Cancellation Charges?

WSO

My OH and I took out a policy through an "advisor" at an estate agents at the start of the year, however we have learnt we can probably make significant savings elsewhere (since they only dealt with Legal & General).

Reviewing the L&G documentation for the policies (1 joint Decreasing Life and Critical for £95,000, 2 single PPIs offering £600pm for 2 years after 26 weeks), I realise these policies have no cash in value... but I'm confused to know if they are likely to charge a cancellation fee to cover the cost of the "advice" given.

Looking through my documentation I don't see any mention of any cancellation charge (just that cover will lapse if payments aren't made) - but what confuses me is the mention of "advice costs" in the Key features documention, and that these costs will be paid out of your premium (I assume that they are assuming we keep it for the term of the cover).

The cost of advice is too high to cancel if the cost has to be paid on cancellation (the advisor got approx £2130 at the start of the 3 policies, assuming we keep them for the first 4 years).

Anybody have any experience with cancelling L&G policies and know if they levvy charges on policies cancelled within the first year?

dunstonh

L&G wont make a charge but the advisor may have a terms of business that uses the commission to offset the charges. If you cancel the policy, there will be a commission clawback (if indemnity) or commission will cease (if non-indemnity or level). The terms of business may allow the advisor to claim the the difference between the cost of advice and commission from you.

L&G are one the lowest priced quality providers with life assurance. They appear in the top 3 more often than not.

WSO

I'm quite suprised that you say that L&G are typically in the Top 3 dunstonh, because after doing some quotes earlier using the comparison engines I found through this site I don't recall seeing them in the top three for any of the quotes I got.

Sorry if I appear a little stupid, but I'm not sure what you mean by indemnity. If you are referring to the commission payment, then there was an immediate payment to the advisor, then a specified payment monthly from month 49.

I will have to go back to the advisor and ask her what type of agreement she has with L&G - perhaps it would be worth buying out of the deal if we have to, but we really need more accurate quotes if we do...

I've been trying to work out how much I am likely to get equiverlant cover for, and estimate I could save about 30% on what I'm currently paying... am I being realistic?

Currently paying
£47.34 for decreasing term with critical illness for both of us (non smokers, no waiver, for one 27 & 26.5 year old, occupation class 4 and 2) - This is a guaranteed premium for the full term (25 years).
£27.13 for 600pm after 26wks for me (occ class 2) - reviewable every 5 years
£13.29 for 600pm after 26wks for him (occ class 4) - reviewable every 5 years

Notes: My premium is probably higher because I mentioned a history of blood pressure problems with the family - and the fact I was 14st 3lb and 5ft 1in at the time (I'm about 12st 7lb at the moment). My other half has since changed jobs and is now an IT Assistant (class 1?), I'm a Stock Controller but was put in class 2 because I (very) occasionally physically move stock about.

The comparison engines have found decreasing cover for only £19.53 (based on 2 seperate plans from Synergy both occ class 1), even allowing for medical revisions I estimate we could save £20 on CI alone.

Looking at getting PPI from Helpupay, quoted £9.99 for £575 + 25% cover for myself, and the same for him... guessing tho that the sickness element will come into play given my family history with blood pressure problems so I can expect to nearly double that for myself.

Estimated costs (making allowances for ajustments)
£30 for Life and CI
£9.99 for his PPI
£20 for my PPI

Still worth doing I feel, but then I'm just second guessing with the actual values after adjustements for health issues etc.

Am I right in thinking that you apply to get a more accurate quote (based on occupation and medical history) and then if happy to proceed you specify a date to start (this is how L&G work)?

What happens when the start date is specified as the date of application (as is the case with the Synergy forms), would they assume we want the policy and start it, requiring us to cancel it if we don't want it?

Sorry for all the questions but I really don't want to have to pay more than I have to or need to.

payless

The cost of advice on the illustrations is what L&G are paying the firm ( in cash and other benefits ) and not a fee you need to pay ( unless you signed for this in a special fee arrangement- see below)

AS DD states the adviser may have a claim for his work ( as he will loss the money paid by L&G) - BUT only you signed a terms of business / fee arrangment to that affect - this used to be fairly widespread ( IMO more so in the independent side) but as far as I know its rarer these days - and even rarer in tied marketplace

one of the reasons it was often used was to offset "free mortgage advice" - but as most lender pay introducer fees and some brokers charge a fee on top I think the practice of "clawback fees" is mainly dropped .

