What are my options ? Life Policy Canada.Life

Sagwala

Good afternoon,

My 77 yr old Uncle has a 19 year old life assurance policy. After the annual assessment in Feb this year, he is paying £80 per month for £17,500 assured sum.

Originally the policy was £40 per month for £20,000.

The whole policy just smacks of a fortune per month for very little return, especially for a pensioner.

Canada life have offered £1300 to cash it in.

Knowing very little about these policies, can anyone advise on his options please?

HappyHarry

Sagwala wrote: »

Good afternoon,

My 77 yr old Uncle has a 19 year old life assurance policy. After the annual assessment in Feb this year, he is paying £80 per month for £17,500 assured sum.

Originally the policy was £40 per month for £20,000.

The whole policy just smacks of a fortune per month for very little return, especially for a pensioner.

Canada life have offered £1300 to cash it in.

Knowing very little about these policies, can anyone advise on his options please?

This sounds like a whole of life policy, with regular (5 yearly?) reviews. Annual reviews are unusual.

At each review, the options are normally to;
(a) increase the premiums and keep the same level of cover, or
(b) keep the premiums the same and reduce the level of cover.

There is also an underlying investment element designed to help smooth the premium rises a little. This is the reason for the offer of £1300.

The options now seem to be:
(i) Carry on paying the premiums, and carry on being covered.
(ii) Surrender the policy, receive £1300, and the cover stops.

Before you leap to surrender the policy, it should be established whether the policy was written into a trust. If so, then it will be the beneficiaries of the trust that will receive the benefit of the policy, rather than your uncle.

An important question to ask is why was the policy taken out in the first place? Is the policy still needed to meet that original need?