Life Life policy for elderly

Newbie13

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Hi I'm hoping someone can give me some information. My parents have had a dual life policy with Irish Life for many years. They are now in their 70's and to maintain any decent sum assured the cost is growing a huge amount each year. The policy was to help provide some money particularly in the event my dad passes first as my mum doesn't have a pension from working. The fund is now worth nothing and I worry it'll soon cost more than they can afford. Is there products that are better or should they cut their losses and just put the money in a savings account?

Any help much appreciated as my dad is very upset the thousands they've paid over the years is all gone.
 
Any help much appreciated as my dad is very upset the thousands they've paid over the years is all gone.

While these are terrible policies, he did have the life assurance for years. Would he be happier to have made a claim for the sum assured on the death of his wife?

It's unlikely to be good value, but you would really need someone to look at the policy for you.
 
That is the case with practically all insurance, you pay and you hope never to claim. You don't insure your house and hope it burns down so you can get your money or you don't wish for a car crash to recoup some of the cost of the car insurance. Insurance is to provide you with peace of mind that you are prepared should the worst happen, all the better if you never have to use it.
 
You need to explain a little more about what the policy is that your father has.

Some life insurance policies build up a fund as well as providing the insurance so if you stop, then you get some money back. Some purely act as insurance so if you stop, then you get nothing back (these are typically cheaper because of this).

You say the fund is "now worth nothing" so a little confused as to which type of life insurance policy you have. If it's one that has a fund then it should be worth something (though it will be a LOT less than the money put in as you have benefited from having Life Insurance for all these years which costs something).

Typically Life Insurance policies are meant to give a pay off in case the worst happens. As wbbs says the hope is you never will have to use them. They are not really intended as a savings vehicle for retirement as you seem to want to use them as. As Brendan says, they are typically poor value when used for this. So while it may pain your dad to have "thrown away" all that money over the year, that is what he paid for. Simialrly to home or car insurance, just cause you didn't claim doesn't mean it was wasted.

Basically as you get older, you should have less need of Life Insurance as you have less financial impressibilities (hopefully your mortgage is paid off and your children become financially independent) and your pension kicks in for your retirement fund. So at this point in their lives it doesn't make sense for older people to have Life Insurance. Not to mention that it gets more expensive as the risk of claiming is obviously higher the older you get.

There are, however, several other points to consider:

You say your mum has no pension but does your dad's pension have a widow's pension included? Many do so your mum may still get some of your dad's pension even if your dad does die (typically 50% of your dad's pension).

If you are paying for a dual life policy, that means your dad will get a pay out when if your mother dies first. Is this payout needed or is it only needed if your dad dies first? A Single life policy would usually be cheaper.

While the Life Insurance policy is expensive (and may get more expensive), since they have kept it on until now, it may be worth keeping it. It depends on how much it is, and how healthy your parents are (and so how likely it is they will claim on it). True, it's probably not the best value product on the market, but then again they may not be eligible for any other life insurance policy now depending on their age. At the very least they will need to pass a new medical test if they want to move to another, better value life insurance policy/provider, so they may be refused cover or only offered cover at a more expensive premium to offset any health risks raised in the medical.
 
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Thanks all for your feedback. Obviously my parents are delighted they haven't gad to use this policy. Does anyone know if a broker or bank could advise them on a single life policy. In reply to the query about my fathers pension my mother would not have any pension if he passed before her.
 
Some life insurance policies build up a fund as well as providing the insurance so if you stop, then you get some money back. Some purely act as insurance so if you stop, then you get nothing back (these are typically cheaper because of this).

You say the fund is "now worth nothing" so a little confused as to which type of life insurance policy you have. If it's one that has a fund then it should be worth something (though it will be a LOT less than the money put in as you have benefited from having Life Insurance for all these years which costs something).

If as I suspect it's a reviewable whole of life policy, then the monthly cost of the life cover is increasing regularly as the clients get older. So while the policy may have started out with the premium being split in some proportion between life cover cost and savings, over time the internal split will have swayed over in favour of the life cover side so that eventually the monthly premium was only paying for the insurance. One of the many bad features of a policy like this is that after that point, the cost of life cover still keeps going up. If it goes above the monthly premium being paid, then the policy starts eating itself - units already accumulated in the savings fund are cancelled each month to pay the shortfall in the cost of the life cover. This is how such a policy may have had a value at one time, but may have little or no value now.

To add insult to injury, my experience is that this is very rarely understood by the owners of these woeful policies and it's rarely made clear in any statements they receive.
 
Thanks all for your feedback. Obviously my parents are delighted they haven't gad to use this policy. Does anyone know if a broker or bank could advise them on a single life policy. In reply to the query about my fathers pension my mother would not have any pension if he passed before her.

Your mother will probably qualify for a widow's pension if your dad pre deceased her. Are you 100% sure about your dad's pension not passing to your mother? It is very unusual for there to be no provision for a spouse.

As has been mentioned before, the thousands paid in has not been wasted. People will never see a benefit from a life cover plan, it is only there to protect your family if you die prematurely.

It is probably the fact that there was a value attached to this particular plan that has your dad upset. That value was never a savings plan for your parents. It was there to pay the premium of a god awful plan.

The premiums for these plans are based on the likelihood of dying (the premiums when the plan started were probably extremely cheap). As your parents are getting on in years, that likelihood of a payout are a lot higher, so the premium is only going to go up and up. Your parents needs to assess the need for the cover versus the ongoing cost. Personally, I believe life cover is to replace income. Once you stop working, you no longer need cover (there are of course exceptions).

As for a single life plan, I ran a quick quote for a 70 year old, Aviva are the only one who will cover and you will get cover...as long as your dad is in good health that is.


Steven
www.bluewaterfp.ie
 
Thanks for all your feedback I think I need to tell Dad to count his blessings and we'll look at savings plans.
 
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