Whole Life Insurance Cruelty with Scottish Provident

barneylodge

How about this.??

I have paid for a Whole Life Insurance Policy for decades.

It was index linked so premiums and sum assured steadily increased.

What I did not spot when I took out the policy as a much younger man, was that the insurers could at certain times review the premiums, and just as I passed the age of 71, with one stroke they have nearly doubled the premiums to over £350/month and offered me the chance to carry on with the current premium but they would almost half the sum assured...a reduction of around £45,000.

And here's the fun bit..in 5 years time they can do it all over again.

What kind of demented individual would ever have signed up to a deal like that!!!

The answer...me!!

If there was even a hint that they could do this to me, there is no way I would have started the policy . Who would??

I assumed that with a company like Scottish Provident I would have been in safe hands and would receive fair treatment.

What grim opportunists they must be.

Old_Lifer

We had a similar post a couple of weeks ago.


If you click on my username and then click on 'find more posts' you will find my two posts of 18.10.19 (thread title 'Premium hike - Is this even legal?') which explain how these reviewable whole life policies work.


Briefly, as you get older the cost of providing the life cover increases more rapidly each year. At the next review you will be asked to pay even more to maintain the current level of cover.


We know nothing of your circumstances or your state of health but may I suggest that you consider carefully the amount of life cover you really need.

Weighty1

They are not opportunists. These sorts of plans were common years ago and you've been lucky if it's never been reviewed before age 70.

Unfortunately, these unit-linked type plans are pretty much obsolete these days with guaranteed premiums whole-of-life plans being the more common arranged type.

As above though, at age 71, do you really need a large amount of life insurance, if any at all? Whilst it might be a bitter pill to swallow cancelling a plan after paying into it for decades there's no use in throwing good money after bad.

SonOf

It was index linked so premiums and sum assured steadily increased.

And as you get older, the cost of life assurance increases. This will be very small in the early years but much greater in the later years. This will be factored into the premum if you bought a plan with guaranteed premiums with the price set at the outset. However, with a plan that reviews the cost of life assurance every 5 years, that may not be the case.

What kind of demented individual would ever have signed up to a deal like that!!!

That is a bit like asking what kind of demented individual would be a black and white TV that could only show 3 channels. 40 years ago, that would be virtually every "demented" individual. Today, you would have to be daft to do that. This type of life assurance plan was pretty much the norm back up until the mid 90s. They also worked well until then because of the way the UK economy had been in the past in respect of investments and inflation and life expectancy was lower. It went obsolete and that is why today, these plans look obsolete.

It is easy to see that with hindsight but nobody could predict the way life expectancy would change or the move to a low inflation economy.

I assumed that with a company like Scottish Provident I would have been in safe hands and would receive fair treatment.

There is no reason to doubt Scot Prov are acting unfairly. The contract is doing what the contract says it will do. i.e. every 5 years they assess the cost of the life assurance and set the premiums reflecting that.

What grim opportunists they must be.

Actually, they probably wouldn't mind being shot of plans like this. They are maintained on old systems that cost a lot to maintain. There is not going to be a high volume of these types of plans as each one drops off is not being replaced with new business of this type (the dominant life assurance type taken since the mid 90s is term assurance). No company likes having to write to people saying they have to increase the premiums like that. The problem is that if they do not get you paying for the premiums of your life assurance that means someone else would have to pay it. And whilst life assurance is a cross subsidy pool, the number of people with this type of life assurance has been diminishing significantly.

So, in summary, you have an obsolete plan that has been obsolete for around 25 years and you would probably have been better served moving to an alternative at some point in that time.

I will just add the caveat that a lot of people have done well out of these types of plans despite them going obsolete. So, it's not possible for an insurer to know whether you need life assurance or not or whether the plan you have is still suitable or not. That is for you or your financial adviser, if you employ one, to decide.

Do you actually need life assurance at 71? Most people do not. Once the children are grown up, the mortgage paid off, and you have stopped working and have a pension income, the need for life assurance drops significantly and most people no longer have a financial need. Some people took these for estate planning but changes in IHT mean that many of those no longer need these plans either. So, think about whether you have a need for it or not.

And if you are worrying about how much you have paid into it. Don't. I have a level term assurance of £600,000 which expires when I am 70. You can imagine the monthly cost of that. I will be very happy if I get past 70 and never have to claim on it despite the amount of money I have paid over the term.