Was I mis-sold critical Illness cover?

tobehonestwithy

This has only come up recently when i was talking to my sister-in-law. My premium on my critical illness cover (+absent from work/+hospital days) came in and was upped to €100 per month. She happened to be in the house at the time and said that was an awful lot to be paying per month (to Bank of Ireland Life)

BackStory:

Back in 2007, i released Equity from my house for a foreign investment. I took out Mortgage protection which is compulsory. I was also told that I needed Life Cover. i assumed that this was compulsory also (i dont believe it is ??) and the the way the Financial Adviosr was talking in the bank, it sounded like it was. I was 26 at the time and a bit, naive if truth be told. I have no health issues or family healthy issues. At the time the premium was around €70.

fast forward to 2012, i got a call about my premium about updating it. I told them i was married with no dependents so they suggested adding my wife to it for an extra €25 or so (I am not exactly sure of the figures). i mentioned that I had Life Assurance as a benefit on my pension which will be paid (plus my pension) to my wife in the event of my death. They still suggested keeping the critical illness. I am still of the belief that i MUST have this and from talking with the agent over the phone I wasnt told any different. €100 for

CIC - 157,000
Hospital Cover: 144 per day
Absent from work: 234 a week

Is this alot. Should I complain about this? Should I even need Critical Illness cover at 33 or indeed, when I was 26?

coylemj

tobehonestwithy wrote: »

Back in 2007, i released Equity from my house for a foreign investment. I took out Mortgage protection which is compulsory. I was also told that I needed Life Cover.

First you need to realise that a mortgage protection policy is life cover, it differs from a normal life policy in that (1) the premium is calculated based on a diminishing benefit to match the diminishing balance on the mortgage unlike most life policies which have a fixed benefit and (2) the policy notes that the lending institution and not the estate of the life insured has first call on the benefit if the insured person dies.

When taking out a mortgage, all you have to buy is the mortgage protection policy. If you were strong-armed to buy any other kind of financial product then I would call that mis-selling.

You talk about being forced to buy life insurance but from the details you've provided it appears that what you were sold (and are still paying for) is critical illness cover as in the thread title. A life policy only pays out when the insured person dies.

tobehonestwithy wrote: »

i mentioned that I had Life Assurance as a benefit on my pension which will be paid (plus my pension) to my wife in the event of my death.

that's not really relevant in this discussion, the life assurance you have at work won't pay a cent if you develop a serious illness which keeps you out of work for 2-3 years so it could be argued (possibly at a stretch given that you have no kids) that you are a candidate for serious illness cover.

Critical illness insurance is highly profitable, it's normally sold with high pressure tactics because the sales agent gets a big slice of the first year's premium. Your experience is pretty typical of how the industry works.

It's hard to give a definitive answer to the question in the thread title ('Was I mis-sold ....'). One the one hand, you describe hard sell tactics. On the other hand, it could be plausibly argued that you were a candidate for critical illness cover since, having saddled yourself with two mortgages, how could you have continued to pay both loans if you were out of work with a serious illness?

SBarrett

It has become blatantly evident, that when "advising" in financial services, the banks do nothing more than try to generate as much commission as possible.

You needed mortgage protection cover (life cover that decreases over the term of the policy in line with your mortgage). The "advisor" added on a load of other things to increase the premium and therefore the commission earned.

A problem that I find people have with banks all the time is that they never know exactly what cover they are taking out. They have filled out a million forms to get to the mortgage and have form fatigue by the time they get to the end. The official tells them it might be a good idea to take out extra cover and people go for it without thinking.

Have you been missold? Probably not. They will argue that they told you about it, you can claim from it if you get an illness and you probably signed a letter of suitability.

Was it right to sell a 26 year old critical illness when all he needed was the cheapest cover available? No it was wrong.

Bank officials are not advisers. Weekly sales targets come down from management that they have to meet and they will have been told to get as many add ons to mortgage protection policies as possible. They are nothing more than salesmen. If you want proper advice, go to some one who is properly qualified and who will work in your interests.


Steven

NewCorkLad

Were these policies miss-sold to you no. Had you developed a serious illness over the last 7 years you would have been very happy you had run in to that hard selling adviser.

Was it necessary for you to take out these additional policies no. If I were you, I would look for an independent adviser in your area and go have a chat with them, you do not need to keep these policies with BOI. They should be able to give you the same policy, while saving you money or if you want to just have the basic mortgage protection, policy save you a lot of money per month. However go in with an open mind, not just trying to save money as depending on your circumstances, this could already be the ideal policy for you.

tobehonestwithy

Guys. Great advice from both.

I have already called up BOI to discuss the policy and expect a call back. I have also had a look through some other quotes and spoke with a broker just to get an idea of a comparison with other companies. Again, he will call me back on this.

I will update when/if i get one

Drumpot

There is a difference between what you are generally required to have in place for a mortgage and what exactly you can take out. . In short you are only obliged to have mortgage protection cover (life only), but that's not to say that Seriously Illness cover is not something you should at least consider.

