Life cover / Specified serious illness

Hellrazer

Hi all .
Im looking for a bit of help.
Im 45 - wife is 46..Both non smokers in good health.
We took out a life cover / serious illness cover policy 20 years ago and its up for review now and I think my financial adviser is getting a bit stuck into me.

At the minute we have

Life Cover of 170k each
Specified serious illness of 240k each - independent of the life cover.


Currently paying 176.00 pm

Got my review and to keep the same level of cover for 5 years the premium has doubled. The way things are at the minute Im not sure I can afford an increase like this.

The options Ive been given are to keep the same cover and pay the doubled premium. Drop my level of cover to 96k life and 136k serious illness cover and keep teh premiums the same or keep it for my whole life at 900 euros per month - thats not an option at this stage.

So Ive been ringing around and Im getting conflicting advice.

So
1. Im told by some advisers that I have things arseways and should have more life cover than serious illness.
2.Im also told that I dont need serious illness cover as its a bit of a scam and only pays out in extreme cases ie in the case of cancer only when it has spread in which case youre probably ****ed anyway.
3.Go all out and just use the increased premium to purchase a huge life cover policy.

BTW my mortgage protection is in a separate policy which is not affected by the above.

Can anyone advise me the best course of action?

Thanks

Browney7

Some points to consider:

Ask for the policy definitions for your current policy and for any potential new policy. The definitions for older specified illness contracts may be looser than new replacement policies (ie old policy might say "cancer" whereas a new policy might say "stage x cancer" for example.

Consider: do I actually need this and what do I need it for? Lump sum Illness cover can be used to supplement income whilst you recover or to adapt your home or lifestyle. Do you have the money to absorb these costs anyway? Do you have any occupational pension scheme benefits?

It sounds like you have a unit linked reviewable life insurance product - the premiums on these can get very expensive over time. If you identify a need to have coverage for 100k illness cover until age 65 for example, what is the cost for such a policy on a guaranteed non reviewable contract?

Are there any conversion options available on the existing contract?

If you identify an insurance need, would you be rated for any underlying medical conditions which arose over 20 years or are you a healthy standard life?

fafy

It really depends in personal circumstances and attitudes.

A good many years ago, i looked into this area in detail, what i found was, Serious Illness policies pay out in quite limited circumstances. There are masses of exclusion clauses. They are also very expensive, and very dubious commission system for brokers and Life Companies. So i viewed it as not worth it, and passed, and do not have it. However, i took that view based on - both in excellent health and no family histories of illnesses which could well be an issue for some people.

On the Life Insurance front, i reduced cover many years ago, to ultra basic, reducing life cover, which is very cheap, and at the same time, reduced the mortgage term on a number of occasions, each time we switched banks. Also at the same time, we increased our pension contributions.

So now, we are mortgage free, several years early, and have reasonably good DC/PRB pension pots, which would all transfer to the surviving spouse, should the worst happen, and theres comfort in that fact, and the PRB’s are accessible at aged 50, if, they are needed.

Its a personal preference, having security of whole of life cover is more important in specific situations, like, only one earner in the household, a family history of illnesses, your age, and there other reasons etc. But Whole Of Life have become increasingly expensive, as we live longer, personally, i don’t think they are worth it, but its a - circumstances dependant decision.

There is definitely an argument, for leaving the whole of life go, or reducing it considerably, and putting extra into Pension, getting up to 40% tax relief, (which may be reduced in the future btw)and its growing for many years all going well. And reducing your mortgage term if you can, by paying more, and reducing the term.

The main point here is people have choices, and you cannot prioritise everything- huge life cover, pay mortgage off quicker, have a large pension pot, change car every year, go on a big holiday every year.

One has to prioritise, whats most important to you. In my case, my choice was, i went with pay mortgage off much quicker(6 years early) and increased pension contributions to maximum levels overtime. To get there, we didn’t spend much on things like cars, and we limited bigger holidays, outside of Europe,to every few years.

Henry Ford III

fafy wrote: »

It really depends in personal circumstances and attitudes.

A good many years ago, i looked into this area in detail, what i found was, Serious Illness policies pay out in quite limited circumstances. There are masses of exclusion clauses. They are also very expensive, and very dubious commission system for brokers and Life Companies. So i viewed it as not worth it, and passed, and do not have it. However, i took that view based on - both in excellent health and no family histories of illnesses which could well be an issue for some people.

