Convertible Term Life Cover

E

Eireann

Registered User
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Hi

I currently have Convertible Term Life Cover. Has anyone extended the policy once the old policy expires?

My question is:
Will the Life Insurance company essentially not just quote a high premium anyhow, to cover themselves for the risk that I could have health issues, which because of my age, gender, etc. (I'm not very old, but am coming into the period where heart attacks etc. would be beginning) would be reasonably normal. In essence, providing a medical (even with health issues) could be cheaper and so the premiums paid to keep the policy going would be a waste and it would be financially wiser to take the risk of seeing what happens?

Essentially I'm asking; will the insurance company just be able to do what they like and the extra I paid over the years was likely to be very little benefit. Unless I knew I was going to die soon (I'm not, as far as I know) and literally took out a new policy (without a medical) just to have a payout after I died then it doesn't seem to have much benefit (although I guess there would be a clause for this in a new policy).

Am I correct in my suspicion that it's not much benefit?

Thanks
 
Well I don't know what extra the convertible option is costing you, it used not be a major amount over the basic cover but if you want to convert then you will be charged whatever the going rate is for a person your age at the time. It wouldn't be cheaper if you went the full new route to the best of my knowledge, you will be getting same rate as a new 'clean' proposal would get.

If there is not a major price difference I'd like the security if it's a thing you might have a need for life cover longer than the existing term/amount such as young dependents for example.

It's all down to attitude to risk, I know many people who have no cover either to start with or let it lapse and they don't lose sleep! Equally we have someone contemplating not bothering with house insurance today, it takes all kinds! Different risk attitudes is what it comes down to.
 
Do you need such cover?
Do you still have a mortgage that requires such cover, or dependents who need to be catered for?
Many people later in life don't really need life cover.
 
Thanks, my cover now I think is very cheap, it was taken out nearly 25 years ago at a time when rates were very low.

I am unlikely to have a use for it before it expires as I do not expect to have a loan in this period.

I'm guessing once you turn 50 a medical would be required. If I did this before my current policy expires I wouldn't have to provide a medical, but then would the insurer not just raise the premium above the going rate, to cover themselves, and also maybe they say why risk a new policy without a medical, lets just increase the premium to dissuade me, as for all they know I could drop dead the next day.

I'm trying to understand if in practice it works out better to take out a new policy with a medical and take my chances with my medical report. If I were to continue paying my current premiums while I will have Life Cover, it doesn't bring any benefit in the future as the company will try to protect themselves and rightly so.

By the way, I'm also the person considering ditching house insurance, but I'm really trying to see what I get with it, do I claim against my own policy or if at a loss as a 3rd party can I claim against another person's insurer or the other person for that matter.
 
Eireann said:
I'm trying to understand if in practice it works out better to take out a new policy with a medical and take my chances with my medical report. If I were to continue paying my current premiums while I will have Life Cover, it doesn't bring any benefit in the future as the company will try to protect themselves and rightly so.
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The point of life cover is to clear a mortgage or provide for dependents. You're insuring your life for those situations. You don't get any benefit from such a policy since in order for it to pay out you have to die!
Eireann said:
By the way, I'm also the person considering ditching house insurance, but I'm really trying to see what I get with it, do I claim against my own policy or if at a loss as a 3rd party can I claim against another person's insurer or the other person for that matter.
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In the other thread it seems like you cannot be convinced that you really need to insure your property. The mind boggles to be honest.
 
ClubMan said:
The point of life cover is to clear a mortgage or provide for dependents. You're insuring your life for those situations. You don't get any benefit from such a policy since in order for it to pay out you have to die!

In the other thread it seems like you cannot be convinced that you really need to insure your property. The mind boggles to be honest.
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My cover is not a mortgage protection policy, Life Cover, but I did have it assigned to my mortgage. It still has the full value of when I originally took it out.

