reducing life assurance policy

[jennifer999]

Hi

My Mortgage is €209,000 and I have the following protection policy (unit linked - no end term - dual life basis) costing €119 per month - €235,000 life cover each & €225,000 independent serious illness cover each and accident benefit each.

I wanted to add hospital cash benefit and surgical cash benefit to this policy for added protection but cannot afford an increase in premium.

Therefore to match the premium I have at present I would be setting up a mortgage protection policy for €245,000 joint life 1st death, reducing life to €100,000 and SI to €150,000, and adding other benefits.

What do people think about this plan?

 

[ClubMan]

I have the following protection policy (unit linked - no end term - dual life basis) costing €119 per month

What do you mean unit linked? Is there some savings element to this policy that gives it an encashment value even if you don't die? If so you might want to consider if this is the best/most cost effective way to invest as often it's not and you're better off keeping mortgage protection and other general life assurance separate from pure savings/investments.

- €235,000 life cover each & €225,000 independent serious illness cover each and accident benefit each.

Do you really need the serious illness/accident benefit cover? If so why?

I wanted to add hospital cash benefit and surgical cash benefit to this policy for added protection but cannot afford an increase in premium.

Ditto. Why not take out general private health insurance separately or just go public if necessary?

Therefore to match the premium I have at present I would be setting up a mortgage protection policy for €245,000 joint life 1st death, reducing life to €100,000 and SI to €150,000, and adding other benefits.

What do people think about this plan?

I think it all sounds very complicated and you might be better off splitting your mortgage protection life assurance requirements from other insurance and investment issues. You should also probably get independent, professional advice.

 

[jennifer999]

Unit linked (termanology on policy) = whole of life plan

• I have a seperate income protection plan that will pay out after deferred period of 13 weeks.
• The accident benefit on the life assurance policy pays out after 2 weeks and will continue until the 13th week.
• I want to make sure that we can still pay the mortgage if something happens to stop us from working for a period of time.
• I believe that we need the serious illness option due to health issue's on both sides of the family.

We both have private health insurance with Bupa also - but want the hospital cash to offset costs incurred while possibly in hospital for more than 3 days.

 

[ClubMan]

Unit linked (termanology on policy) = whole of life plan

Are you sure that it does not involve some element of savings/investment that gives it an encashment value other than on death?

I have a seperate income protection plan that will pay out after deferred period of 13 weeks.

Why do you need more cover so? Remember that you may be entitled to Jobseekers Benefit it not self employed and it may well be possible to get some work to tide you over.

I want to make sure that we can still pay the mortgage if something happens to stop us from working for a period of time.

Do you have an emergency "rainy day" fund for this purpose?

I believe that we need the serious illness option due to health issue's on both sides of the family.

OK - that could be a relevant factor alright.

We both have private health insurance with Bupa also - but want the hospital cash to offset costs incurred while possibly in hospital for more than 3 days.

I don't understand - seems to be overlapping cover. Are you sure that you're not overinsuring here/generally?

 

[RS2K]

Simplify it.

 

[jennifer999]

Maybe I am over insuring, but I dont know where to cut back.

We're only have our mortgage for the past 2 years and our rainy day fund is not great

We have a child so I wanted both of us protected should anything happen to the other. And I wanted to make sure that should one of us not be able to work that the same income would still be coming in each week as both incomes are needed to pay all our bills.

As far as Im aware the weekly benefit from the state if we are out of work is €185.80 and I need the accident benefit to top this up from the 2nd week until the 13th week and then the income protection plan to pay from the 13th week on. This is mainly to cover us if we cannot work at all due to illness or accident. Especially for my hubbie as he works in constructions and the risk is greater for him.

There is a tiny portion of savings from our montly premium but its not a savings plan.

The Bupa policies are to pay for the cost of being in hospital, the hospital cash benefit is to cover the income loss of being in hospital.

Where do you think im going wrong and should cut back. Cos its costing a lot each month.

 

[ClubMan]

Maybe I am over insuring, but I dont know where to cut back.

You should consider getting independent, professional advice on your insurance needs in my opinion.

There is a tiny portion of savings from our montly premium but its not a savings plan.

This seems contradictory to me. If it contains some element of savings then it is quite possible that this is not the best way to be doing this.

The Bupa policies are to pay for the cost of being in hospital, the hospital cash benefit is to cover the income loss of being in hospital.

But aren't these covering stuff that is already covered by SW and/or your income protection?

Where do you think im going wrong and should cut back. Cos its costing a lot each month.

See my first comment.

 

[alfabeta]

A unit linked Whole of Life policy is set up with a premium at outset based on a specified growth rate and generally the fund chosen is the managed. If the policy is set up with an assumed growth rate of say 6% then the fund would have to acheive 6% to maintain the selected growth rate. Also generally these policies has a guaranteed period of 10 years built in whereby it is guaranteed that the premium will not go up in the first 10 years but some will allow you to select a higher guaranteed period but at a cost. After the 10 years, the premium and sum assured would be acccessed to see if the premium could maintain the sum assured for the next five year and so on and so on, till 70 then generally annually. If it could not then the owner would be given two option, one to increase their premium whilst maintaining the sum assured and the other to reduce the sum assured but maintain the premium. If of course the fund grew at 20 per annum then the premium would probably never go up and there would be a fund building up, there are so many variables but they are not considered savings policies. One of the main benefits of these type of policies are their flexibility.

 

[alfabeta]

Jennifer, to cover for every eventuality is costly as you know, consider a few things, the hospital cover, this pays out a payment per day if you are in hospital. Some of these specify over 3 days and some over 10 days where you have to be in 3 or 10 days before they start paying out, i am only going from memory as I have not looked at one of these for ages. Generally overnight stays in hospitals are for very short periods and that if you can get a bed. I see you have a 13th week, most now are minimum 26 weeks now so you possibly have a good contract there, obviously i cannot see it. Have you taken into account any benefits that you have from work? Are you also working or is your husband the sole earner. You may have to compromise on the type of policies you have to get the best solution. IMO Life cover based on what you said above is possibly the most important but this is very much dependant on what eles is left in the event of death and not on a whole of life basis if cost is a factor which it is not far behind would be Income Protection & Critical Illness, hospital cash would possibly be last.

 

[RS2K]

A unit linked Whole of Life policy is set up with a premium at outset based on a specified growth rate and generally the fund chosen is the managed. If the policy is set up with an assumed growth rate of say 6% then the fund would have to acheive 6% to maintain the selected growth rate. Also generally these policies has a guaranteed period of 10 years built in whereby it is guaranteed that the premium will not go up in the first 10 years but some will allow you to select a higher guaranteed period but at a cost. After the 10 years, the premium and sum assured would be acccessed to see if the premium could maintain the sum assured for the next five year and so on and so on, till 70 then generally annually. If it could not then the owner would be given two option, one to increase their premium whilst maintaining the sum assured and the other to reduce the sum assured but maintain the premium. If of course the fund grew at 20 per annum then the premium would probably never go up and there would be a fund building up, there are so many variables but they are not considered savings policies. One of the main benefits of these type of policies are their flexibility.

Yes, but these type of policies were at one time sold wholesale specifically as savings policies. Irish Life had a Lifesaver policy which was dominant in the market.

Many unit linked endowment mortgage contracts were of this type too.

Commissions, and therefore charges were very high, and annual premium indexation meant new charges were levied yearly.

I've reviewed policies where after 15 years premiums (and with a nominal sum assured) no profit was being made. A disgrace.