Critical illness cover - realistic expectations

apinot

When I got my first house, I took out a critical illness plan. It seemed very sensible at the time - more so that PPI. The plan was clearly explained to me in the sense that I understood my responsibilities for payment throughout my life. I also understood that the payments might have to change if the market changed throughout my lifetime. My question I have to the forum is what is a realistic expectation of an insurance company? I think the company should invest my money wisely to ensure that the increases in my premium are not excessive. This is where I think the company has failed. To illustrate, in 1997 my insurance premium was £38 and the sum assured was £107,500 - enough to cover my mortgage. This week I have been told that my premium will be increased again. It is now £372 and the sum insured is £222,000. It does not take a mathematical genius to work out that the premium is 10 times higher and the sum insured is only twice what it was in 1997. Is this fair? Is there anyway that I can challenge this? I have tried talking to the insurer and they basically say this is what I signed up to. My view is that I signed up to having my money invested with a trustworthy insurer. By the way, I do understand that this is not an investment but nevertheless, as far as the insurer is concerned, my money is invested.


Thanks for your help.

dunstonh

also understood that the payments might have to change if the market changed throughout my lifetime.

That only applies to reviewable premiums and investment backed plans (which are obsolete by todays standards). Guaranteed plans do not change.

I think the company should invest my money wisely to ensure that the increases in my premium are not excessive. This is where I think the company has failed.

You may think they have failed but they haven't. You have a plan that is obsolete. It was bought in the 90s just before they went obsolete.

Since then, we have had two major stockmarket crashes of the scale that is normally only seen once in a generation. Your 20% crashes are quite common. However, 45% crashes are rare but you have had two.
Also, the product you have has target growth rates that need to be achieved to keep the premiums at a certain level. These targets would have been set on past performance data from the 70s and 80s where growth gross of inflation was higher than today.

It does not take a mathematical genius to work out that the premium is 10 times higher and the sum insured is only twice what it was in 1997. Is this fair?

Fairness isnt an issue. It is about commercial reality.

Is there anyway that I can challenge this?

No.

I have tried talking to the insurer and they basically say this is what I signed up to. My view is that I signed up to having my money invested with a trustworthy insurer. By the way, I do understand that this is not an investment but nevertheless, as far as the insurer is concerned, my money is invested.

If it is investment backed then it is an investment.

Have you considered moving to a modern plan that is not investment linked and has modern pricing with guaranteed premiums?

apinot

Thanks for your response. I have thought about moving to a modern plan but the plan I have gives a guaranteed pay out on death. Given that I am older now, I am sceptical as to whether I would get critical illness and life assurance rolled into one that was affordable. I am 47. Mind you, I am also sceptical that I would be able to keep on playing the premium on retirement so I would probably never be able to receive the death "benefit" anyway.

Nearlyold

apinot wrote: »

Thanks for your response. I have thought about moving to a modern plan but the plan I have gives a guaranteed pay out on death. Given that I am older now, I am sceptical as to whether I would get critical illness and life assurance rolled into one that was affordable. I am 47. Mind you, I am also sceptical that I would be able to keep on playing the premium on retirement so I would probably never be able to receive the death "benefit" anyway.

Part of the extra charge you are paying now is to cover the fact that the sum insured has increased but you are older, and were older each time the sum insured increased. As dunstonh says why not look at some modern plans to compare overall costs/benefits

HappyHarry

Given that I am older now, I am sceptical as to whether I would get critical illness and life assurance rolled into one that was affordable. I am 47. Mind you, I am also sceptical that I would be able to keep on playing the premium on retirement so I would probably never be able to receive the death "benefit" anyway.

This implies that you have a "Whole of Life" policy, that pays out on death or diagnosis of a critical illness. A Whole of Life policy with Critical Illness cover will be very expensive, even with modern policies. The chances of you claiming for a Critical Illness at some point before death are massive.

A Whole of Life policy that pays out on death can be useful for estate planning or funeral planning, though a death benefit of £222,000 implies the former.

You said you took this out along side your mortgage, and presumably, the mortgage has a fixed end date?

You might want to consider if:
1. You need life cover for ever, or just until the mortgage is repaid
2. You need critical illness cover for ever.

If you decide that you need a certain level of life cover for a fixed term, and a certain level of critical illness cover for a fixed term, then you may well find a less expensive policy is available to you.