# life company wants to increase my premiums!



## Highlight (20 May 2009)

In 1996 I took out an Insurance Policy with New Ireland.The premium was IR£35 per month with Life Cover of IR£20000.The Initial fund choice was Balanced Managed Unit Funds(5).The projected Value @ 12 years was IR£4916 and @ 15 Years IR£7339.The Premium and Life Cover increased each year by 5% and the Premium is now €72 and the LIFE cover is €41500 from July 09.The Cash Value in 2006 was €3800 and it is now worth €3600 and I have over €8000 paid in.WHAT should I do.Should I cash it in or should I continue paying the premium and purchase Units at a cheap rate and hope for the best in Two to Three years


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## Jimbobp (20 May 2009)

*Re: Life Insurance*

This sounds like a reviewable unit linked life policy (theres been a lot of discussion on this site about this policy type, a search should bring up most of them) if it is this type of policy their full of nasty little conditions. For e.g the life cover is usually 'reviewed' every 10 and then 5 years 'to ensure you are paying sufficent premium for your cover'. These reviews can often mean your premium is doubled to keep your existing cover. Also the investment element can be used to pay for your life cover so you can lose more and more of your investment as you get older. You will find a strong argument on this site for encashing and taking out a guaranteed convertible term policy instead.


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## StevieC (21 May 2009)

*Re: Life Insurance*

Totally agree with Jimbobp. These types of policies are not suitable as savings plans as reviews when you get older will eat up the savings you have made over the years. If you really want a whole of life plan, a couple of companies offer guaranteed whole of life plans with no reviews, they are a bit more expensive but at least you know the premium will not be reviewed and there is no potential to be held to ransom down the road on review. If you just want cover for a specified term, then a term life policy will work out much cheaper. For regular savings I recommend using a proper savings account not a life insurance policy. Look for deals on special interest accounts in banks like 30 day accounts or even try the credit union. These types of policies generally do not produce savings as you get older.


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## Sumatra (21 May 2009)

*Re: Life Insurance*

I wouldn't totally agree with direction. 

From the information given all we can comment on is the apparent poor value for money Highligh has obtained over the past 13 years and how poor the outlook is. 

Highlight should go back to New Ireland, outline the problem, state his / her requirements and ask New Ireland to come up with a solution. It would be desirable if he/she could then contact an independent financial adviser who could take New Ireland's solution into account and look at the market as a whole.


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## StevieC (22 May 2009)

*Re: Life Insurance*

Sorry Sumatra, I'd have to disagree with you on this one. Even if unit linked funds do well, these types of products are not really suitable for saving as you get older. I dont have a problem with the fund performance in recent years, I have an issue with the fact that Insurance companies conduct reviews and can charge whatever they want at these reviews. We all know that as you get older, things start going wrong with us and therefore it can be harder to get cover. A customer can be put in a situation where the insurance company raises the premium to an amount that the customer cannot afford and when they look for cover elsewhere they find they cannot get cover, in these instances the client is left with the only choice of reducing the level of benefit they have.

The idea behind these products is that you use the savings element to offset future reviews to prevent what I just said from happening. Unfortunately, these products have either been sold as savings products or people get the wrong idea that they are savings products because they have a value on them. 

The industry is starting to move away from reviewable whole of life products because of the aggro and complaints insurance companies receive at review periods. Already a number of companies have moved to guaranteed whole of life products with no reviews and I forsee others doing the same in the not too distant future. The idea that insurance companies can charge whatever they want at review flys in the face of consumer protection in my opinion.


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## North Star (22 May 2009)

*Re: Life Insurance*

I agree with Steviec. Most clients dont understand what a whole of life/reviewable unit linked life policy is. As practitioners we should help clients meet/cover their needs not shift product. For a protection need, a guaranteed convertible term policy is clear, understandable and is what I would recommend for a client and would buy for myself, not a product that has investment risk, uncertainty of premium and uncertainty on duration of cover.


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## LDFerguson (22 May 2009)

*Re: Life Insurance*

Some reasons why I hate reviewable whole-life policies: - 


The split between cost of life cover/protection and "investment" is not fixed - it can and will change frequently.
The cost of life cover/protection WILL get dearer as you get older.
You won't necessarily be aware that you are being charged more because you are paying the same premium every month - but internally less is being diverted to investment and more to protection.
If the cost of protection exceeds your monthly premium, the policy can cannibalise itself by eating into your existing investment fund.
I always tell clients "If you want protection, buy a protection policy on guaranteed terms.  If you want to save money, save money.  Don't try to do both in the one policy as they rarely do both efficiently."  Which is broadly similar to StevieC's post above.  

I'd be happy to see these policies removed from sale altogether as they are far too easy to mis-sell in the wrong hands, which does no favours to the reputation of the industry.


