Is life insurance worth it ..

stingray_316

Is life insurance worth paying for .. wouldn’t you be better off putting a monthly amount into a interest account .
I say this as my mum has paid £15 a month for 24 years , she was 69 at the time so has paid well over £4,000 now and still paying at 93 years old , yet her insurance is only worth 1,900.
It was a over 50’s plan and l thought you stopped paying after 90 years old .
Where has the £2,000 plus money she has paid in gone,
Has my mum lost out on money she has paid in to her insurance..
These insurance company’s must make millions in profit ..
Am l missing the point on this insurance, can someone explain why my mum would still be paying for a insurance she will only end up getting less than half for in the end ..

McKneff

Ask her insurance co.

All insurance is a risk, some more riskier than others

Mojisola

Martin's take on these plans -
https://www.moneysavingexpert.com/insurance/over-50s-life-insurance/

Aretnap

stingray_316 wrote: »

Is life insurance worth paying for .. wouldn’t you be better off putting a monthly amount into a interest account .

That depends on when you're going to die. If you pay £15 a month into a savings account, then die after a few months, the £100 or so that is in the account won't go far towards caring for your loved ones, or paying for your funeral costs, or whatever you think the money will be needed for.

I say this as my mum has paid £15 a month for 24 years , she was 69 at the time so has paid well over £4,000 now and still paying at 93 years old , yet her insurance is only worth 1,900.

The nature of insurance is that some people pay in a lot more than they pay out, and others take out more than they pay in. Your mother is in the first category. That's a good thing because it means she has lived to a ripe old age.

It was a over 50’s plan

It's a bit late to say it now, but over 50s plans (which tend to ask no questions about your health and accept you even if you have, say, cancer) are usually poor value for money - a last resort for people who cannot get a standard policy because they are in poor health. Anyone who is in better than average, or even reasonable health for their age is likely to be better off with a normal term or whole of life policy... though even then they are likely to "lose" money if they live into their 90s.

and l thought you stopped paying after 90 years old .

Check the actual terms of the policy. If they do say that you can stop paying at 90 (and keep the benefits of the policy) then your mum will be due a refund. If you merely thought that they did on the other hand...

Where has the £2,000 plus money she has paid in gone,

Some of it will be the insurer's profit margin, but a lot of it will have gone to pay out for people who died much younger than her. That's the nature of insurance.

Has my mum lost out on money she has paid in to her insurance..

Only to the same extent as I've lost out on all the money that I've paid into my home insurance - my house has never burned down so I've never seen a penny of it back. I've still had the benefit of the policy though - being insured means I can sleep (reasonably) soundly at night.

These insurance company’s must make millions in profit ..

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." - Adam Smith

Am l missing the point on this insurance, can someone explain why my mum would still be paying for a insurance she will only end up getting less than half for in the end ..

You may be missing the point that insurance is not a bank account. There is no pot of money which is "hers". What she is paying for is the guarantee that when she dies her estate/family will get a payout - regardless of whether she dies tomorrow or lives for another decade. The whole nature of the product demands that some people must pay in more than they take out - if they didn't, insurance could simply not work.

SonOf

Is life insurance worth paying for .. wouldn’t you be better off putting a monthly amount into a interest account .

There are around 13 different types of life assurance. So, it can really depend on the type of plan and the objectives.

I say this as my mum has paid £15 a month for 24 years , she was 69 at the time so has paid well over £4,000 now and still paying at 93 years old , yet her insurance is only worth 1,900.

In that example, she may have had access either to a whole of life assurance plan or an over 50s life insurance plan. If she was in good health at the time of taking it out, a whole of life assurance plan would almost certainly have been a better option. A decent one of those would have had a cap on premiums (i.e. she would have stopped paying around age 80-85 but retained benefits). The sum assured would probably have been higher as well.

However, it sounds like she went for the over 50s version which has a lower sum assured and tends not to have a cap on premiums. These types of plans tend to favour the short lived and penalise those that live longer.

Where has the £2,000 plus money she has paid in gone,

Paying the sum assureds of all those that died early.

