Life Whole of Life Assurance

My husband and I have a whole of life assurance policy taken out in 1986 for €63487.00 payable on the first death. The Policy says it will pay out the guaranteed death benefit along with the value of any units attached to the Policy. The Policy has just been reviewed by the by Aviva and they say the premium we are paying at present is adequate but will be reviewed in 2016. The value of the units in the Policy have dropped dramatically and it is now worth a lot less than we have put into it.

We have received a letter from the Insurance Broker who sold us the Policy and he is recommending that we cash in the Policy as on the next review date we could be asked to pay a much higher premium. He then says we should take out a level term insurance policy instead.

We would very much appreciate any opinions as we do not know what to do.

Just be careful of brokers churning - definition 10 here:

http://www.encyclo.co.uk/define/CHURNING

Not saying that's the case here since I don't have enough info about the advice received.

Does this policy meet your needs and have you shopped around independently to get an idea of the cost of a similar or better replacement policy?

What do you get for "cashing in" this policy? Is there a savings element to it as well as the life cover?

There are other contributors who know a lot more about life assurance than I do who might be able to comment or say what details you need to post to get better feedback.

Thanks for your reply Clubman, there is a savings element to this Policy which was worth approx €21000 at its highest value but is only worth €14000 approx now which is a lot less than we have put in to it. The problem being that if the savings element keeps losing value that we would have to pay a much increased premium to keep the benefits of the Policy. I have heard of people being asked to pay crazy premium increases.

The Broker has given us premiums for Level Term Insurance where we could get the same life cover for the same premium we are paying now for a 20 year term. I have also done some research and his figures seem to be the norm for this type of policy.

I take your note about churning and will keep it in mind.

If i'm reading this correctly, you took out a Life Assurance Policy payable on the first assured death, NOT a savings plan. All Life policies have it in the Policy that they can be reviewed every few years and the Life Cos have the right to increase the premiums if they so wish. Saying this you are guaranted that the full amount will be paid out.

Now if you change your policy now, your premium will increase as both of you are older. Your broker might want you to change ! For what ?? So he can earn more commission from you. The Brokers earn the bulk of the commisions from the first few years premiums.

So. Before you do anything, think carefully. Your Life Assurance Policy, the purpose for starting the Policy in the first place is intact. If you want a savings plan open a savings plan.

I'm not a Broker and have no affiliation to the Industry at all. I simply hate watching people get ripped off.

Weren't combined life assurance (and/or insurance?) plus savings/investment policies popular at one stage? I.e. part (most?) of the regular premium paid for the assurance/insurance and the other part was invested. Not a great idea in my amateur opinion but there you go. However if somebody has one of these now then they should really think carefully about the implications of stopping it/cashing and all of the options open to them. It may be difficult to comment authoritatively here given the partial info posted so far.

You're broker may be giving you some very good advice. Reviewable whole of life policies tend to get very expensive the older you get (They are usually set up to review after an intial 10 years, then 5 years for a period & then every year). The danger with them is that after multiple increases, the premium increases by so much that you are forced to cancel the policy. The life side of the policy can also eat into the savings side as time goes by, so their is a critical point that the investment side will be at its most. Their are guaranteed whole of life policies out there (i.e that don't review) and may be cost effective depending on your circumstances. It really does depend on your circumstances as to whether this is the best move or not.


www.powerinsurances.ie

Angelab said:

We would very much appreciate any opinions as we do not know what to do.

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Have either of you suffered any ill health issues since you took out the original policy - if so your premiums may be loaded if you move to a new insurer.

If no health issues then I agree with your broker, cash in your current policy and take out a term or guaranteed whole of life policy.

Have a look at the offering from New Ireland, it combines a level term policy and a whole of life policy, you stop paying premiums at the end of the term so effectively you get free whole of life cover.

Thanks for the replies, Jimbobp has it right the Policy is both Life Assurance and savings (which sounded good 25 years ago but in hindsight was a bad idea). We do not have any health problems NorfBank, will have a look at New Ireland but we won't be rushing into doing anything just yet, it is a big decision.

Angelab said:

Thanks for the replies, Jimbobp has it right the Policy is both Life Assurance and savings (which sounded good 25 years ago but in hindsight was a bad idea). We do not have any health problems NorfBank, will have a look at New Ireland but we won't be rushing into doing anything just yet, it is a big decision.

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It's a no brainer.

Life insurance costs have fallen dramatically over 25 years, I've no doubt that your current policy is poor value for money.

You would be far better off getting the best quote available for a new protection policy with guaranteed premiums for as long as you need it (whole of life is available), and cashing in the old policy if accepted on standard terms for the new protection policy.