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As stated L&G are competitive on life / crit illness - although I believe that they do have a different product charging structure available to certain agents ( tied and possibly some networks ) , that means that when an IFA like DD is saying L&G are ususally near the top in premiums , he is talking about the "normal product" available via IFAs and most "whole of market advisers" which may not always be the same as the one as sold eslewhere )


Synergy poroducts I believe are reviewed and priced in a different manner ( annually costed which is different to reviewable, as the review also takes increasing age into account)

Specialist (M)PPI firms premiums may be cheaper than those available from a "normal" life office- although make sure you are comparing "like for like"
ie benefit period of 12m, 24m or until end of mtg / retirement

dunstonh

Nice clarification payless, thanks.

Different distribution channels often have different pricing. L&G are very good on the IFA/independent/whole of market side.

Sometimes the obvious places to get the product from a provider are more expensive. For example, buying a scottish widows product direct or from a LTSB bank and you get a version of the product that is either more expensive or has less options than the IFA version.

WSO

Payless, I realised that the cost of advice would be equal to the agents commission - but I queried it because I wasn't sure if I would have to pay a percentage or not since this would effectively be the agents pay (since we were not charged directly for the advice).

I will have to check my documentation, I remember signing something when we were getting the advice (for some reason I seem to remember something about £400 if the policy was not taken up) - will have to hunt it out.

If I were to cancel, I assume L&G would claw back a proportional amount of the immediate payment that was made, so perhaps they would ask for the difference if they are left with the £400 I seem to recall.

Yes, Synergy have a reviewable premium and provide an illustration on what it is likely to be over the term (both with and without loyalty discounts) - typically premiums work out to be about 150% of the original premiums by the end of the term.

I know to get a more accurate comparision we should be comparing like with like, but as our circumstances have changed it is rather difficult to do. The Helpupay figures I quoted is for £718pm for 12 months after 30 days... quite different to the policies we have now, but it would suit him better since changing his job he does not have as generous a payout for sickness as he used to. I also hope that all the weight I have lost recently could help minimise any additional cost in premium they might impose on my policies.

Does anyone know if Helpupay income is means tested (ie if you can afford to be without it, do they withhold payment until you can't?) The reason I ask is that I would still be paid a full wage after being off "sick" for a month, but I might claim if it is long term to help when pay gets cut to half (3 months) or even when I'd go to SSP (6 months). It would be nice to put the money to one side, it could be earning interest until we are ready to use it.

DD unfortunately I can not comment to say if what we were offered was competitive or not, in hindsight it probably wasn't - but we were new to all this house buying business, and while we feel we found the best deal available to us at the time for the mortgage - we neglected the insurance side of things probably because we didn't want to give medical history to too many people, and didn't realise (or rather take much notice) at the time that the advisor only dealt with L&G.

Well the mortage advisor in the same offices offered a good range of products so we assumed the insurance advisor would have a similar range... I could continue making the excuses but now I just want to cut the costs.

I suppose financially it makes sense for the more obivious ways of getting a product to be more expensive... makes more money to help pay for those adverts you see on telly of course!

payless

IMO Thats the reason why they decide to tie ( and thus earn more per case) as people
buy on the back of the mortgage advice

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Just prepared a "dummy" synergy quote for myself ( obviously will differ)
its an interesting product, but not sure from this limited comparison it would provide me ( yours could be different) value over the more tradiational routes
( I have the figures but feel unfair to post)

It may produce a potential saving to you over the existing plan , but is it the best compared with the whole of market ?

WSO

payless wrote:

It may produce a potential saving to you over the existing plan , but is it the best compared with the whole of market ?

I'm not in a position to know how it compares with the whole of the market... at the moment I am looking to cut costs while providing a suitable replacement for the plans we currently have.

Seems I have a lot of research and reading still to do.