On the Life Insurance front, i reduced cover many years ago, to ultra basic, reducing life cover, which is very cheap, and at the same time, reduced the mortgage term on a number of occasions, each time we switched banks. Also at the same time, we increased our pension contributions.

So now, we are mortgage free, several years early, and have reasonably good DC/PRB pension pots, which would all transfer to the surviving spouse, should the worst happen, and theres comfort in that fact, and the PRB’s are accessible at aged 50, if, they are needed.

Its a personal preference, having security of whole of life cover is more important in specific situations, like, only one earner in the household, a family history of illnesses, your age, and there other reasons etc. But Whole Of Life have become increasingly expensive, as we live longer, personally, i don’t think they are worth it, but its a - circumstances dependant decision.

There is definitely an argument, for leaving the whole of life go, or reducing it considerably, and putting extra into Pension, getting up to 40% tax relief, (which may be reduced in the future btw)and its growing for many years all going well. And reducing your mortgage term if you can, by paying more, and reducing the term.

The main point here is people have choices, and you cannot prioritise everything- huge life cover, pay mortgage off quicker, have a large pension pot, change car every year, go on a big holiday every year.

One has to prioritise, whats most important to you. In my case, my choice was, i went with pay mortgage off much quicker(6 years early) and increased pension contributions to maximum levels overtime. To get there, we didn’t spend much on things like cars, and we limited bigger holidays, outside of Europe,to every few years.

Please enlighten us a little more on the highlighted bit, remembering that all fees/charges and commissions must be disclosed prior to sale.

p.s. Did you have any dependents when you minimised your life assurance?

The J Stands for Jay

Henry Ford III wrote: »

Please enlighten us a little more on the highlighted bit, remembering that all fees/charges and commissions must be disclosed prior to sale.

A lot of these products were sold in the days before disclosure was required. 'Nil allocation periods' of 18 months weren't unheard of. Commission >50% in the first year.

fafy

McGaggs wrote: »

A lot of these products were sold in the days before disclosure was required. 'Nil allocation periods' of 18 months weren't unheard of. Commission >50% in the first year.

Exactly, that kind of practice, maybe it has changed now, and i found “Some” brokers were recommending unsuitable products, and it became clear some, were recommending products that had higher commission payments to them. It was a wake up call at the time, but served me well, to do plenty of research and shop around extensively.

Henry Ford III

McGaggs wrote: »

A lot of these products were sold in the days before disclosure was required. 'Nil allocation periods' of 18 months weren't unheard of. Commission >50% in the first year.

Not even close. Commission was 90%. Still is.

Henry Ford III

fafy wrote: »

....A good many years ago, i looked into this area in detail, what i found was, Serious Illness policies pay out in quite limited circumstances. There are masses of exclusion clauses.

https://www.royallondon.com/media/press-releases/press-releases-2020/june/575m-paid-in-protection-claims-2019/

Of course there are exclusions, out of necessity. People get sick all the time and some of the conditions are not "serious".

S.I. policies will pay out for cancer, heart attack, or stroke (subject to policy definitions). That's why these policies exist.

Mrs OBumble

OP do you have kids?

If not, and given that your mortgage cover is sepatate, then what on earth do you even need life cover for?

Henry Ford III

Mrs OBumble wrote: »

OP do you have kids?

If not, and given that your mortgage cover is sepatate, then what on earth do you even need life cover for?

A surviving husband/wife?

NewCorkLad

Hey Hellrazer, this decision should not be taken in isolation of your other financial commitments/responsibilities/plans and it would be very hard for anybody to give proper advice on this without carrying out a full review.

The problem with your current plan is the Specified Illness Cover which has increased in cost dramatically over the last 20 years and you have a relatively high level of cover for Specified Illness.

For me I would definitely not be going with the 5 year option as you are only kicking the can down the road and will end up in the same situation again.

Mrs OBumble

Henry Ford III wrote: »

A surviving husband/wife?

Provided the mortgage is covered, and you have enough savings to pay for your funeral, the surviving spouse is an adult and take care of themselves. Dependent children can't.

Henry Ford III

Mrs OBumble wrote: »

Provided the mortgage is covered, and you have enough savings to pay for your funeral, the surviving spouse is an adult and take care of themselves. Dependent children can't.

It's not that simple.

If the primary earner dies prematurely the income reduction will go way beyond mortgage payments.

skippy2

I suggest Income Protection Insurance over Serious Illness.

Henry Ford III

skippy2 wrote: »

I suggest Income Protection Insurance over Serious Illness.

2 completely different products. Best choice will depend of individual circumstances.