Irish Life Policy Review

brownswiss

I received a policy review today stating that if I continued to pay the same premium that my life cover would almost halve. If I want to maintain the existing cover I will have to pay a %50 increase in premium. It is just a life cover policy and I have not reached an age that would cause such a review. Have any of you received such a policy review ?

I will change from irish life so would appreciate any recommendations.

Thanks

phormium

Nothing particularly to do with your actual age, your policy just has review dates on it based on when you took it out, is it a whole of life policy?

SBarrett

You have a unit linked life cover policy. These policies have an element of savings and the life cover. Each month, your premium goes into the savings plan and the cost of the life cover is deducted from it. The idea is that the savings will grow and cover the increasing cost in cover in older age.

It never works out though as they assume that the savings will grow at a constant rate each year. When have you ever seen investments grow in a straight line?

Part of the pricing of the plan, is based on age. When you are younger, the chances of you dying are minimal, so they charge a very low premium as they know that they probably won't pay out. As you get older, the chances of a pay out increases, so the cost of cover reflects that.

The cost of life cover will constantly increase. If you want to keep the same premium, then the level of cover will decrease.

What you want to do is switch to a guaranteed life cover plan. Unlike the one you have, this plan does not have a savings element to it. You pay your premium and get your life cover. The only way the premium will increase is if you chose the indexation option and even then, it will increase by a fixed amount each year, which you know in advance. That way, you can easily calculate the premium in the last year of the policy. With the plan you currently have, you have no way of knowing what the cost will be in 5, 10 or 15 years.

You can also take out cover that pays a smaller lump sum and then a regular monthly income. It can be easier for people to calculate how much they need this way e.g. I need €1,500 a month if Tom dies instead of calculating how much lump sum you need and then being exposed to investment risk.



Steven

brownswiss

Thanks Steven. I did not realise there was a savings element. Must check. I do not remember seeing any value on it. I was very surprised at a 50 % jump in premium