term v whole of life

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rocky

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hi all
i am looking for some info on life assurance.should i switch from my term policies to whole of life policies? at the moment i am paying over €400 per month for €1.3m cover for myself and €.8m cover for my wife. this also has critical illness included.after crunching the numbers with a rep from another company he suggested that if i switched to whole of life then it would leave €2m for the kids regardless of how long we live. this seemed a no brainer untill i spoke to my own broker and he said that the whole of life policies were not recomended as they are reviewed on a regular basis and the monthly premium eventually becomes too much and one has no choice but to terminate the policy. as he said if it seems too good to be true it probably is.my problem is who do i believe.
 
Your broker is right. A Whole of Life policy only has a guaranteed period for premium of ten year, apart from Canada Life's policy I beleive where the guaranteed period is up to 20 year if selected. Obviously the longer the guaranteed period selected at outset the more expensive the policy. You can also elect to take a higher assumed premium payable period for, ie. assumed premium sustainable for 15 years however it still is only guaranteed for 10. After the 10 years the policy is reviewed and based on the companies own claims history, not based on your personal circumstances, the premiums could go up and based on a selected 10 year sustainable premium they more than likely would. Every 5 years thereafter the premiums would be reviewed and after age 70 every year.

My view is pay for what you need, if you need cover to be sustained past a certain date and going forth into later life then Whole of Life is good as you have guaranteed cover, but a Term policy is generally recommended, and if you want the possibility to continue after the term expires then select the conversion option at outset. Bear in mind here that if you convert, the premiums payable would be those applicable at the time of conversion based on age, but not health as the conversion option deems that you do not have to provide medical evidence.

Ask the guy who is recommending the WoL to answer the following question and see what his reaction is...

1) What is the guaranteed period
2) What is the sustainable period
3) What is the growth rate assumed
4) What is the investment fund

Premiums are sustainable based on a growth rate in generally the managed fund. Generally it would say that the premiums are sustainable for say 15 years if the fund acheives a growth of 7% say. If the fund only acheives 6% then the premium would go up before the 15th anniversary, on the other hand if they acheived 9% say, then the premiums probably would not increase till about year 18. These contracts are not savings contracts and should never be sold such but unfortunately this is how many are advised.

I hope this is not all too confusing, it is not the easiest contract to explain, post again with any questions you have. PS, the Critical Illness in a Whole of Life policy is soooo expensive.
 
hi kitty kat
thank you for your reply
i will run these questions by him and see what he says.will post his response
 
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