Life insurance cut in half!

Tmouse

Hi,

Was wondering if anyone has some advice for us. My partner has a unit linked assurance policy with ABBEY LIFE to provide £60K of life and critical illness cover, which he has been paying into for the last 10 years. However they have just written to tell him that they have recalulated his policy and it is now worth only £30K. We are a little confused as to how they are able to do this. They suggest that we now take out an additional policy with them to make up the new £30K shortfall. Should we do this - or should we go elseware? The 60K is part of our mortgage cover - so we don't want to leave ourselves with not enough cover - but we also don't want to be paying over the odds!
Any advice much appreiciated
Thanks, T

deadlion

Tmouse wrote: »

Hi,

Was wondering if anyone has some advice for us. My partner has a unit linked assurance policy with ABBEY LIFE to provide £60K of life and critical illness cover, which he has been paying into for the last 10 years. However they have just written to tell him that they have recalulated his policy and it is now worth only £30K. We are a little confused as to how they are able to do this. They suggest that we now take out an additional policy with them to make up the new £30K shortfall. Should we do this - or should we go elseware? The 60K is part of our mortgage cover - so we don't want to leave ourselves with not enough cover - but we also don't want to be paying over the odds!
Any advice much appreiciated
Thanks, T

You need to check the terms of the policy document carefully. I suspect this will be whole life term assurance policy which allows for reassessment of premiums on the 10th anniversary; in effect, as you get older the level of cover decreases ( in line with the greater risk carried by the insurer ) but usually you can extend cover up to the original figure agreed without the need for a medical examination.....however you'll have t0 pay for this and the premium will be more. The policy should specify whether cover is to be reviewed and the frequency of this, ie., every 5 or 10 years. A lot of people don't appreciate it this "small" detail when they take out this kind of policy. You could check elsewhere to see whether you can get the shortfall in cover insured on better terms. You should be able to do this as a proportion of your current premiums are being invested in a savings fund so I don't see why you wouldn't get straight fixed term life cover cheaper elsewhere. hope this helps.

dunstonh

Abbey Life, like allied dunbar sold a load of these plans and they are expensive and the reviewable premiums make them unattractive.

Whilst modern CI coverage may not be quite as good as one from 10 years ago, the lower cost of life cover today and the availability of non investment linked cover with guaranteed premiums may make sense to go with a modern alternative.