Overpaid life policy

[Marine 8]

An elderly relative of mine has received notification from Irish Life that she has paid more into maintaining a Fixed Benefit Whole of Life Policy than the policy will eventually be worth.
It's not a huge amount but the surrender offer comes to only about half the policy's value. When I asked if he could stop paying into it and just let it sit there, they said they would eat into the value with fees and maintenance. I asked could we just put in a tiny amount each month to keep it running but that didn't seem an option either. Any advice appreciated.

 

[ClubMan]

Is this some sort of combined life assurance and savings plan - i.e. a life assurance policy that also has an encashment value even if the insured party does not die? Seems to me that these are generally complicated and poor value for money.

 

[PM1234]

Is the surrender value currently half the sum of the assurance cover?

The disadvantage of this type of product is that a proportion of the premium contributes to the life cover and a proportion builds into a savings plan. The proportion paid into the life cover increases with age and added risk which results in the savings part not building up. If your relative is elderly it may be possible that by now the whole premium is being used to pay for the life cover element and its possibly already eating into the surrender value. This might explain why a 'minimum' premium can't be paid. You would have to check with the provider to see if this is the case and you can do this by asking for a breakdown of the monthly/annual premium.

Discontinuing premiums result in the life cover staying in place but as this still needs to be paid for, this cost is taken from the sum already saved up. This along with management fees etc reduces the savings element.

However in this situation (depending on their age) your relative may find it difficult to obtain life cover if at all. Is life cover really a requirement for her? Is she more interested in the life cover than the savings plan? Would she be better off just taking the surrender value and enjoying it now? These are questions she will have to answer herself.