Cornhill, now Phoenix, Life - pay out less than half total premiums

Herbyme

My mum died a few weeks ago and I've realised that the sum her life insurance will pay out is less than half what she paid in in monthly premiums.

She took out the policy with Cornhill but the policy has ended up with Phoenix.

Can I challenge this ? I bet it wasn't properly explained to her

lisyloo

What type of plan was it?
did it provide her with insurance during her lifetime?
it might be that she was paying for insurance and it’s not a straight investment.

on what basis would you be challenging?
 Mis-selling?
not sure but that may be impossible after death to claim she didn’t understand what she bought.
you can’t challenge on the basis of performance, investments can go down as well as up.

my guess is that this was bundles in with insurance, so part of the money has gone in insurance premiums.

do you have details of what the investments were?
and whether insurance was included?

Herbyme

It was a Senior Security Plan taken out in 2004 with a £10 monthly premium and a pay out of £938, having paid in £2220.

It was just a policy that paid out on death, that's all. It was always going too pay out £938, no matter when she died. The paperwork does state that, I'm not claiming otherwise.

She was a sensible woman and I doubt she'd have taken it out if she'd realised that. When I asked her about it, a few years ago, she said she didn't know what the direct debits were for but that I shouldn't cancel them. That doesn't make me think she properly understood the policy.

But I agree, hard to prove mis-selling now. I'm hoping either there's a lot of these cases and there's an agreed way of dealing with them to make the payout fairer, or that Phoenix will want to avoid possible negative publicity and make a fairer offer.

The_Fat_Controller

This is a perfectly normal situation and you have no redress.

Here is a screenshot from the market leader (so they say) Sun Life.

dunstonh

Can I challenge this ? 

On what basis would you challenge it?

 I bet it wasn't properly explained to her

What evidence do you have to proof that statement?
However, these plans were not sold by an individual.  They were bought via adverts in the media.  So, nobody would have explained it to her beyond what the paperwork said.

It was a Senior Security Plan taken out in 2004 with a £10 monthly premium and a pay out of £938, having paid in £2220.

That makes it pre-regulation but also very easy to see when the breakeven point is.

e.g. £938 divided by £10 makes 93 months.  If you live longer than 93 months then you will be worse off. If you live less than 93 months, then you are better off (other than earlier death!)

She was a sensible woman and I doubt she'd have taken it out if she'd realised that. When I asked her about it, a few years ago, she said she didn't know what the direct debits were for but that I shouldn't cancel them. That doesn't make me think she properly understood the policy.

That was a few years ago.   What matters is her mental capacity in 2004.

But I agree, hard to prove mis-selling now. I'm hoping either there's a lot of these cases and there's an agreed way of dealing with them to make the payout fairer, or that Phoenix will want to avoid possible negative publicity and make a fairer offer.

As you say, it clearly says £938 would be the payout.   Nobody sold it to her.  She chose to buy it.   They are a gamble which is which sometimes pays off and sometimes does not (from a financial point of view).   The other way of looking at it is your mum ended up living longer than she expected.  So, that is a positive thing for you rather than a few hundred pounds extra had she died earlier.

lisyloo

The paperwork clearly states it but you think she didn’t realise?

there’s only one person responsible for reading what she bought and paying for it for many years

sorry for your loss

Herbyme

Oh well it was worth a try. Thanks for the help.  No need to be quite so blunt maybe? 

lisyloo

People are just being honest and trying to help by telling the truth.
The chances of challenging depend on where the liability lies.
appreciate its hard to hear at this difficult time.

Aretnap

The nature of all insurance products is that many (in fact, usually most) people pay in much more than they take out. You're insuring yourself against the risk of a specific event, and if the event doesn't happen then of course with hindsight the insurance was a bad investment.

For example if you buy home insurance, and you are lucky enough that your house doesn't burn down, you can pay in thousands of pounds over the years and get diddly squat back. Does it follow that you were mis-sold home insurance? Of course not.

Life insurance is no different. You are essentially insuring yourself against the possibility that you might die young. If you do die young, you (or rather your beneficiaries) get back more than you paid in. If you live to a ripe old age then of course  you get back less than you paid in (for a while of life policy) or nothing at all (for a term policy). Living to a ripe old age is generally considered to be a good thing, so the people who lose money are the lucky ones (like the people whose houses don't burn down).

It couldn't actually work any other way. Presumably your mum didn't think that life insurance was some guaranteed money market, where the insurance companies pay everybody more than they ever paid in premiums? How would that work?

Sea_Shell

Also, in many of these cases*, the policyholders may never have really needed the cover in the first place, if their estates would be sufficient to easily be able to pay for their funeral (which is why many of these plans are bought), as some of the advertising does put a guilt trip on people of "providing your family with money for your funeral".





*Obviously we don't know the estate value in the OP's case at the time of buying the insurance.

dunstonh

Sea_Shell said:

Also, in many of these cases*, the policyholders may never have really needed the cover in the first place, if their estates would be sufficient to easily be able to pay for their funeral (which is why many of these plans are bought), as some of the advertising does put a guilt trip on people of "providing your family with money for your funeral".





*Obviously we don't know the estate value in the OP's case at the time of buying the insurance.

Indeed.  I bet many people have these types of plans that either don't really need them or could get better.

Over 50s life insurance plans are an option of last resort for people that don't have enough assets and cannot get proper life assurance due to poor health. Someone in good health could get 10x the sum assured for the same premium using life assurance compared to over 50s life insurance.