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## Sumatra (22 May 2009)

*Re: Life Insurance*

Anyone who knows me knows how much I deplore unit linked WOL policies.

We all know many brokers only sold the product because they obtained higher premiums and higher premiums meant more commission. 

They choose to ignore the implications of the 'review' within the T&C and because they knew they mislead clients and that became misselling. Stevie, should the insurance companies have drawn attention to it or was it up to the brokers to ask? 

Today there are examples in AAM of other products where intermediaries are conveniently choosing to ignore the T&C for the opportunity of a quick sale and we all know the products. 

Liam in the past they were missold. They were sold as money if you live money if you die policies. They were sold to cover funeral expenses. They were sold to cover educational fees. They were sold to cover mortgages. Wrong, wrong, wrong.

Its not that they didn't have a choice. At the time very few sold term assurance (ask IIF) because it was too cheap and wasn't worth the effort.

When I said I didn't agree with the direction given I was referring to the "You will find a strong argument on this site for encashing and taking out a guaranteed convertible term policy instead." 

If Highlight went away cashed in his policy and took out a convertible term would we as contributors to AAM have done him/her a service.


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## StevieC (22 May 2009)

*Re: Life Insurance*

Its not just brokers who sell/have sold this product. Tied Agents and direct sales forces for insurance companies have sold it as well and I know at least one bank who have stopped their direct sales force from selling it to people for mortgage protection purposes because they got better credits towards their sales targets (and it wasnt all that long ago). 

Like any industry there is good and bad brokers just like their are good and bad direct sales force people. Lets not tarnish brokers all with the same brush please. The fact that insurance companies are now moving away from this type of product shows that they recognise that this product is not consumer friendly long term as too many accusations of mis-selling and insurance companies screwing customers at review are coming out.

Like Liam said, the product is fundamentally flawed. If you want life insurance buy a term/convertible term product/guaranteed whole of life plan, if you want a saving product, get a savings product. The two do not work together. Highlight says that €8,000 was paid in, a lot of this went to pay for life assurance, this is money that Highlight will never see back but seems to have an expectation to. In my opinion that isnt right regardless of who sold the policy, the policy itself is misleading as you do not know what it will cost long term.

I would have not have a problem getting acceptance on a new policy, stopping the existing policy at this stage, enquiring if the units can be left paid up to avail of any bounce in the markets and starting a new policy if I was in Highlights position.


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## Sumatra (22 May 2009)

*Re: Life Insurance*

Stevie, I didn't tarnish 'all' brokers I said 'many' and its a given that I'd imagine contributors to this post never sold one?

Highlight never said he / she was in good health, never said there was a requirement for €41000 cover so before we recommend encashing a policy and starting a new convertible term policy or advising ceasing paying premiums perhaps we should have included a note least the person jumps from the frying pan but into the fire.


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## StevieC (22 May 2009)

*Re: Life Insurance*



Sumatra said:


> Stevie, I didn't tarnish 'all' brokers I said 'many' and its a given that I'd imagine contributors to this post never sold one?
> 
> Highlight never said he / she was in good health, never said there was a requirement for €41000 cover so before we recommend encashing a policy and starting a new convertible term policy or advising ceasing paying premiums perhaps we should have included a note least the person jumps from the frying pan but into the fire.


 
Apologies Sumatra, I was just pointing out that other sales forces have sold these products inappropriately or not explained them enough to clients and not just brokers. I think its a good sign that the contributors agree that this product is not as simple as it seems and tries to be something its not, I wish more people felt that way. 

I wouldnt recommend anyone cancelling a policy before another was set up to replace it, sorry if I gave that impression.


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## Sumatra (22 May 2009)

*Re: Life Insurance*

Cheers. Have a nice weekend all.


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## Brendan Burgess (16 Jan 2014)

bump for admin purposes


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## Gondola (23 Jan 2014)

Can anyone tell me what are the criteria by which insurance policies are assigned to mortgages? Why do brokers say some policies are acceptable to the bank and others not -surely the bank is just interested in the value of the life cover? What am I missing?


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## Gondola (23 Jan 2014)

Can anyone tell me what are the criteria by which banks assign insurance policies to mortgages? Why are some policies acceptable to banks and others not - surely the bank is just interested in the value of the life cover? What am I missing?


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## LDFerguson (25 Jan 2014)

Gondola said:


> Can anyone tell me what are the criteria by which banks assign insurance policies to mortgages? Why are some policies acceptable to banks and others not - surely the bank is just interested in the value of the life cover? What am I missing?


 

The amount of life cover must always be at least equal to or greater than the loan amount.
The expiry date on the policy must not be before the expiry date of the loan.
If the loan is interest-only (even for a period) then the policy must have enough cover to take account of the fact that the principal of the loan will not be reducing during the interest-only period.
For home loans, all that is required is cover in the event of death.


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