Whole-of-life insurance (joint) policy, insured sum decreasing, couple early 70s in good health

sensiblecare

Our joint whole-of-life policy has come up for renewal. The benefit has decreased by 40% to £51k while the monthly premiums remain constant at £167/month. (The benefit will remain constant for the next 5 years, after which it will decrease again.) This seems expensive to us, but we don't know what others are paying. Can anyone comment? Thank you!

pramsay13

What are you insuring for or against? 
The only life insurance I have is £10 per month for £140,000 of benefit but I am only mid 40s and it will end in 10 years when my mortgage is paid off. 

poseidon1

sensiblecare said:

Our joint whole-of-life policy has come up for renewal. The benefit has decreased by 40% to £51k while the monthly premiums remain constant at £167/month. (The benefit will remain constant for the next 5 years, after which it will decrease again.) This seems expensive to us, but we don't know what others are paying. Can anyone comment? Thank you!

Unfortunately, this is exactly how unit linked whole of life assurance work which is what I suspect you have. See attached article which explains the pitfalls of such policies which rely on there being sufficient investment performance to pay for your increasing mortality risk as you each get older -

https://www.sussexifa.com/information/protection/?title=What+Is+Whole+of+Life+Assurance?&aid=15#:~:text=Unit Linked whole of life,of cover in later years.

You may have elected for maximum cover when you 1st took out the policy, with minimal investment element to maintain that cover  ( at your chosen premium) at the 5 year review, hence the significant 40% reduction in cover. The investment element may also have fallen victim to the world wide fall in the equity markets earlier in the year, occasioned by Trump's unfortunate tariff hikes.

Alternatively if I am wrong and this was merely a five year renewable term policy  ( zero investment element) with option to renew with no medical, then a 40% loss of cover at the renewal date is not unexpected once you pass 70, especially if it is a first death policy. The mortality risk would increase noticeably for the male policy holder.

If this policy was supposed to assist with your joint IHT planning, suggest you conduct a review of its efficacy for that purpose.

sensiblecare

Thank you very much for your comments, pramsay13 and poseidon1. Both are very helpful.

DullGreyGuy

As has already been asked, what do you need the life insurance for? Most people by 70 dont have dependent kids or a mortgage to repay and with your sum insured you arent using it for just providing for a funeral. 

Whole of life assurance is expensive because unlike life insurance it's not a question of if the policy will payout or not but a question of when it will pay out. Premiums are normally reviewable and typically every 5 years after the initial period with the choice of either decreasing the benefit or increasing the premiums at each one. Some you pay until a certain age and some are until point of claim. 

If its first life or second life payout will make a significant difference to the premiums but also what its intended for, for IHT planning it'd normally be second life as on the passing of the first most the estate goes to the spouse who's exempt from IHT