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Feeling Ripped Off.
I have never really trusted insurance companies in general.
Many people have the view that they like taking the premiums, but hate paying out the claims.
I received a letter this week that in my view takes this to a whole new level.
I took out a life insurance policy in 2010.
At the time I used an Independent Financial Adviser, who was referred to me by my Accountant.
He suggested that it would be a good idea to leave some cash to my wife in the event of my death.
I went along with him.
I was aware that there were savings plans available, like endowments, that included life insurance.
These plans had an end date, and the life insurance stopped at that point.
I was clear, I wanted a policy that ran until I died and paid out the cover to my wife.
That's it end of.
I took out a policy that gave me £220,000 worth of cover for £154 per month.
That was my understanding of it.
I pay the premiums until I die, then my wife gets the money.
Not so.
I received a letter this week.
The letter was clear in two aspects.
Firstly that even though I had paid in almost 18k since 2010, I could cash it in for £614.
Secondly if I wished to maintain the cover I would have to increase the premiums.
So I have a choice of increasing the premiums, or reducing the cover.
The projected premium increases are mind boggling.
From May this year, to maintain the same level of cover I need to pay £263 per month.
From 2025 I need to pay £500 per month.
From 2030 £905 per month.
From 2035 £1570 per month.
From 2040 £2394 per month.
In 2040 I will be 84 so these figures are dependant upon me living that long.
Was I just naïve and gullible to think I just had to pay the premiums until I died, and my wife would get the money?
If the above was made clear, would anyone ever buy one?
What choice do I have going forward?
I could cash out, and turn 18k into £614.
I could continue with the premiums and drastically reduce the cover, hoping to die sooner rather than later, to get the best value for money.
This would mean that the longer I lived, and the more premiums I paid, the less money my wife would get.
Try selling that to somebody, the more you pay in the less money you will get.
Attempt to pay the increased premiums until I am forced to default and get nothing.
Would anyone in their right mind that was fully informed, take out a similar policy?
In my view the only way a similar policy could be sold is by completely misleading the purchaser.
Many people have the view that they like taking the premiums, but hate paying out the claims.
I received a letter this week that in my view takes this to a whole new level.
I took out a life insurance policy in 2010.
At the time I used an Independent Financial Adviser, who was referred to me by my Accountant.
He suggested that it would be a good idea to leave some cash to my wife in the event of my death.
I went along with him.
I was aware that there were savings plans available, like endowments, that included life insurance.
These plans had an end date, and the life insurance stopped at that point.
I was clear, I wanted a policy that ran until I died and paid out the cover to my wife.
That's it end of.
I took out a policy that gave me £220,000 worth of cover for £154 per month.
That was my understanding of it.
I pay the premiums until I die, then my wife gets the money.
Not so.
I received a letter this week.
The letter was clear in two aspects.
Firstly that even though I had paid in almost 18k since 2010, I could cash it in for £614.
Secondly if I wished to maintain the cover I would have to increase the premiums.
So I have a choice of increasing the premiums, or reducing the cover.
The projected premium increases are mind boggling.
From May this year, to maintain the same level of cover I need to pay £263 per month.
From 2025 I need to pay £500 per month.
From 2030 £905 per month.
From 2035 £1570 per month.
From 2040 £2394 per month.
In 2040 I will be 84 so these figures are dependant upon me living that long.
Was I just naïve and gullible to think I just had to pay the premiums until I died, and my wife would get the money?
If the above was made clear, would anyone ever buy one?
What choice do I have going forward?
I could cash out, and turn 18k into £614.
I could continue with the premiums and drastically reduce the cover, hoping to die sooner rather than later, to get the best value for money.
This would mean that the longer I lived, and the more premiums I paid, the less money my wife would get.
Try selling that to somebody, the more you pay in the less money you will get.
Attempt to pay the increased premiums until I am forced to default and get nothing.
Would anyone in their right mind that was fully informed, take out a similar policy?
In my view the only way a similar policy could be sold is by completely misleading the purchaser.
Comments
Unless you already have -start somewhere like here
You are going to die. At some point they will have to pay out.
Your premiums have already been spent on you not dying up until this point. Clearly the risk that you will die increases over time. You’re not going to be able to buy 200k of over for £200 a month when you’re in your 80s.
Did you think you were getting a savings account with an insane rate of interest?
It’s obvious you didn’t understand what you were buying all those years ago, and so if the product wasn’t explained clearly enough you may have a case.
But insurance is exactly that, you pay in because you might need it. You didn’t need it, but many people in the pool did (not sure if that’s going to help your mood). You wouldn’t ask for all your car insurance premiums back after x years because you didn’t claim, that obviously wouldn’t be a sustainable model.
Not everyone is trying to rip you off, but you should understand what it is you’re buying.
In theory, they are fine. They are designed to be able to provide flexible life/investment strategies for your whole life. So, typically (and I appreciate this will vary):-
Early 20s investment
Late 20s-early 40s (when young dependant children) life cover
Late 40s-60s investment
Later life EITHER life cover OR investment, depending on the amount of money in the pot
That's the theory. Now the practice.
People typically buy these at a life cover stage. Unscrupulous salesman ramp up the life cover element so it looks really attractive, and routinely fail to mention that the cost of life cover will ramp up (normally 10 years into the policy).
Unfortunately, many of these policies get the worst of both worlds. The commisiions are far higher than for term assurance. The costs of administering these policies are far higher than more simple assurance/investment products.
I cannot understand why these policies have not always had a compulsory warning as to what will happen at the first review period.
I know you are not one to complain
No mention of increased payments.
I was also expecting the company to do something with the money.
My dad lived until he was 89.
I would have accepted a much lower level of cover, and maybe a slightly high premium.
If it was a genuine policy, I might have gone for 100k worth of cover for £200 per month, assuming there were no increases.
So over 35 years I would have paid in almost 90k.