Endowments and Critical Illness Insurance

AyeGoonan

Hi all. I was diagnosed with Bowel Cancer. I had an endowment mortgage with a separate payment for Critical Illness. The critical illness payment was £365.64 with endowment payment £128.76 monthly.  After being rejected for critical illness, the surgeon stepped in and we received a payment to cover our mortgage using the critical illness insurance. I was expecting the endowment to be paid out also, as this was a separate transaction. They closed down the account and refused to pay out the endowment.

As I saw the situation I had paid in approx £12000 to the endowment and this, in my mind, was used to pay out part of the insurance. If I had been nearer the end of the endowment then that would mean my endowment paying entirely for the insurance.

I feel that, because these were two separate transactions, then they should be paid out separately.

Your input would be much appreciated.

Thanks

Mike

dunstonh

I was expecting the endowment to be paid out also, as this was a separate transaction. They closed down the account and refused to pay out the endowment.

A claim pays the higher of the investment value or the sum assured.   Not both.

As I saw the situation I had paid in approx £12000 to the endowment and this, in my mind, was used to pay out part of the insurance. If I had been nearer the end of the endowment then that would mean my endowment paying entirely for the insurance.

Correct.  Which is why the costing was equivalent to a decreasing term assurance (plus investment element) rather than a level term assurance (plus investment element).

I feel that, because these were two separate transactions, then they should be paid out separately.

No.  That is likely down to your misunderstanding the product though.  The terms are quite clear in the policy details and the initial illustration issued at point of sale before you signed up.  Generically, how they have paid out is what you would expect for every Low cost endowment (LCE)  

Had it been a few years later when PEP mortgages started to be used, they did offer the option to take with a decreasing term assurance or level term assurance as the two bits were actually different things running alongside each other.  But a LCE as a single bundled product.

AyeGoonan

Hi dunstonh. Thanks for your reply. You explained it very well. Thanks for the answers. All the best to you. Cheers