthly payments.

These plans do frequently have a maximum age for premium paying. Tends to be somewhere between 80 and 90.

I have now received a letter telling – in essence – that once I pass 70 the premiums will start to increase dramatically. The older I live the more cripplingly expensive they will become. Eventually the premiums required to maintain the £400,000 cover will be so high that I will likely have to start spending the “accrued sum” to pay the life insurance element. Hardly what I understood as an All of Life Policy I maintain. Indeed, once the entire accrued sum has gone to pay premiums the policy will be “exhausted” – in other words a worthless All of Life Policy.

They are meant to eat the investment value. That is how they work. This is not a savings plan.

So, can anybody help? Do I have a claim – if so what is my loss?

You have no loss as they have provided the policy and you have paid the premiums. Also, nothing you have said suggests any issues other than your understanding. Problem is that you are talking about a verbal conversation that took place 23 years ago. Almost certainly you recall little what was said and there will be no evidence to suggest any wrongdoing in the verbal conversations.

Also, you have verified you were issued the warnings. After two decades of some of the worst investment returns on record along with low inflation (the plan you have works best with high inflation - which it would have been when taken out) means that things you confirm you were warned about have happened.

These types of plans are woefully obsolete by todays standards. They started going obsolete in the mid 90s. What you normally look to do is see if you can get a modern, non-investment linked whole of life plan (if you still need it that is - you may not any more given the tax changes). Life assurance is cheaper today but your pricing will be based on 1990s levels. If your health is still good and you use an IFA rather than an expensive bank product (which are are often nearly twice the price of what an IFA would have arranged for you) you can move to guaranteed premium and save money.

[Deleted User]

Ramornie wrote: »

ALL OF LIFE POLICY. MISSOLD?
Do I have a claim? If so, what is my loss?

Not mis-sold. No claim. No loss. Consult an IFA for a better/cheaper deal, but no refund will be forthcoming I'm afraid.

addedvaluebob

Why did you need £400 K of life cover?

Ramornie

God knows!

Ramornie

Thanks for all the replies.

addedvaluebob

Look back to your circumstances at the time. Why did you need £400K of life cover? Did this cover a mortgage or debt? The fact that you have said 'god knows' suggests this may have been wrong by virtue of being too much cover or too long. There is nothing fundamentally wrong with whole of life but it is certainly not a one size fits all product. If it was to protect the family then what age were your children and how long did you need the cover for, same applies to a debt. Did you cancel any other policy when taking this one out. I think you have at least a few reasons to go back to HSBC and start asking questions and are more likely to be mis-sold this policy than not, so should consider making a formal complaint