Phoenix life changing whole life insurance rules?

Ropo202

My mum took out a whole life insurance policy in 1999 costing £31 a month with a £30,000 payout on death. Originally taken out with Cornhill but has been transferred to two companies since and now with Phoenix life. 

The original terms stated a set premium for the whole of the policy and a set payout of £30k on death or accumulated value, which is greater.

Phoenix life have now contacted her saying that they review the policy, the premium and payout regularly and now need to up the payment to £50 a month if she wants to keep the £30k payout or she can continue paying £31 a month but now the payout will only be £17k. 

They have given the option to cash in and valued it at around £8700 (less than what has been paid over 25 years).

I believe something is wrong here, are they changing the rules that were originally signed? Are they allowed to do that? Or are they taking advantage of my elderly mother?

I have suggested that she cashes in and gets the money back - it seems quite unusual to allow someone to cash in the insurance they have paid and that makes me think something is not right here.

Now that my mum is only on pension income it does not seem worth it to carry on paying - especially if the payout is reduced. 

Does anyone have any advice or experience of this happening?

Keep_pedalling

Have you actually read the policy document yourself? It is not unusual for whole life policies to be reviewable, or for the policy holder to be given the option of cashing in the policy.

DullGreyGuy

Many whole of life policies have a first review of premiums after 10 years and then a review every 5 years there after. The premiums aren't fixed and so if performance is below original expectation then you are given a choice of increasing your premiums to keep the same sum insured or reduce the sum insured to keep the same premiums. 

Does she actually need a whole of life policy for £30,000? Is this intended for IHT or something else?

dunstonh

Phoenix life have now contacted her saying that they review the policy, the premium and payout regularly and now need to up the payment to £50 a month if she wants to keep the £30k payout or she can continue paying £31 a month but now the payout will only be £17k. 

That is normal with investment backed whole of life plans.

They have given the option to cash in and valued it at around £8700 (less than what has been paid over 25 years).

That is normal and expected.  These are not savings plans after all.  The investment element is there to help pay for later premiums when you are more expensive.    (putting aside the target growth rates that are set at the beginning which could effectively change one of these plans into a savings style plan)

I believe something is wrong here, are they changing the rules that were originally signed? Are they allowed to do that? Or are they taking advantage of my elderly mother?

You haven't said what rules you think they are changing.  Nothing you have said is unexpected.    So, what is it that you think is the problem?

Review points normally kick in at year 10 or 15 and then typically every 5 years thereafter.    A change is not necessarily required every 5 years.   i.e. if its on track, then nothing would change.

I have suggested that she cashes in and gets the money back - it seems quite unusual to allow someone to cash in the insurance they have paid and that makes me think something is not right here.

Its not at all unusual for the investment value to be available for surrender.  Indeed, it would be unusual for it not be.

Ropo202

DullGreyGuy said:

Many whole of life policies have a first review of premiums after 10 years and then a review every 5 years there after. The premiums aren't fixed and so if performance is below original expectation then you are given a choice of increasing your premiums to keep the same sum insured or reduce the sum insured to keep the same premiums. 

Does she actually need a whole of life policy for £30,000? Is this intended for IHT or something else?

Thanks - no she doesn’t need the £30k anymore - it was originally because me and my siblings were younger and would’ve needed financial help in that situation but it’s not necessary now we’re all older. 

Ropo202

dunstonh said:

I believe something is wrong here, are they changing the rules that were originally signed? Are they allowed to do that? Or are they taking advantage of my elderly mother?

You haven't said what rules you think they are changing.  Nothing you have said is unexpected.    So, what is it that you think is the problem?

Review points normally kick in at year 10 or 15 and then typically every 5 years thereafter.    A change is not necessarily required every 5 years.   i.e. if on track, then nothing would change.

Thanks for your advice. 

I haven’t read the policy documents myself but was concerned that the original policy/contract potentially wasn’t being upheld after it’s changed companies a couple of times. 

But as you say, this is normal practice to review after a number of years and maybe this is included in the original policy small print. 

I thought it was unusual that a policy that has been in place for 25 years, hasn’t previously required an adjustment in premium but if they didn’t review for the first 15 years or so, then it would only be now - in the current economic climate - that a review may warrant a change. 

She will be cashing in the policy as it’s not worth continuing to pay. 

Thanks