life insurance

ellymk

Hi I have an index linked insurance that pays out on my death and is a whole of life policy. For instance if i paid £20 per month say I would leave 20000 and each year it goes up, say £22.00 leave 25.000 etc etc. It now stands at £32 per month leaving around £52000. I have the option to freeze it meaning I can stick at my payments as they are now and it leaves the same.amount at my death. I have had a letter to say , in order to maintain my cover I have to pay £57 a month. This I cannot afford, I have the option to stick at £37 but they have not told me how much I would leave. Can they do this, will the amount I leave be reduced?this is not the terms I agreed to?? Can anyone help?

shaunrc

Hi Elly

I am an IFA but please do not take this as advice because I am a regulated person and advice has a specific meaning for us.

It sounds as though your cover was executed on what we call a maximum basis. What this means is that after a period ( usually 10 years at first) the price of the cover goes up . In my experience it usually goes up more than yours has ( not much comfort I am sure!) so I am guessing you are relatively young.

There is another type of cover where the premiums are intially higher but money is either put aside or invested to pay for life cover when you are older. Do you remember this being mentioned?

This should be mentioned in your original documents with use of a phrase like maximum cover. On that basis yes they can do it I am afraid.

dunstonh

i agree with shaun. It sounds like the 10 year review point. You have probably benefited from 10 years of premiums cheaper than they would have been but now they want you to pay more ongoing.

Only guaranteed plans have a guarantee not to increase premiums.

Do you actually need a whole of life plan or could a level term assurance with guaranteed premiums (or even a whole of life assurance with guaranteed premiums if you have a whole of life need) be the better option?

Also, life assurance premiums have dropped so you may find a modern plan actually works out cheaper than these legacy plans if you are still in good health.