The benefit of the Convertible Term Cover is I can extend it in the future, if I needed it, for a new loan, or if I wanted to provide a benefit to others if I were to die. When I talk of it being a benefit or not, I'm not referring to the actual life sum insured, I'm referring to the usefulness of Convertible option that I chose. It probably could have been beneficial years ago, if I changed house and also had an illness. Neither of these things occured but that benefit was there. Now that I'm older I wonder if the Life Insurance Company will not just up the premium on a new policy anyhow. I hoping to hear from someone who has done this to see if a competitive quote can be got or if they will just not risk it.

I have already decided to cancel this policy, but before I do that, I was trying to figure out if there could be a benefit to keeping it. For example, if I thought I could get low cost life insurance (even though I don't need it now) I would have an option available at possibly a low cost. But I doubt if it would even be any cheaper and is likely to be dearer that a new policy even with a poor medical report, so no benefit (again not the life sum).

With the Life Insurance policy, its gone if I cancel the policy or let it expire at maturity, but I should be able to re-start house insurance at any stage.
 
The convertible option allows you extend the term of the life cover without the need for a medical examination.

The cost of the cover will be based on your age only.

It will be much higher than the current premium but you cannot be refused cover because of any medical condition
 
As said in above post the cost for a new policy for an applicant with no issues will be the same as the cost of you converting with no medical questions so level playing field with new customer, you will both be charged on your age/amount/term, no extra cost just because you are using a convertible option.

I had not realised when I answered initially that you were the same poster with the house insurance query :) but anyways it's not always that easy either to insure a house that has not been insured without some extremely good reason/explanation that will satisfy the insurance company. When an incident arose with a relative's house his wife discovered her husband had let the house insurance lapse several years earlier (he had already owned the house when they married so she wasn't involved in any of the utilities obviously in previous years), well anyway his previous insurer would not insure him and the local broker could not get them a policy either. I had a few insurances through a broker for years and through that relationship I was able to get them a policy luckily, it had several exemptions on it for first few years but is normal now.

Back to the life insurance though, if you don't need the policy at all for any financial reason then cancel it. However if your intention is to just try remove the convertible option to decrease the payments then I'm not sure that will work, the policy is most likely as it is and any change to it probably requires you to either take out a brand new basic policy or use the convertible option now to convert to basic policy. Neither are likely to be cheaper than existing so it's probably keep paying until it expires or just cancel whole thing.
 
I don't believe in convertible term insurance. It really only has a purpose of sick people being able to take out cover knowing that they won't live to the end of the extended term and give their estate a financial boost. Otherwise, you shouldn't need it.

Most life cover plans should be taken out on a reducing term basis. When you are younger, you have much more expenses; high debt, low wealth, child care. As you get older, you children become independent, your debt reduces/ is paid off, your wealth increases, your working life reduces so there is less lost income if you die. What do you need life cover for? You can self insure.

If you convert the policy, you get the rates at the date of the conversion based on your age. The only difference is there is no medical. Depending on the insurer used, there may be a cheaper provider but there may not.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Steven Barrett said:
Most life cover plans should be taken out on a reducing term basis. When you are younger, you have much more expenses; high debt, low wealth, child care. As you get older, you children become independent, your debt reduces/ is paid off, your wealth increases, your working life reduces so there is less lost income if you die. What do you need life cover for? You can self insure.
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In theory yes that's the ideal life but not always the way it goes, people lose jobs/get sick/don't manage to increase their wealth/have children that will be dependant or semi dependant adults. An old payout above and beyond reducing can be very handy in some cases but unfortunately most of the likely pitfalls to the perfect life are unknown to people when they are taking out policies so erring on the side of a bit of caution can be a good idea too when extra cost is not substantial.
 
jpd said:
The convertible option allows you extend the term of the life cover without the need for a medical examination.

The cost of the cover will be based on your age only.

