Mis-sold Life insurance?

topcat685

Hi everyone - am posting as I'm hoping someone can offer some advice and help point me in the right direction!

I currently pay around £42 a month for a life insurance policy which I bought into around 8 years ago. I was working as a teacher at the time and now work for local government in a similar capacity. I bought the policy at the same time as re-mortgaging my house and so bought via a broker, not the providing company. The insurance was predominantly in case of a terminal illness (I wanted the mortgage to be paid off as my wife is unable to work), and a sickness benefit in case I was seriously ill and couldn't work.

My problem is, as I've become more aware of what benefits etc. are included with my employment (and were included when I was employed as a teacher) e.g. 6 month at full pay and 6 months at half pay if ill, a death in service payment etc., I am beginning to believe that I shouldn't have been sold the insurance policy in the first place and that I was a bit naive in agreeing to it. However, having paid around £4000 over the last 8 years, I'm reluctant to cancel the policy as I'll obviously lose all benefits immediately and I have no idea how to go about justifying / investigating further whether I can argue that I was mis-sold the policy in the first place!

Should I cancel the policy?
Do I have any recourse for arguing that the policy was unsuitable for me int he first place?
How do I move forwards with this please?!!!

Can anyone help please?
Many thanks.

dunstonh

I am beginning to believe that I shouldn't have been sold the insurance policy in the first place and that I was a bit naive in agreeing to it.

Why do you think that?
You have given a scenario that would indicate you DO have a financial need for it (married with debts)

I have no idea how to go about justifying / investigating further whether I can argue that I was mis-sold the policy in the first place!

Perhaps because there is no justification for saying it was mis-sold?

Should I cancel the policy?

We know nothing of your circumstances other than you are married and have debts. Two things that normally make life assurance a financial need.

Do I have any recourse for arguing that the policy was unsuitable for me int he first place?

Why do you think it is unsuitable as you haven't given any reason?
Are you suggesting you are immortal?

My problem is, as I've become more aware of what benefits etc. are included with my employment (and were included when I was employed as a teacher) e.g. 6 month at full pay and 6 months at half pay if ill, a death in service payment etc.,

none of which indicate there is no financial need for life assurance. Sick pay of upto 12 months indicates a financial need for income protection (for 12 months onwards). Death in service grant is to go some way to replace lost pension benefit and provide a very shot term income replacement. So, not suitable for covering a mortgage let alone providing a decent amount for you spouse.

topcat685

Hi Dunstonh,

Thanks for your quick response. One of the reasons for my lack of clarity over some of the detail you have described above is that I'm still trying to work the details of this out myself. However, as an example, a teacher's pensions guide I have downloaded states that, if you die in service the death grant:

'is calculated at three times your average salary and further information on this can be found in the fact sheet ‘Average salary’'

This would have covered the amount which was outstanding at the time of taking out the policy and so would have been suitable for covering my mortgage...

The idea that I might have been sold something I didn't actually need has come from a recent conversation with a colleague who has made me aware of what benefits were already incorporated into both my employment T&Cs and my teacher pension. I'm not trying to be litigious here, but I do want to try to work out if I was sold something over and above what was needed...

Quentin

You are forgetting that you would lose your death in service benefit if you lose your job!

You don't look to have a case of being missile

If you now feel the policy is a waste of money then it's your call on whether to continue with it

dunstonh

'is calculated at three times your average salary and further information on this can be found in the fact sheet ‘Average salary’'

This would have covered the amount which was outstanding at the time of taking out the policy and so would have been suitable for covering my mortgage...

You dont say how old you are. But lets give an example of 35. That is a working life of at least another 30 years. i.e. 30 years of salary to come in. Plus, 30 more years of pension provision to build up. Now, lets say you die now. Death in service gives just 3 years. So, what does your spouse do for the other 27? What about the reduced pension benefits because there hasnt been the build up of qualifying years in the plan, which would have taken place had you still been alive?

The idea that I might have been sold something I didn't actually need has come from a recent conversation with a colleague who has made me aware of what benefits were already incorporated into both my employment T&Cs and my teacher pension. I'm not trying to be litigious here, but I do want to try to work out if I was sold something over and above what was needed...

It is important to know your employer benefits. However, they are nowhere near good enough for most people. The general rule of thumb is 10 times income plus debts. Its a crude and dirty figure but it's aim is to get you in the ballpark of expectation. Some people may need more than that, some less. e.g. a surviving spouse with low investment knowledge and unlikely to use an adviser would need more than a more experienced investor as 10x income is based on an expectation of investment returns. Not cash interest returns. With low interest rates, 15x income may be more appropriate if the person is not going to invest. The figure can be fine tuned to suit the individual and their circumstances.

So, 10x income plus debts is the crude requirement vs 3x times income with no provision for debts which was what you had without any life assurance.

topcat685

Thank you - that makes sense. I guess the question is not around whether there is some benefit to having life insurance - but whether this policy was suitable for me at the time. The niggling bit is that, when asked, I specifically wanted to have the mortgage paid off in case of death and that was the main reason for taking the policy. If a death in service grant would have done that then surely that policy was not right for me in the first place - or at the very least, that should have been explained?

Quentin

What if you got the sack??

Weighty1

In your original post you stated that you wanted something which paid out in the event of terminal illness as your wife is unable to work.

Would your DIS provision pay out if terminally ill? Quite possibly not.

What if you became ill and didn't work for 12-months BEFORE then being told you are terminally ill. How would you then continue to service the mortgage?

Based on your original post it seems to me like the life cover is doing exactly what you wanted it to do.

In addition to that, as has already been mentioned, if you wife is unable to work, would you want your DIS being used to repay the mortgage leaving her little to life on or would it be better to have the mortgage repaid and then the DIS used to provide money to maintain your wife's standard of living?

I can't see any reason for a mis-sale here.

dunstonh

I specifically wanted to have the mortgage paid off in case of death and that was the main reason for taking the policy. If a death in service grant would have done that then surely that policy was not right for me in the first place - or at the very least, that should have been explained?

Your objective would not have been met by the death in service grant.
1 - it is discretionary and not guaranteed
2 - mortgages are long term and you could change job

So your specific desire to have the mortgage paid off in the case of death is best met with a life assurance and not death in service.

Generally, advisers will not include death in service in the shortfall analysis for long term debt coverage because of this and the reasons mentioned in the previous post. It really isnt geared for debt provision.

I guess the question is not around whether there is some benefit to having life insurance -

any complaint would look at the suitability of the insurance for your circumstances. You had a debt and a spouse who would be financially worse off in the event of your death. The shortfall analysis would have the death in service offsetting reduced pension benefits for the spouse. Leaving a shortfall in debt coverage and income replacement. So, a clear financial need for life assurance. Complaint rejected.