Whole Life Iinsurance Policy 24 October 2022 at 1:46PM edited 26 October 2022 at 9:50AM in Insurance & life assurance 21 replies 460 views

Eyewearman

Hi   Heres the story   Took out whole life insurance policy for my wife & myself with Sun Life 1n 1986(£20 per month) with "guaranteed"£40k payout with the death of one partner Last year Pheonix(who took over the policy from SunLife) informed me that "guaranted"payput now reduced to £32k & this year it has fallen to £8k To keep this £8k payout I will have to keep paying the £20 per month,& the surrender value would be approx £200!  My question is can they do this?  I await your response  Regards [Name removed by Forum Team]

dunstonh

Took out whole life insurance policy for my wife & myself with Sun Life 1n 1986(£20 per month) with "guaranteed"£40k payout with the death of one partner 

Guaranteed sum assured plans were rare to non-existent in 1986.    These would have been investment backed and the sum assured required the investment to hit the target growth rate to maintain the sum assured.   If it didn't, the monthly contribution would need to increase or the sum assured be reduced.

 My question is can they do this?

Yes.    These types of plans had review points (typically from around year 15 and then every 5 years thereafter or something along those lines).      Some of the legacy plans that Phoenix took over failed to carry out earlier checks but Phoenix has picked up on these and is now applying the terms correctly.

No rip off

Bradden

@dunstonh .. it might be legal but still looks like a "rip-off" to me. £20 a month since 1986 and they get £8000 payout if they die.

Eyewearman

Does not seem morally sound ,but thats typical of the way insurance policies work

kingstreet

The idea of flexible unit-linked whole life policies was to provide choice.

Maximum cover - lowest premiums and maximum cover for a short period. Usually ten years. Plan reviews would then mean lower cover or premium increases in future unless performance of underlying investments was staggering.

Balanced/Lifetime cover - premium and sum assured designed to last for the whole term.

As there was an investment element, this could be used for growth; or simply used to lessen premium increases later in life.

Although these were poor value for money in the 1980s when they were designed, they had a purpose and provided they were properly explained they had a place in the financial planning toolkit.

dunstonh

Bradden said:

@dunstonh .. it might be legal but still looks like a "rip-off" to me. £20 a month since 1986 and they get £8000 payout if they die.

£20pm to get £40,000 in the 1980s to £32,000 for the next stage and £8000 now.   It hasnt been £8000 the whole time.  

They are "unfortunate" to have lived longer than they had hoped.

The family of those that died early did very well out of these plans.  Those that had a long life, did poorly out of them.  

Does not seem morally sound ,but thats typical of the way insurance policies work

No its not typical of the way they work.    It is not uncommon for investment-backed insurance policies bought at the peak of AIDS to be expensive compared to modern options.   This type of plan is long obsolete but that doesn't make it a rip-off.    

The OP doesn't say how old they are.   So, we cannot gauge whether they have lived longer than expected at 1986 life expectancy rates.     Many of these types of plans had a maximum contribution age as well.  i.e. if you did make it to a certain age, you could stop paying and the insurer would retain the sum assured at the rate it was at that time.   Typically the ages would range from 80-90.   

Eyewearman

Hi Our ages now are 68 & 66

dunstonh

Eyewearman said:

Hi Our ages now are 68 & 66

I was expecting you to say 80ish.  You took these out very young.   They should have ideally been updated decades ago to something more modern.   Indeed, there still is time if you are in good health and still have a need for life assurance.

Think of these plans as a black and white tv with an aerial you have to move around to get a picture on one of three channels.

Brie

My understanding is that this is basically how a lot of life insurance works.  i.e. you pay into it hoping that you (or more correctly your spouse) will never have to claim it, or at least for as at as distant a date as possible.  I had to get life insurance as part of getting a mortgage - good advice frankly, just in case.  But now after £30 a month for 20 years we would get next to nothing if either of us popped off.  Likewise funeral polcies from the 80s - the inlaws paid £4 each per month to get £250 off their funerals.  Unfortunately (well sort of) they both lived into their 90s and paid way more than the policy would fork out for them.  But it made sense at the time.  Basically we're making a bet we hope we don't win.

Eyewearman

Insurance company 1 me 0

Eyewearman

If I had hidden the £20/mth under my bed since 1986 I would have been better off now Was never told by any of the insurance companys to increase premiums ongoing to maintain original payout figure The financial advisor suggested the £40k payout was"guaranteed"on death of one partner,no suggestion of increasing level of monthly rate  My mistake was believing the sale pitch