Life insurance plummeted in value

caroleknight15

i took life insurance out with Sun Life of Canada, 27 years ago in 1994, for £50,000.00 of cover. I have paid £20.38 per month.
This years annual review states if I die they will only pay £5,885.00.
If I cash it in I would get £587.41.
Can this be right?

JGB1955

It wasn't decreasing term life insurance was it?

Sandtree

Was asked yesterday too....

https://forums.moneysavingexpert.com/discussion/6268797/reducing-life-insurance-payout 

dunstonh

Can this be right?

Yes.

If it is a yearly renewable term assurance then you are given the choice of keeping the premium the same and the life assured reduced or keeping the sum assured the same and increase the premiums.

I wondered if you had an investment-backed whole of life assurance.  However, they don't have annual reviews.  They tend to be 3 or 5 year review points.  They too tend to have the increased premium or reduce sum assured.

Apart from that, you haven't given us a lot of information to go on. A bit more detail on the type of plan would be helpful

Old_Lifer

A reviewable whole life policy will often have annual reviews in the last 5 years of a premium payment term.

Old_Lifer

Twenty seven years ago £50,000 was quite a large sum assured.  This tells us that the aim of the policy was to provide  a high level of cover.  A policy where the main aim was investment would have had a far lower sum assured; perhaps several thousand pounds or less.   Much of your money has gone to provide the high level of cover you required.

The cost of purchasing the life cover  rises each year, gradually at first but then increasingly more rapidly as you age.  Later in life the premium is no longer sufficient to purchase that level of cover  so  the policyholder is faced with  the  choice of  pay a higher premium or suffer a reduction in the sum assured. 

Every year as you get older, the premium of £20.38 per month will purchase less life cover.