What use are Life Assurance policies?

[Marie]

My parents paid into life assurance policies for themselves from about 1946, for their children as they were born and for my maternal grandmother (a widow) and one of my mother's sisters who had poor health from childhood.

What provoked this question is that I came across the policies and payment books whilst decluttering my home and was struck by how expensive this was on a young couple starting out in life with young children.

Apart from some funeral expenses for my grandmother and maternal aunt who died in the early 1970's none of these policies were cashed in. My parents were paying in from 1946. Presumably they fell into arrears and hence into abeyance as my mother had Alzheimers in her final years. As they had 'lapsed' by the time of deaths of various family members for whom the policies were held there were no payouts.

This is probably typical of most families. I wondered what is the point of this kind of 'assurance' and who benefits from all the unclaimed funds?

 

[jpd]

Standard life assurance policies are what they say on the packet - they pay your estate or named beneficiaries a sum of money if you die within the term covered by the policy. If you outlive the term then you get nothing. It is a cheap way of ensuring that in the event of your untimely death, your dependants are covered against the loss of your income. These type of policies have no cash-in value - it's like motor insurance.

Life assurance policies with a savings element are a very different type of policy. In addition to the life insurance element, they are designed to build-up a sum of money that is paid out when the policy matures.

If either type of policy is not claimed on maturity, then the insurance companies put the money aside. You are entitled to claim it even years later, if you can show that the death occured within the term of the policy in the case of a standard life assurance policy or in all cases for a savings life assurance.