Life assurance - keep going or with or without indexation?

silvercar

My OH has a life assurance policy taken out 30+ years ago. The intention at the time was to provide cash if the worst should happen to pay the mortgage/ support me while the kids were growing up etc.

Now the mortgage is cleared and the kids are self sufficient. So its original purpose is no longer.

However, it is in place and obviously over the years a lot of money has been paid in to it, so it seems silly to lose it all.

Each year there is the (default) option to increase the sum assured in line with inflation. So the sum assured increases. Though the sum assured increases by less than the monthly premiums eg this year the sum assured increases by 3.4% and the monthly premium by 4.1%. Once you opt out of increasing the sum assured the option is gone for good.

So my questions:

a) should we continue to increase the sum assured each year or leave it at the current level

b) is there anything I'm missing.

For context, we are early 60s and the sum assured is currrently 125 times the annual premiums.

mrklaw

keeping ours - runs out at 65 but when we moved house 20+ years ago we renewed the life insurance to be flat so its a nice bit of income cover until 65. if one of us dies early, that helps with the loss of a state pension. If I die early it helps with one state pension and 50% of my DB.

Also its relative peanuts having taken it out decades ago. About £30 joint cover for £250k. Keeping it as long as possible - life insurance once your’e over 55 gets expensive fast.

as for indexing specifically though - I’d model what both look like. if you don’t need the money but its useful additional income I’d probably skip the indexing

NormalNorman

I was wavering too thinking no mortgage, kid grownup, cover from two jobs but came to my senses thanks to mrklaw.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82086185#Comment_82086185

We must have a different type of policy, this is over £400 a month for £600k. So it isn't peanuts.

StewedApple

For context, we are early 60s and the sum assured is currrently 125 times the annual premiums.

You could look at similar cover from other insurers and compare costs. This may assist in your decision. It then becomes more a question of do you want/need life insurance and is this policy value for money?

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/82086245#Comment_82086245

when you mentioned indexing I did wonder. is yours a whole life insurance or similar? I was looking into those along with family income benefit schemes which pay out a yearly amount for X years - both to cover the gap if one of us dies. but they were really expensive. Mine is a simple level term insurance policy - I assumed those were standard for things like mortgage cover and relatively inexpensive to take out in your 30s.

having said that - £600k is a lot more cover than I have. £5k a year is a lot to pay if you don’t need the income and have planned without it. I’d be tempted to drop it as it could be something like 10-15% of your annual spending

silvercar

It must be whole life insurance as there is no end date. So eventually, if you carry on with the payments it will payout.

I wonder if there’s an option to make it paid up ie future payments come out the sum built up, until it is all gone.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82086336#Comment_82086336

the problem with dropping it now is it means losing out on all the money we’ve put in.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82086400#Comment_82086400

You are going to need to read the policy documents to see how it works. If it is pure life assurance then if you stop the premiums the life cover will stop. But I think you can have whole life policies where some of the premium builds up an investment pot - maybe there is a surrender value?

westv

https://forums.moneysavingexpert.com/discussion/comment/82086405#Comment_82086405

You shouldn't think of it that way. Your premiums have given you peace of mind for a number of years. It's insurance against the unexpected, not savings

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82086480#Comment_82086480

It’s an assurance policy, not insurance. When I’ve been paying £400 vs £40 that others have been paying, I’ve clearly been paying for something extra.