It will be much higher than the current premium but you cannot be refused cover because of any medical condition
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Thank you, I hadn't realised that you cannot be refused, good point.
So that would have been a benefit, for example if I had an illness and wanted to move house, but needed a loan.
 
Steven Barrett said:
I don't believe in convertible term insurance. It really only has a purpose of sick people being able to take out cover knowing that they won't live to the end of the extended term and give their estate a financial boost. Otherwise, you shouldn't need it.

Most life cover plans should be taken out on a reducing term basis. When you are younger, you have much more expenses; high debt, low wealth, child care. As you get older, you children become independent, your debt reduces/ is paid off, your wealth increases, your working life reduces so there is less lost income if you die. What do you need life cover for? You can self insure.

If you convert the policy, you get the rates at the date of the conversion based on your age. The only difference is there is no medical. Depending on the insurer used, there may be a cheaper provider but there may not.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
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Hi Steven

Based on my experience I would 100% agree with you. However, when I took out the loan, I expected to be upgrading and this seemed like a wise decision and it could have been. But now I feel that the best reducing term cover is better, you have what you need at that moment.

I don't need cover now, I'm planning to cancel my current cover, as I've essentially over-insured. However, because it's good value I was thinking I could keep it to give me options, but suspect insurance companies will cover themselves on the premium (that is if I need a new policy), so that it would be no real advantage and likely better to just use a medical, even though I am coming in to a risky age group.

I don't understand what you mean by: 'You can self insure', could you elaborate.

Thanks
 
Eireann said:
I don't understand what you mean by: 'You can self insure', could you elaborate.
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Cover the cost of some adverse event yourself from you own savings. E.g. don't take take contents insurance because if your telly gets nicked you'll just buy a replacement yourself.
 
Monbretia said:
As said in above post the cost for a new policy for an applicant with no issues will be the same as the cost of you converting with no medical questions so level playing field with new customer, you will both be charged on your age/amount/term, no extra cost just because you are using a convertible option.

I had not realised when I answered initially that you were the same poster with the house insurance query :) but anyways it's not always that easy either to insure a house that has not been insured without some extremely good reason/explanation that will satisfy the insurance company. When an incident arose with a relative's house his wife discovered her husband had let the house insurance lapse several years earlier (he had already owned the house when they married so she wasn't involved in any of the utilities obviously in previous years), well anyway his previous insurer would not insure him and the local broker could not get them a policy either. I had a few insurances through a broker for years and through that relationship I was able to get them a policy luckily, it had several exemptions on it for first few years but is normal now.

Back to the life insurance though, if you don't need the policy at all for any financial reason then cancel it. However if your intention is to just try remove the convertible option to decrease the payments then I'm not sure that will work, the policy is most likely as it is and any change to it probably requires you to either take out a brand new basic policy or use the convertible option now to convert to basic policy. Neither are likely to be cheaper than existing so it's probably keep paying until it expires or just cancel whole thing.
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I was guessing that insurance companies would be suspicious of giving a new policy where house insurance has lapsed. I experienced this with van insurance, where I had no use for a van for about a year, but decided to keep the van and declare it off-road, which it was, and inform my insurer of this. However when I did go to re-start the policy; they and other insurers were very suspicious of this, despite me informing my own insurer in advance and having everything official. I ended up paying a few hundred euro more the first year of renewal, although it did drop back to normal on the second renewal. I assumed they thought I was driving around without insurance and was a risky customer, despite having vehicles insurers for years and years prior.
 
Monbretia said:
In theory yes that's the ideal life but not always the way it goes, people lose jobs/get sick/don't manage to increase their wealth/have children that will be dependant or semi dependant adults. An old payout above and beyond reducing can be very handy in some cases but unfortunately most of the likely pitfalls to the perfect life are unknown to people when they are taking out policies so erring on the side of a bit of caution can be a good idea too when extra cost is not substantial.
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There's always exceptions to the rule. If you have children that will always be dependent and don't build up wealth, you are better off with a guaranteed whole of life policy than a convertible term, which can very well expire while you are still alive and it can't be converted forever.
Eireann said:
I don't understand what you mean by: 'You can self insure', could you elaborate.

