Premium hike - is this even legal?

It is as Weighty says, from the description it is a unit-linked whole life policy. As would be expected, it is reviewable.



Some Life Offices would review a policy after 10 years initially but most would review every 5 years and annually in the last 5 years of a premium payment term. Whole life policies with a premium payment term were often used in the early 1990s as mortgage repayment vehicles, usually by tied agents who could not offer an endowment. Usually reviewable whole life policies were offered with a choice of low, medium or high levels of cover.



Your payments buy units in a fund and the costs of the life assurance and ongoing charges are deducted from your 'pot'. Although over time the value of the units would have been expected to rise, there would have been periods during the term when unit prices remained fairly static for a while or were falling. It is during these periods of fairly static or falling unit prices that the value of the 'pot' takes a hit, as more units need to be sold to pay the ever increasing charges.


As you get older each year, so too the cost of the life cover gradually rises each year (you would not have been asked to pay more at earlier reviews if the current premium was sufficient). The cost of the life cover increases ever more steeply each year later in life. As your policy is indexed-linked this means that the life cover rises and this impacts the cost.


I was working for a Life Office when reviewable whole life policies were first introduced. The perceived wisdom at the time was that a high level of cover could be selected early in life but later, when the kids had grown-up and left home and the mortgage had been repaid, the level of cover could be reduced.



All the complaints I have read on the Forum about these policies, seem to be from those who have selected a high level of cover at the start and who expect that level of cover to continue as retirement approaches and beyond. For many, the policy will simply become unaffordable eventually. I would think that many will struggle to pay the ever-rising premiums as they do not wish to 'lose what they have paid-in' whereas in reality there is no longer a large an investment 'pot' and that if they continue to pay the existing premium this will be insufficient to pay for existing level of life cover to the next review date.


The fact that the policy is reviewable would probably have been seen as a major plus when the policy was taken-out. It would also have been mentioned in the sales literature and in the policy.


The cost of purchasing £77,154 of life cover each year will continue to rise increasingly more rapidly each year. At the next review (5 years?) you can expect to be asked to pay far more than £214.80 for that amount of cover.


We know nothing of your circumstances or you state of health but may I suggest that you consider very carefully the amount of life cover you actually need.