Life assurance premium increase

annie42 · 6 February 2017 at 4:12PM

I have a policy with Old Mutual Wealth. Last Year I opted to pay an increased premium for a further five years cover. I have the option to pay an increased premium this year but can decline and still have the same cover for the next four years. I'm pretty green about this kind of stuff and am not sure of the implications of not increasing the premiums for the next four years. Obviously there will be an increase of the premium at that point but is it likely to be much greater than the accumulated premium increases over the four years? I'm wondering if I should spread the pain of increases and pay extra each year. If it is relevant I am sixty six.

Chris_Pollard · 6 February 2017 at 5:07PM

Hi Annie, it sounds like you might have an old Skandia Plan (policy numbers start with TSP) which is a unit linked whole of life policy. I'll assume it is quite flexible. The first question I would ask is what is the life cover for, and do you still need that level of cover. Based on your age, you could well still be working, have a mortgage, and possibly financial dependents. If the answer to these is "no", then I'd question why you might want the life cover at all. If the current cover is too much but you still want some life assurance, you can reduce the sum assured at each policy year. This would mean you would not necessarily need to increase your premiums.

However, answering your direct question - if you do skip an annual increase (that sustains the sum assured potentially for another five years) then the next review letter will likely require a larger increase in premium to maintain the current sum assured.

As I said at the top, it is a flexible plan, but ask yourself some questions, and then by all means give OM a call to better understand your options.

Hope this helps

annie42 · 6 February 2017 at 5:52PM

It was indeed a Skandia plan. I am retired and do have mortgages on rental properties but have separate cover in place for them. I have no financial dependants. The cover is 50k held in trust to go towards payment of inheritance tax after I turn up my toes. The current premium is £33 per month. I think, given what you've said, I should opt to increase the premium each year so I don't suddenly turn up my toes in shock in four years time. Many thanks for your help. It's much appreciated.

dunstonh · 6 February 2017 at 6:27PM

This type of plan is quite obsolete. If you still have a life assurance need and are in good or reasonable health then you should look at modern alternatives. Not all old/obsolete plans are bad. Occasionally you come across old gems that are worth keeping. However, you should be comparing against modern options now.

annie42 · 6 February 2017 at 8:35PM

Many thanks. I've looked online and assume you are talking about balanced cover? I will look into it as I am in good health so hopefully in the long run it could cost me less. The cover began in 2003 at £20 per month and if I opt for another increased premium now I will be paying £37. Goodness knows what I will end up paying in a few years time if I stick with OMW.

Weighty1 · 6 February 2017 at 8:53PM

A guaranteed premium would give you absolute certainty over what you pay for eternity. There are quite a few providers who offer guaranteed premiums on whole of life plans. They are move expensive to start but there's zero risk of being priced out of the policy when you get too old.