Life Assurance

Ziggy71

hiya, I am new so apologies if I have missed this - but I have looked. I am seeking advice on behalf of my grandfather. He has a life assurance plan which he took out in 1998. he pays £14 per month - and will receive a payout of £1,230 upon death. My concern is that he has now paid into the plan a total of £3528 and has to keep paying the £14 to receive the £1230.

On speaking to them following the recent death of my grandmother - who had the same plan - I have been told he can cash out - and receive a one off payment of £664 or Surrender his policy - stop paying and receive £754 upon death....

I am frustrated that he has essentially paid more into the scheme than he will ever receive back (he is now 92). Does anyone have any advice or have come across this type of scheme before? It feels like the company are making money from this poor scheme.

dunstonh

I am frustrated that he has essentially paid more into the scheme than he will ever receive back (he is now 92).

Quite normal with these types of plan when people live longer than expected.

. Does anyone have any advice or have come across this type of scheme before?

Yes to the latter but not sure what advice you are after. If its about keeping or surrendering or making paid up, then nobody can answer that as we dont know the date of death. We could say surrender it and he could die next week. Or keep it and he could die in another decade or two. Nobody can make the decision for him.

Old_Lifer

What dunstonh has said sums up the position. It is quite normal.


The following explanation may help:-


This situation is all down to your grandfather's age when he look out the policy (71?).


The cost of life cover rises with age and a policy taken out in the twilight of life will be particularly expensive. Had your grandfather taken out the policy at age 72 the sum assured secured by the premium
of £14 per month would have been less than £1230. It would have been less still at age 73 and even less at age 74. If your grandfather had taken out the policy at a younger age the £14 premium would have secured a higher sum assured and had he been considerable younger the £14 premium would have resulted in an even bigger sum assured.

Old_Lifer

sorry- clicked on the post button in error




In a situation where the sum assured is low because of advanced age and the life assured lives for many years after the policy was taken out, the point is soon reached where the premiums paid exceed the sum assured.


Perhaps £1200 was the cost of a local funeral in 1998

Ziggy71

Thanks for all of the above.... I guess I am just very frustrated that he has paid in a load of money but will not realise even the sum of a funeral.
To me - who is someone that is obviously not very good at this - it just seems VERY unfair on him .

Thanks for all your comments..... he still has a good +5 years in him (I hope) so I guess it is his decision now whether to surrender it.... I definatly don't want him to keep paying when it will not realise the sums he wanted them for.

I know this sounds very brattish (tech term) but it just seems so unfair

dunstonh

I guess I am just very frustrated that he has paid in a load of money but will not realise even the sum of a funeral.

Be thankful that the alternative had not occured. i.e. early death.

To me - who is someone that is obviously not very good at this - it just seems VERY unfair on him .

The type of plan he has is very out-of-date. Many of the better ones did have a maximum age you paid to (often 85-90). So, if you got to that age, you stopped paying premiums but retained the benefits as if you were still paying them.

Financial products are like all retail products. You get good ones, bad ones and average ones. You get good prices, bad prices and average prices.

I know this sounds very brattish (tech term) but it just seems so unfair

What you should take from this is realise that not all products are the same and that researching products to get the best is important. Some people put massive effort into researching mobile phone type but nothing with their washing machine or boiler or pension or mortgage or life assurance.

CCP456

Hi I'm new on here but thought I could add something..

It is so frustrating but like dunstonh says, it's a blessing that he's still around with you.

If he decides to continue paying into the policy, think about putting it into Trust (free and easy to do with most insurers). It means that the payout could be paid immediately to people your grandfather nominates which could then be used to pay for the funeral if that's what your intention is (instead of it going into his Estate which could take a while to be released). A trust also makes sure it's not subject to Inheritance Tax should that be triggered by the value of his Estate.