These insurance company’s must make millions in profit ..

These types of plan are actually niche and not offered by most insurance companies.

Am l missing the point on this insurance, can someone explain why my mum would still be paying for a insurance she will only end up getting less than half for in the end ..

1 - your mum has lived longer than her life expectancy. So, be grateful she is alive and has lived longer than expected. The alternative would be that she is dead.
2 - She chose to take out that type of plan because she didn't think she would live long. She has happily been proved wrong and has enjoyed a longer life to spend with her family.

wouldn’t you be better off putting a monthly amount into a interest account .

Not if you die early. You would only be better off if you died after the period cover was needed. As you dont know your date of death, you can never say in advance which is going to be best.

ACG

If your mum had paid £15 a month for 10 months and your mum had passed away, there would have been a £1900 payout for £150 paid in.

Some people "win" I obviously use the term lightly as it means they passed away earlier. Some people "lose" which again, I use lightly as it means they lasted a bit longer.

If you pay money in to an account and die the next day then there is not a very big pay out. If you last longer then yes it is probably financially better to do it that way.

It is not just health that matters, you could be run over, have an allergic reaction etc.

More people insure their £500-1000 phone than do their bloody life! How ridiculous is that. Kids might go without if mum or dad dies but so long as they can get a new phone if it breaks, happy days.

I have paid for car insurance for 7-8 years and never made a claim. My dad has for 30-40 years and never made a claim. It is insurance, some will pay out, others wont. If your mum puts £15 a month in to a savings pot from tomorrow and dies next month are you going to be able to afford a decent enough funeral? £2k will probably struggle to cover the basics, we buried my grandad earlier this year and it was nearly £4k.

Mojisola

ACG wrote: »

If your mum had paid £15 a month for 10 months and your mum had passed away, there would have been a £1900 payout for £150 paid in.

Most plans require you to have paid in for at least 12 months (others require 24 months) before you get a payout.

Before that, you just get back what was paid in.

Old_Lifer

Your mum was 70 next birthday when she took out the policy.


A life policy taken- out towards the end of life is going to be expensive. An over 50s plan where no medical questions are asked will be even more expensive. These types of policy attract those who have medical conditions, some serious and some who believe (often wrongly) that they will be unable to obtain a 'normal' life policy. This means that the policies are expensive for anyone who is reasonably healthy. Typically, the policies are sold with a free introductory gift or shopping vouchers and some will apply just to get the freebie and then cancel the policy. This too will be factored into the pricing.


Originally, these policies did not pay-out on death within the first 2 years but instead paid only a return of premiums paid. Some providers, presumably in a bid to secure market share, cut this initial period to 1 year. Without this initial period where the sum assured is not paid, the policies would be completely unworkable. Someone with a terminal condition with only weeks or a couple of months to live could take-out a policy for the maximum amount and then shortly afterwards , with only a hundred or two having been paid in premiums the Life Office would be expected to pay-out a sum assured of thousands. In the world of insurance this would be known as 'selection against the Life Office'.


The cost of life cover rises with age. Even with an over 50s plan, if your mum had taken-out a policy at age 50 the premium of £15 a month would have secured a much higher sum assured. At age 69 it secured a sum assured of £1900 but if she had been aged 70 when she took-out the policy the sum assured bought by the premium of £15 would have been less than £1900 and if aged 71 less still and if aged 72 , even less.


Where the sum assured is small due to the age at which the policy was taken out and the policyholder lives for many years after taking-out the policy, the point is soon reached where the premiums paid exceed the sum assured.


Take a look at your mum's policy. In the schedule it will state the premium payable. This part of the schedule will also state the date of the last premium due. If there is no date, the premium is ongoing.

ACG

Mojisola wrote: »

Most plans require you to have paid in for at least 12 months (others require 24 months) before you get a payout.

Before that, you just get back what was paid in.

Hopefully the OP got the point I was trying to make.

Mojisola

ACG wrote: »

Hopefully the OP got the point I was trying to make.

Of course - but it just shows how important it is to read the small print and be sure of the conditions.