If you think you were missold the cover and you only wanted the cheapest option and you feel it would be clear from your initial application, You can put in a complaint to the bank and they are obliged to respond within a specified period at which stage you can decide to take things further or not. It is up to the bank to prove that it was cover you wanted/needed and that you clearly understood the extra cost when taking it out.

I am 36 and actually really value serious Illness cover personally and professionally. I think its a great (but expensive) add on to have if you can afford it.

I always ask people why they think Life cover or serious illness policies are "dead money" if they don't make a claim. Do people actually want to make claims on these policies? Most people take these out (like house or car insurance) hoping that nothing bad happens but if something does happen that you or your family will have some sort of compensation..

What I would suggest is that if you decide you actually do like having the serious Illness cover, you should consider contacting a financial adviser. For one, they can possibly get you a better deal on the cost, give you flexible options and since the market is so competitive, the life companies cover more things on their policies then they did even 2 years ago! With the EU gender directive coming into play last December, the cost of your cover may reduce.

Incidentally, there is some information thats not clear from your post. You said that in 2012 you "added" your wife to the plan and that the premium recently went up. This sounds like you have indexation (cover and premium go up annually). Did you take out a new policy in 2012 or did they actually just "add" your wife to the policy? If you could include the policy name (Eg Lifetime Term Assurance) it would help. If you have a reviewable whole of life cover I would recommend that you get it reviewed immediately with an independent adviser (preferably somebody you know or trust). The reviewable plans are no longer available because they get extremely expensive in the latter years.

tobehonestwithy

Drumpot wrote: »

Did you take out a new policy in 2012 or did they actually just "add" your wife to the policy? If you could include the policy name (Eg Lifetime Term Assurance) it would help. If you have a reviewable whole of life cover I would recommend that you get it reviewed immediately with an independent adviser (preferably somebody you know or trust). The reviewable plans are no longer available because they get extremely expensive in the latter years.

Hi Drumpot. Again, you have made it clear. On my police, it is a BOI LifecarePlan.

Critical Illness Cover
Hospital Cover
Absent from work.

whether it is a new policy or any upgrade on my existing one, i am honestly not sure. i should have more info in the coming days as I will be getting a call back from BOI before the end of the week and getting other quotes

i am going to continue with Critical Illness but dropping Absent from work & Hospital cover. I dont need the latter. i do see the benefit in having CIC as regards with a Mortgage.

Great advice from all. Much appreciated

SBarrett

Drumpot wrote: »

I always ask people why they think Life cover or serious illness policies are "dead money" if they don't make a claim. Do people actually want to make claims on these policies? Most people take these out (like house or car insurance) hoping that nothing bad happens but if something does happen that you or your family will have some sort of compensation..

When it comes to insurance, you always have to ask yourself, what are the consequences if the event happens and you are not insured.

If your washing machine goes bust, it's not the end of the world, you can self insure and buy a new one. If your house burns to the ground, you are homeless.

Same with life cover and critical illness. What will the consequences to your family be if you died and your income is gone or if you get a critical illness and can't work? Isn't it worth insuring that risk?

tobehonestwithy wrote: »

Hi Drumpot. Again, you have made it clear. On my police, it is a BOI LifecarePlan.

I'm not 100% but that sounds like a reviewable plan. Cheap now but as you get older and the chances of a claim increases, the cost shoots up.

It may have a value, so I would look at cashing it in and taking out a policy where the premiums are guaranteed.


Steven

Drumpot

SBarrett wrote: »

When it comes to insurance, you always have to ask yourself, what are the consequences if the event happens and you are not insured.

If your washing machine goes bust, it's not the end of the world, you can self insure and buy a new one. If your house burns to the ground, you are homeless.

Same with life cover and critical illness. What will the consequences to your family be if you died and your income is gone or if you get a critical illness and can't work? Isn't it worth insuring that risk?

Exactly. The younger you are, normally the greater the requirement for Life (and illness if you can afford it). A 30 year old with 2 children generally has a mortgage and obviously 2 dependants who are financially dependent on them.

tobehonestwithy, this is a great opportunity for you not just to alter your cover but to get a better understanding of what it covers and why it is valuable. You have figured it out a lot younger then many people who unfortunately only spot these discrepancies when its really too late to get a cheaper or better alternative.

SBarrett

And while we're at it, don't forget income protection, which I think is the most important of the lot. Being almost dead is worse than being dead. At least if you're dead, the mortgage will be paid and once you're buried, you cost nothing. Not so if you have a bad accident, medical bills could go on for decades and the household bills still have to be paid.

Critical illness will not pay out in all circumstances but income protection will provide you with a regular income if you can't work. The State will only pay you €9,884 in disability but if you are self employed, you get nothing.

Steven

tobehonestwithy

Very helpful guys. I have plenty to go on. I will be talking to a few different people this week to get a better understanding of where I am at