Life replacing "whole life" with term policy

Hi,

I have a whole life insurance policy (joint life first death), valued at 210k and I pay 63euro/month.

I recently learned (via this forum), that it is likely that this policy will be reviewed when it is deemed to be uneconomical and my premium will likely rise substantially. Indeed I asked a family member about theirs and it had happened to them and they cancelled.

I am now 38 and my partner is 39.

I have received a quote online for a 30 year term policy for the same cost per month, but for increased cover of 240k.

Would I be better off cancelling my whole life policy now and taking out this term one, which will run until I am 68?

I am assuming that if I wait 5 years for the call about my whole life policy review, that the switch to a term policy will be even more expensive.

It depends on which type of whole of life you have. There are some guaranteed whole of life plans which are never reviewed but mostly its unit linked policies that were sold.

Ask the insurance company if its reviewable and if so there may be a value attaching now i.e.a 10 year reviewable plan could have a small value after about 5 years to pay for the higher cost of cover over the next 5 years.

If you do decide to go with a term product make sure you include a conversion option as that will allow you to take out a new plan without giving medical evidence at the end of the current term. Most term plans only cover you to age 80 max though.

It will depend on your own circumstances on whether you will still need life cover in your later years. i.e. your mortgage should be paid off and your children able to fend for themselves.

I'm not 100% sure if I have a guaranteed whole of life policy, need to check, but odds are that it will be reviewable.

Never heard of conversion options. So I could stick with the same provider and therefore not have to do medicals?

If I can afford to have life cover then I think I will keep it on even if I don't have a mortgage or dependents, simply as it will provide a lump sum for living on. She might want to live it up a bit once I am out of the way....

I might do this via a broker rather than cancelling and buying online...

Conversion options is as you say. Just before the end of the term you should be able to take out a new term plan for another say 10 years without having to answer any medical questions. They will charge you the standard premium for a 68 year old regardless of your health.

Some companies even have rolling conversion options so you could take out a term plan for say 20 years now and take out amother one for another 20 years at 58 and again for another 12 years at 68.

A broker will be able to look at the cost of cover for every company and may have an agreement to match the cheapest on the market anyway.

There is no term..... I thought I could just ring them up now and convert straight away. They might facilitate that rather than lose a customer.

I rechecked online and the AIB Life Long Protection Policy is explicitly stated as having no increase in premium for the entire length of the policy. I had better ring them.
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63/month for 215k with no term is good as if I go online now for a new policy it is 300 odd/month.

If your current plan is with AIB then you need to ring them and ask specifically in relation to your policy, if its reviewable. A lot of insurance companies stopped selling reviewable plans due to negative publicity and I suspect AIB would only advertise current available policies on their website.

If it is a guaranteed whole of life plan then its a valuable policy and should be continued.

If not, and you want to have a guaranteed premium then you will need to apply for the new policy and complete a questionnaire with medical info. The conversion option I spoke of should be included under the new plan so that the policy can be extended at the end of the original term.

Good news!

Just off the phone and the policy monthly payments are guaranteed never to change!
Something has gone my way!

Hi fraggle

I'd ring them and ask for that in writing. I just done the sums and it just simply does not work out...the company would need both lives to live for a minimum of 277 years just to breakeven!

Ok not really because life companies depend on a substantial number of guaranteed WOL policies to be cancelled by customers. But even allowing for a 85% cancellation rate the company still would not make money.

I hope that they gave you correct information because that would make it the best life policy that I have ever heard of!

Hi fraggle,

I'm 100% with Baracuda on this one. Here's a few back of an envelope calculations.

Most insurance companies work on the assumption that the average person will live to their mid-eighties - that's going up slowly as people's health improves across the board.

Even if both of you live to be 100, the insurance company will only receive another €46,000 in premiums. I don't know how long you've had the policy, but let's say I assume you were very sensible and started it 15 years ago, then you've paid in about €11,000 to date. So by the time you'd BOTH hit 100 years old, you'd have paid in less than €58,000 in premiums. Even allowing for improvements in medical science and longevity, the statistical likelihood of you both plodding along for too many years beyond that is tiny.

There has to be something missing here and you owe it to yourself to find out what it is. I find it highly unlikely that you'd be given a policy that will definitely pay out €210,000 at some point but you're VERY unlikely to pay anything more than €60,000 into. Even allowing for the fact that the insurance company can invest your money and generate a return, it still doesn't add up to me.

As Baracuda says, get it in writing from the insurance company.

Hi LDF,

I was sensible, I started the policy in 1998, when I was 23. I have been paying 63.10 per month since then. (I also had separate mortgage protection).

I have just rung them again and they are 100% insisting that this premium will not change and are sending me out a letter/details to that effect. I pressed them on it and mentioned some of the above (at a high level) and they still insisted. They also said that they do not sell this type of policy any more.

I will update the thread with details of whatever they send out.

There were very good value whole of life plans available about 15 years ago and the insurance companies stopped selling them for the reasons Baracuda mentioned. Don't cancel that policy for any reason even if you have to go hungry as that value will never be available again!

Well they have sent me a policy document with a cover letter which contains my policy number on it. They have highlighted a section in the policy document which states that the premium will remain the same for the duration of the policy.

Of course now I am thinking that the policy document is the current policy doc and not the one in existence 15 years ago.

At this stage you have to take their word for it that your plan is a guaranteed whole of life contract. Does the terms and conditions brochure you received match what you got when you took it out originally.

Also have a look at any code that may be written on the back or front of the brochure as companies usually put a reorder code on brochures with a print date. i.e. aib 1234 05/14 which would indicate that it was printed in May 2014


What is the name of the contract as that might give you a clue.

I don't have the original policy docs/brochure.

The reason I am suspicious is because the last page on the policy doc is branded Hibernian.... I can't keep track of how it is moving around.

I'm pretty sure when I bought the policy it was AIB/Ark Life (and it has been AIB/ArkLife I have been ringing) and they then put me through 'to another dept'.

I thought Hibernian bought them only a few years ago.

And now Guardian have them.

Ah, it most likely is a guaranteed WOL policy. Hibernian did produce a policy back then with guaranteed premiums but only sold it for a couple of years.

Aviva done admin for Ark life back 6 years ago, AIB agreed to sell on the back book of business last Christmas to Guardian Insurance. Guardian is a UK based company who specializes in managing closed back book business. And just to really confuse you Irish life is the current administrators for the Ark life back book! So every time you ring in that is why they need to transfer you to another department, (that is Irish Life)Simples really

Hi Fraggle, in 2003 I took a mortgage with AIB. We took a whole of life cover from Ark Life. The Ark Life rep recommended it and said they were about to be discontinued by the provider. The premiums are 69.28 pm with cover of 169,000 (Joint life - first death).

I still have the original policy document and this states that the "Premiums will remain level throughout the continuance of your plan". It also states that the "plan will not have a cash-in value at any time" and that it "does not acquire a surrender or maturity value"

It seemed like a good plan, if we make it to 90 it'll cost about 50k but we'll get 169k (well, one of us will). I didn't worry too much about how they were going to make a profit, I assumed they were smart enough to know how.

Thanks all, my mind is put at ease now. I'm keeping a close eye on my wife's actions....

In this instance, I'm happy to have been proven wrong. As long as you've satisfied yourselves that (a) the cover cannot be amended for the rest of your lives and (b) neither can the premium, then I'd say hang on to those policies forever. I can't figure out why the insurance company would sell these so cheap, but as losttheplot says I wouldn't worry too much about that.