Massively underperformed Life Insurance Plan

lisyloo

KK14 wrote: »

Personally, I think it may have been mis sold!

This will be near impossible to prove after 27 years.
Almost certainly any documents the company had would have been destroyed and they (your parents) May have bought this product without advice I.e. they weren’t actually “sold” it, they chose to buy it.

I know to not much consolation but we had 2 of these for MIL and FIL.
I decided not to stop them by the time I found out about them, but they’ve paid a lot over 20 years and it’s about half what a funeral would cost (my speculation but i can’t think of any other explanation for these odd amounts expect what they expected a funeral to cost at the time).

Old_Lifer

The strange sum assured has nothing to do with the cost of a funeral. It is quite normal with life policies and it is caused by a specified premium being requested at outset.


Most people wanting life cover will request a level of cover (eg £20,000, £50,000 etc etc ). However, some people will request a level of premium they wish to pay (eg £20, £50 per month, £250 per annum etc etc ). In these cirsumstances the Life Office will calculate the precise sum assured secured by the desired premium.


It is common where policies are sold by leaflet for only certain levels of premium to be offered (eg £5, £10, £20 per ). With each premium level, the amount of cover will depend upon the age of the life assured at outset so there will be a range of precise sums assured.


Your mother was only 63 (?) when the policy was taken out, so in the absence of any medical issues, the sum assured of £723 appears very low given the premium. Also, your mother being female, I would expect the premium to secure a higher sum assured than for a male of the same age. Perhaps this was just an expensive policy.


We had a similar query in early March. In my posting history on 6th March I think.

lisyloo

Thanks for the info.
I do find it strange though to think in our case that they they would have requested premiums of £17 (female) and £19 (male).

These were through cornhill (1998) and are now Phoenix.

Old_Lifer

The effect of cheaper life cover for a female; compared to a male of the same age ( with no medical issues and both accepted at ordinary rates), would appear in one of two ways:


either the female would have a higher sum assured


or the female would have a lower premium.


With an endowment for instance, a female would receive a higher payout at maturity than a male of the same age who had an endowment with the same term and same premium.

lisyloo

Old_Lifer wrote: »

The effect of cheaper life cover for a female; compared to a male of the same age ( with no medical issues and both accepted at ordinary rates), would appear in one of two ways:


either the female would have a higher sum assured


or the female would have a lower premium.


With an endowment for instance, a female would receive a higher payout at maturity than a male of the same age who had an endowment with the same term and same premium.

Well yes I agree.

MIL age 71 (in 1998) £17 per month for £1957
FIL age 70 (in 1998) £19 per month £1866

What I was disputing was the idea that might have selected premium levels of £17 and £19. Those seem odd figures to have selected.
I suspect these were for funerals and hers is a higher figure for lower premium as she would have been expected to live longer so have a more expensive funeral but pay premiums for longer.

It would make sense if they were £10, £15 or £20, but who would say “what can you give us for £17 and £19”?

Rainbowgirl84

Did these kind of plans not usually have table on what it costs/month based on your age?

Old_Lifer

I agree these are not standard premium amounts that you would normally find in a leaflet, which suggests that they submitted normal proposal forms rather than a simple leaflet proposal.


It is unlikely that they requested a sum assured of £1957 where the premium just happened to be exactly £17 while at the same time requesting a sum assured of £1866 where the premium just happened to be exactly £19. Do you think it possible that they wanted £2000 each to pay for a funeral but wanted to pay a premium in whole pounds?

lisyloo

Old_Lifer wrote: »

It is unlikely that they requested a sum assured of £1957 where the premium just happened to be exactly £17 while at the same time requesting a sum assured of £1866 where the premium just happened to be exactly £19. Do you think it possible that they wanted £2000 each to pay for a funeral but wanted to pay a premium in whole pounds?

FIL has passed and MIL doesn’t know what day it is, so I’m afraid I really have no idea.

My best guess is that these were forecasted values for funerals at the forecasted date on death In 1998 (why else would someone want a relatively small sum?) and are now insufficient as funeral costs have risen beyond expectations from 20 years ago and also they’ve both outlived their life expectancy.
I guess it’s possible the company liked to worked to the nearest round £ or had a forecasting tool 20 years ago that worked that way?

I can not think of any other reason why someone would require these kind of amounts on death.

It’s perfectly possible they were sold these as they were not very savvy people, but on what basis would that kind of amount be sold?

I’m certain they didn’t have a mortgage or any debts at that time, so it’s the only explanation I can think of.
It’s not to pay off debts or to provide an inheritance when they had a property, so it’s the only explanation that makes sense to me.

Old_Lifer

I 've been thinking further about this and if I remember correctly saw a leaflet years ago which in addition to a range of premiums had a blank box for 'other amount' (in whole pounds). By using the tables in the leaflet it would be a simple matter to roughly calculate the level of premium required to provide a sum assured of around the amount desired.

KK14

@Old Lifer this is what I would have thought that my mum & dad would have said ok as want life cover for x amount so what’s the premium for that?

My mum was only paying £6.00 a month into it so it wasn’t a fortune each month but it was paid every month for 27 yrs! She took out the policy in 1992.