Thanks
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You carry the risk yourself. Like when you go to buy a new fridge and they try to sell you insurance. You refuse because if the fridge breaks, you can afford the cost of buying a new one (unlike the cost of rebuilding your house from scratch on that other thread you have!). If you build up enough wealth and your family can continue to have a good lifestyle on these assets you have accumulated, you don't need cover to replace the lost income they will experience from your death.
 
Steven Barrett said:
There's always exceptions to the rule. If you have children that will always be dependent and don't build up wealth, you are better off with a guaranteed whole of life policy than a convertible term, which can very well expire while you are still alive and it can't be converted forever.

You carry the risk yourself. Like when you go to buy a new fridge and they try to sell you insurance. You refuse because if the fridge breaks, you can afford the cost of buying a new one (unlike the cost of rebuilding your house from scratch on that other thread you have!). If you build up enough wealth and your family can continue to have a good lifestyle on these assets you have accumulated, you don't need cover to replace the lost income they will experience from your death.
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Yes, I see your point on dependents and it re-inforces, what I Monbrieta said, whereas I was anticipating what I might do in future when I took out the policy, deciding on what your actual requirements are is probably better. My policy was very go value, so I'm not really kicking myself, but I think with hindsight I would have taken reducing cover as you suggested earlier.
 
I felt I should challenge some of the views above. I have always been a strong believer in life assurance and convertible is the preferred choice for younger people in order to get decent cover for protection for their requirements as these arise. Reducing cover is useless, unless it’s all that is affordable (especially for first time buyers) at the outset because as the chance of death increases the cover levels are dropping, and you are still paying the original monthly premium. There is a lack of understanding in this country what maintaining wealth means and life cover is a critical part of that planning
For example a colleague in another jurisdiction regularly sells life cover with cover 10 million as a sum assured and many times higher than this.
It is also a great protector of estates when it comes to inheritance tax
Regrettably I have seen the benefit of life cover too often in my years but one thing is clear I never had enough as there is no such thing when it’s need arises
For the cost and the options it gives I would always recommend convertible term cover given the choices it gives later on
Life assurance and its benefits is and continues to be misunderstood except for those who benefitted from it
Those are families and individuals who benefitted from it, sometimes for generations to come
just my alternate view to above Pádraic
 
PadKiss said:
I felt I should challenge some of the views above. I have always been a strong believer in life assurance and convertible is the preferred choice for younger people in order to get decent cover for protection for their requirements as these arise. Reducing cover is useless, unless it’s all that is affordable (especially for first time buyers) at the outset because as the chance of death increases the cover levels are dropping, and you are still paying the original monthly premium. There is a lack of understanding in this country what maintaining wealth means and life cover is a critical part of that planning
For example a colleague in another jurisdiction regularly sells life cover with cover 10 million as a sum assured and many times higher than this.
It is also a great protector of estates when it comes to inheritance tax
Regrettably I have seen the benefit of life cover too often in my years but one thing is clear I never had enough as there is no such thing when it’s need arises
For the cost and the options it gives I would always recommend convertible term cover given the choices it gives later on
Life assurance and its benefits is and continues to be misunderstood except for those who benefitted from it
Those are families and individuals who benefitted from it, sometimes for generations to come
just my alternate view to above Pádraic
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Hi
Thanks.
Do you have any thoughts on the premiums (not figures, just which is more expensive)for the following:

1. Extending convertible cover (without a medical, for say a 55 year old male)
2a. Getting new cover at this age with an ok medical, not about to die any time soon
2b. OK medical, has risk of heart attack?

I'm wondering if of the 3 options above, the with medical options are actually a safer bet for an insurer as it's more of a known quantity?
 
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