whole of life premium increase, gouging?

PWR

Took out a whole of life illness/death policy for two people in 1994, for an assured sum of about 170K Euro. Monthly premium was E112, at 10 year review it went to E143. At 15 year review, just done, they want to increase the premium to E377, 260% increase. Broker has explained that its not a savings type product, that the premiums had to cover a claim at any time, thus the sum of the premiums is not relevent (though at about 22K paid it looked very relevent to my bank account), and now, given our age and circumstances (46 and 45, smokers, desk jobs) the new premium is what any insurer would charge. Insurer is Friends First.

Is this gouging? I'm sure its covered in the small print, but it still seems totally excessive. That we would get older by 15 years from 1994 to 2009 was predictable, they should have been able to figure that out. Am I justified in complaining to the relevent ombudsman?

As a second issue, this is assigned to mortgage provider. What I now have to do is look for cheaper cover, I am quoted about E110/month for a "term policy for life cover only for the next 15 years with a conversion option, with inflation protection option which means cover and premium increases by 5% each year and at the end of the term you can have the same level of cover without any medicals provided you pay the premium prevailing at the time".

Ta for any advice.

PWR

Long Onion

I have never been a fan of whole of life policies unless there are inheritance tax issues which may pass to your children, like the endowment mortgage situation, they rarely live up to their promise and almost always result in premium increases or cover decreases. I also question the sensibility of continuing to be covered for €170,000 into your 70's & 80's at the time that your debts and the needs of your dependants have reduced or disappeared completely.

I would rather take a decreasing life cover policy to cover mortgage commitments and have this assigned to the bank, after this i would set up a level term policy for family needs based on the amount of income your dependants would be out of pocket on a monthly basis were you to die. I would run this term up to retirement age or until my youngest child was 21ish, take a conversion option on this by all means and rduce the level of cover accordingly at the end of this term.

If a higher rate tax payer, put the level term cover through a pension term assurance policy and avail of the (currently) 41% tax relief available. On the pension term assurance side, your policy and that of your spouse/partner would have to be set up seperately and they cannot be assigned to a lender.

Hope this helps.

P.S. I would not personally take out an indexation option either, your financial cover needs should decrease over the years - it does not make a huge amount of sense for your level of cover to be increasing. Many brokers liked whole of life plans as they get trailer commission each year that the policy is in place - the amount of commission rises with the premium so they can be quite lucrative over the policy term.

broker2008

Well for the same premium that you were paying, €143pm, you could get guaranteed cover for 20 years with a Conversion Option with Irish Life as an example. So mortgage will be covered, will last a little longer and you have a conversion option.

PWR

thanks to you both, will look for quotes from broker, and will also complain to FS Ombudsman - I think its gouging even if it is within small print terms.

Best,

PWR

PWR

having done the research I am getting 5 options:

Option 1 same policy as currently
Based on age profile and one being a smoker, a Whole of Life policy with €170,000 life and accelerated Serious Illness with a review in 10 years would be €351.79 per month with New Ireland.
Option 2 – take life cover and accelerated serious illness on a reducing balance
This would be a mortgage protection policy and would pay off the balance on the mortgage either on diagnosis of a serious illness or first death. No balance would go to the estate. The most competitive for €170,000 life and accelerated serious illness over 20 years would be €206.41 per month.
Option 3 – take life cover only on a reducing balance
This would be a mortgage protection policy with life cover only of €170,000 over 20 years. The balance on the mortgage would be paid off in the event of first death – no balance would go to the estate. The most competitive for €170,000 over 20 years is €58.96 per month.
Option 3 – take a term policy with accelerated Life & serious illness
This would be a term policy for 20 years with life & serious illness cover of €170,000. The balance on the mortage would be paid off, at the time of first death or diagnosis of a serious illness and any balance on the policy would go to the estate. This would be a dual life convertible term which means at the end of 20 years, I would have the option of continuing the policy provided I paid the premium for a male and female 20 years older. Dual life means both of us would be covered. In the event of first death, €170,000 would be paid out and the surviving spouse would still have the €170,000 cover. The most competitive for this option would be €425.25 per month.
Option 4 – take a term policy with life cover only
Same as option 3 but having life cover only of €170,000 over 20 years – this would cost €100.94 per month.
Option 5 – take Mortgage Protection policy and an element of Income Protection
Serious Illness policies can be hard to get paid on and I am recommended Income Protection before Serious Illness. If I get a serious illness that keeps me out of work for more than my chosen deferred period, I will get paid up to selected retirement age. This would be my chosen weekly benefits and not a lump sum as in Serious Illness. To cover an income of €50,000 payable once out of work for 8 weeks would cost a nett premium of €128.85 per month. Together with the Mortgage Protection policy, the total cost would be €187.81 being €58.96 and €128.85. The Income Protection is based on a retirement age of 60.
so, would you think that 5 is the way to go? Thanks again.

PWR

Long Onion

PWR wrote: »

having done the research I am getting 5 options:

Option 1 same policy as currently
Based on age profile and one being a smoker, a Whole of Life policy with €170,000 life and accelerated Serious Illness with a review in 10 years would be €351.79 per month with New Ireland.
Option 2 – take life cover and accelerated serious illness on a reducing balance
This would be a mortgage protection policy and would pay off the balance on the mortgage either on diagnosis of a serious illness or first death. No balance would go to the estate. The most competitive for €170,000 life and accelerated serious illness over 20 years would be €206.41 per month.
Option 3 – take life cover only on a reducing balance
This would be a mortgage protection policy with life cover only of €170,000 over 20 years. The balance on the mortgage would be paid off in the event of first death – no balance would go to the estate. The most competitive for €170,000 over 20 years is €58.96 per month.
Option 3 – take a term policy with accelerated Life & serious illness
This would be a term policy for 20 years with life & serious illness cover of €170,000. The balance on the mortage would be paid off, at the time of first death or diagnosis of a serious illness and any balance on the policy would go to the estate. This would be a dual life convertible term which means at the end of 20 years, I would have the option of continuing the policy provided I paid the premium for a male and female 20 years older. Dual life means both of us would be covered. In the event of first death, €170,000 would be paid out and the surviving spouse would still have the €170,000 cover. The most competitive for this option would be €425.25 per month.
Option 4 – take a term policy with life cover only
Same as option 3 but having life cover only of €170,000 over 20 years – this would cost €100.94 per month.
Option 5 – take Mortgage Protection policy and an element of Income Protection
Serious Illness policies can be hard to get paid on and I am recommended Income Protection before Serious Illness. If I get a serious illness that keeps me out of work for more than my chosen deferred period, I will get paid up to selected retirement age. This would be my chosen weekly benefits and not a lump sum as in Serious Illness. To cover an income of €50,000 payable once out of work for 8 weeks would cost a nett premium of €128.85 per month. Together with the Mortgage Protection policy, the total cost would be €187.81 being €58.96 and €128.85. The Income Protection is based on a retirement age of 60.
so, would you think that 5 is the way to go? Thanks again.

PWR

To be honest, I prefer Income protection policies to SIC, for a number of reasons, one being the fact that the cover is much broader and another being the fact that you can claim tax relief on the premium at your marginal rate.

Bear in mind that you can, as a rule only cover a max of 75% of your total annual salary (this 75% includes the state disability benefit of €10,624). I would see this as being much better value. I would personally consider this option and if you wanted life cover benefits for your dependants, you could take out a seperate pension term assurance policy and claim full tax relief on this premium also.

P.S. shop around online also, you may be surprised at what you can find.