Whole Life Iinsurance Policy

DullGreyGuy

Brie said:

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.

This is the difference between insurance and assurance but unfortunately we have become lax over time with our language.

Insurance is what you describe... pay a small premium in exchange for protecting IF an event happens, which typically you hope it wont

Assurance, which a whole of life policy is, is fundamentally different because its not cover for IF it happens but for WHEN it happens. At some point you will die and so life assurance will payout. Life insurance most often doesnt payout because you dont die within the policy term. This massively changes the economics of the policy.

Eyewearman said:

Insurance company 1 me 0

And for someone else... insurance company 0, them 1

Thats fundamentally how insurance works, people pay into a pool and the "unlucky" few take out more than they paid in. Most however would rather have paid their premium and "lost" than be the person that paid their premium and got paid out £150k when their home was burnt to the ground.

Why did you think you needed a whole of life policy when you were in your 30s?

RobM99

Car insurance doesn't promise a pay-out!

Sea_Shell

Eyewearman said:

Insurance company 1 me 0

But you're winning at LIFE!!

Would you rather the alternative?

Eyewearman

Thats what advisor advised,we were self employed with a mortgage

DullGreyGuy

RobM99 said:

Car insurance doesn't promise a pay-out!

Yes it does, IF one of a list of events occurs (depending if TPO, TPFT or comp) and hence its insurance

dunstonh

If I had hidden the £20/mth under my bed since 1986 I would have been better off now 

If you had died during the bulk of the period, your beneficiary would have been better off by more than you paid.

Thats what advisor advised,we were self employed with a mortgage

In 1986, there were no advisers.  Just insurance agents.   

However, that may explain how this policy was set up.   Term assurances were not commonplace with insurance agents back then.   Whole of life assurance plans were.   If the primary objective was to cover the mortgage, then the expectation would be that you would cancel it when the mortgage was repaid but could keep it if you felt you wanted it.   The target growth rate was probably set high to increase the sum assured and would have been that high for about 15 years before its first review point.   It would not have been sustainable over your lifetime but it would mostly have been over the term of the mortgage.  

Chances are the mortgage that it was taken out to cover is long gone but you chose to retain the policy.

Eyewearman

I bet the"agent"had his full commission though  

Eyewearman

Still does not explain why in 2021 payout was £32k and in 2022 down to £8k

dunstonh

Eyewearman said:

I bet the"agent"had his full commission though  

They would have had the full commission whether you cancelled it after 5 years or 25 years.

Still does not explain why in 2021 payout was £32k and in 2022 down to £8k

Answered earlier in the thread.

tempus_fugit

Life insurance policies are to cover us if the worst happens. My wife and I have term assurances and any payout would be very helpful if one or other of us dies before the end of the term. However, I hope we never have need to get the pay out because that means we are still here together beyond the time we were covering ourselves for. It doesn't mean we have got nothing back though because we have had peace of mind for the period of the insurance. That's how insurance works.