Life insurance advice needed please!

Taffygirl_2

Hi, I have a policy with Friends Provident which we took out 3 years ago through a IFA, when we re-mortgaged. We didn't pay a fee, as the advisor told us he got his money from the mortgage/insurance companies. We have since moved to a higher value house and are now underinsured by at least £100k. We are currently paying £66 p/m for £95k worth of cover, which I have since discovered is very expensive! I have managed to find another policy (through this site, I might add!) for £250k cover at £44 p/m. I have tried to cancel the original policy, but have now been told by my IFA that I may be liable to pay them a fee for cancelling the policy early. I am waiting for them to get back to me on this as they are unsure whether we will owe any money, but I am so angry because this certainly wasn't made clear when we took the policy out and have been paying £66 for over 3 years! Surely they would have made their fee by now? Any advice on this would be greatly appreciated as I have just sent a chq for £25 to Moneyworld to set up the new policy and I'm worried now! thanks.

dunstonh

We are currently paying £66 p/m for £95k worth of cover, which I have since discovered is very expensive!

You dont say your age or health but based on FP pricing and what figures you mention later in your post, it suggests you are not comparing like for like.

My guess would be that you have CI cover on the current one but not on the new one. Or you have chosen reviewable instead of guaranteed. Or the original one was rated and the revised quote is on standard terms.

but have now been told by my IFA that I may be liable to pay them a fee for cancelling the policy early. I am waiting for them to get back to me on this as they are unsure whether we will owe any money, but I am so angry because this certainly wasn't made clear when we took the policy out

You said in your first line "We didn't pay a fee, as the advisor told us he got his money from the mortgage/insurance companies." So you did appear to know about it.

Advisers are allowed to offset fees by use of commission. Its called Customer agreed remuneration. Technically, the fee should not equal the commission but be the same fee that they would have charged had you paid by cheque. Some do abuse that on clawbacks but others dont.

and have been paying £66 for over 3 years! Surely they would have made their fee by now?

FP have a 4 year tie in for clawbacks. After the 4th anniversary, there is no clawback. The clawback could be as much as 25% of the original amount. Whether the 75% paid to date is enough will depend on the fee agreement you signed agreeing the fee.

Any advice on this would be greatly appreciated as I have just sent a chq for £25 to Moneyworld to set up the new policy and I'm worried now!

I would be more worried about what you have signed up for not being as good as what you have already.

Taffygirl_2

Hi, thanks very much for your reply. This whole thing is turning into a nightmare! The original policy we had did include CIC and was on a decreasing basis, whereas the new policy doesn't include CIC (I was told it is rarely worth paying extra for) and level term cover. We are both mid 30's, good health, one smoker. We have spoken to them today and they are sticking to their guns for now, but trying to pin down the FA we used, as he's now left the company! Anyway, thanks again for your reply, there's a few pointers in there that are very useful. Much appreciated :-)

dunstonh

whereas the new policy doesn't include CIC (I was told it is rarely worth paying extra for)

OVer 80% of claims on CI policies are paid out. Statistically 1 in 6 will suffer a claimable event before retirement. That compares to 1 in 5 for life cover so its not far behind life cover.

Anyone telling you CI isnt worth it doesnt know what they are on about. Another thing to note is that CI definitions on older plans tend to be better than those on newer plans. So despite the cost, the older one may be better quality.