Life Life Insurance overcharge, what to do?

[clancger]

My folks recently discovered that they have been paying approx €20 per month more than they had planned / agreed to for the past 3+ years on their Life Insurance Policy which has been running since the early 90s with a 5 yr review cycle.

In 2009, they agreed to a price increase up to approx €117 which was to be kept flat for 5 years (2010-2015).

At the time, they had been quoted approx €140/month which would give them the same level of cover but for the longer duration of 2010-2020, and approx €180 / month for rest of life.

Now they discovered by accident that they have been paying a higher monthly amount (€140 instead of €120) for more than 3 years and were gearing up to get their solicitor to recover the difference paid to date of approx €800. It's not yet clear if this is an overcharge on the initial plan or if the insurance company has bumped them to the longer term plan, thus the higher price. I'm assuming this is the case.

I looked at the details and my thoughts are that considering the degree of price increases in healthcare, insurance, and their increasing age, the likely price rate which will apply from 2015-2020 will be dramatically higher than the current level, and likely well above the €180 full life rate from 2009

Assuming that they are on the plan running till 2020 I’m thinking they should be keeping quiet, as the total premium to be paid from 2015-2020 will probably be so much more than 2010-2015, that they would have to pay way more in total 2010-2020 than if they continued on the approx €140 rate till 2020.

Specifically, they would have paid €7200 in total between 2010 and 2015 on the lower rate, and will actually pay approx €8400 over the period till 2015.

If I imagine a 2015-2020 rate of say €300 (wild guess, but they’ll be 77 and 73 by then I hope) then they would pay a further €18k at that rate from 2015-2020, and in total €25200 2010-2020 based on that assumption.

10 years at the current rate would be €16800 if they don’t change anything.

I imagine the insurance company would be happy(ish) to refund the overpayment to date, and recover it directly from increased 2015-2020 premiums.

Any ideas?

 

[StevieC]

Without knowing all the details, I can tell you from my experience that reviewable policies are quite simply not good value. Every review the premium gets larger (unless there is a saving element that gets diminished) and as people get older the reviews typically become more frequent. Assuming your parents are both in good health, they should consider either;

1) Changing to a cheaper term assurance policy, though they may prefer whole of life cover

or

2) Change to a Guaranteed Whole of Life plan, they may have to reduce their sum assured to suit their budget but they will have the peace of mind that the premium will remain the same for the rest of their lives (aside from any change to the 1% government levy).

Reviewable policies for older people are simply not good products in my opinion as the only options available to them are to increase the premium regularly or reduce the cover and there is no guarantee how much the increases in price/decreases in cover will be.

The sooner they review their position the better as life assurance rates are age related. Talk to a reputable independent broker who deals with all the life companies rather than a tied agent or a bank who may only be able to offer you one companies products to ensure you get the best value.

Hope this helps.

 

[Dave Vanian]

clancger - why do your parents need the cover this policy provides?

 

[IrishRain]

If the policy is a Unit Linked plan there will be a savings element so the extra premium paid should have gone into the savings fund. They should contact the Insurance company first to get a value of the plan and ask what are the implications of taking the over payment from the fund now and reducing the premium.

As StevieC says they could take out a term assurance plan with guaranteed premium instead but these usually cease at age 80/85 and depending on their current age and health they may not qualify.

 

[StevieC]

As StevieC says they could take out a term assurance plan with guaranteed premium instead but these usually cease at age 80/85 and depending on their current age and health they may not qualify.

Actually I personally prefer the second option I suggested of a guaranteed whole of life plan. There is no premium reviews and depending on the individuals age/health status, these policies can offer very good value for money and dont have a cessation age.

 

[Sumatra]

Before any meaningful response can be given a reply to Dave Vanian's question is crucial.