Big annual hikes on life assurance plan

Agricola

Looking for some advise on what's the best course of action here......

My parents hold a joint policy with Friend's First for donkey's year. The premiums have remained static up until about 3 years back where the annual reviews started to notify them that in order to keep the current level of cover an increase would be required.

Last year's was a 25% hike. This year the review letter has requested an almost 50% increase on top of what they pay now. My father is 82, in rude health, and I hope he's around to keep cursing about these letters for many years to come, but realistically this kind of hiking is not sustainable for them to keep paying.

I got them in touch with a financial advisor a few year's back and his advise up until now has simply been to not let the level of cover drop, as the increase is still significantly less than the drop in benefit, in the event of a death.....

I'm well used to playing hardball with other kinds of insurance and trying to get a better deal, but Im green as far as life policies etc.

Have they any cards to play here or is it as simple as taking a hit on the level of benefits or just swallow another big hike?

Thanks

Atlantic Dawn

Some policies are reviewable, when they are there's usually a term either based on policy holders age or term of the policy when the company recalculates how much the premium should be. You could shop around for a new policy but after age 70/75 the cover is going to be at a premium.

phormium

In my opinion they hold all the cards and I don't think you will get anywhere trying to negotiate the amounts but if you do let us know!

The reviews will have been in the original policy and this happens all reviewable policies, they normally end up too expensive to continue indefinitely. But on the other hand what does your father need life cover for at 82? I know it's possible he has dependents but in general people of that age don't, some are keeping it to pay for a funeral but you must weigh up the costs of keeping going with the benefit bearing in mind when the next reviews are going to be as well.

I am actually just waiting on a letter myself from another insurance company whose rep rang me yesterday to make an appointment to discuss the review letter I received, except that I hadn't received it! So have to wait and see what news it brings.

Browney7

Although These policies are whole of life, they're not really suitable at old ages.

Would echo the advice as to why he needs life cover? If the argument is that he's paid so much in, it's because he hasn't died. Much the same like paying car insurance and not crashing.

Also, there are probably product and commission considerations going on in projection calcs. Possible the adviser will get a chunk of commission on the increase in premiums and also likely there is a nil allocation period on the extra premium for a number of months. Basically, these contracts are complicated!

If he can revise down the life cover to a small amount, there might be some benefit in using this as a savings policy - either on the old net funds regime so taxed at a lower % or the previous protection premiums may count as a loss on the policy and savings could grow tax free. You'd have to ask Friends about this

Agricola

Atlantic Dawn wrote: »

Some policies are reviewable, when they are there's usually a term either based on policy holders age or term of the policy when the company recalculates how much the premium should be. You could shop around for a new policy but after age 70/75 the cover is going to be at a premium.

I hadn't thought of looking for an alternative as I thought the idea of an 82 looking for a new life policy would be...odd! When I speak with the advisor next week, I'll see what he says about other possibilities for the lump sum.

phormium wrote: »

In my opinion they hold all the cards and I don't think you will get anywhere trying to negotiate the amounts but if you do let us know!

The reviews will have been in the original policy and this happens all reviewable policies, they normally end up too expensive to continue indefinitely. But on the other hand what does your father need life cover for at 82? I know it's possible he has dependents but in general people of that age don't, some are keeping it to pay for a funeral but you must weigh up the costs of keeping going with the benefit bearing in mind when the next reviews are going to be as well.

He doesn't need it for dependants no, but yes it is now very much a funeral consideration. He's very happy in the knowledge that a good lump sum will be there at the end of the day to cover all eventualities and not place any burden on the family. TBH, if he surrendered the policy, the value of it would sort all that, but the death benefit is now 3 times the value, so they are at pains to loose it at this stage, obviously.

Browney7 wrote: »

Although These policies are whole of life, they're not really suitable at old ages.

Would echo the advice as to why he needs life cover? If the argument is that he's paid so much in, it's because he hasn't died. Much the same like paying car insurance and not crashing.

Also, there are probably product and commission considerations going on in projection calcs. Possible the adviser will get a chunk of commission on the increase in premiums and also likely there is a nil allocation period on the extra premium for a number of months. Basically, these contracts are complicated!

If he can revise down the life cover to a small amount, there might be some benefit in using this as a savings policy - either on the old net funds regime so taxed at a lower % or the previous protection premiums may count as a loss on the policy and savings could grow tax free. You'd have to ask Friends about this

You sort of lost me there in the last two paragraphs! But I do remember asking FF something similar a couple of years back after the first hike. Their advisor had the idea of encashing some of the value, and keeping a reduced fund going, with smaller premiums and smaller death benefit. As i recall, FF wouldn't hear of it. They were very inflexible about any and all possibilities other than the 3 options presented on the letter. Very much a case of "Computer says no"

skippy2

+1 In general never understood the need for older people to pay life insurance once they have no dependants etc. This is just money for jam for insurance companies. They live on our insecurities. My attitiude is you get LI for when you have a young family who will be left impoverished if one or both parents die.
Generally speaking I would hope most kids would reassure their parents they will look after any expenses when they eventually die. Save the money you would pay on premiums this will cover most funeral expenses anyway