Life insurance policy
Discussion
What sort of life policy is it? Has it gone up each year? Were premiums guaranteed for a certain period? Is it a Whole of Life Policy? Has it got a fixed term? Single life or joint life? Any investment element? Reviewable Premiums every 5,10,15 years?
Nobody can answer your question without knowing exactly what sort of policy it is. Contact Royal London to ask why.
Nobody can answer your question without knowing exactly what sort of policy it is. Contact Royal London to ask why.
Edited by craig1912 on Friday 12th December 12:47
That doesn't sound right.
Generally premiums get fixed when you take out the policy and unless you change something like the term or the sum assured it remains the same premium each month ?
Even if yours is inflation linked and /or that increased term or have suddenly taken up a dangerous hobby to treble at 57 doesn't sound right at all especially if on an existing rather than new policy ?
Generally premiums get fixed when you take out the policy and unless you change something like the term or the sum assured it remains the same premium each month ?
Even if yours is inflation linked and /or that increased term or have suddenly taken up a dangerous hobby to treble at 57 doesn't sound right at all especially if on an existing rather than new policy ?
franki68 said:
Had a significant policy with Scots provident for going on 30 years to cover IHT , got my renewal through this morning .
I m 57 in good health but they have trebled the premium from last year .
Obviously I expect increases but tripled overnight ?
Is this normal ?
If it is a new policy it is not really "overnight" increase, you would have been 27 when taking out the previous policy.I m 57 in good health but they have trebled the premium from last year .
Obviously I expect increases but tripled overnight ?
Is this normal ?
The risk / likelihood changes quite a bit for a new term from age 57.
alscar said:
That doesn't sound right.
Generally premiums get fixed when you take out the policy and unless you change something like the term or the sum assured it remains the same premium each month ?
Even if yours is inflation linked and /or that increased term or have suddenly taken up a dangerous hobby to treble at 57 doesn't sound right at all especially if on an existing rather than new policy ?
Could quite easily be correct if it’s an old type policy with an investment element. Quite often the premiums were based on an optimistic return and if those returns don’t happen then they review the rates.Generally premiums get fixed when you take out the policy and unless you change something like the term or the sum assured it remains the same premium each month ?
Even if yours is inflation linked and /or that increased term or have suddenly taken up a dangerous hobby to treble at 57 doesn't sound right at all especially if on an existing rather than new policy ?
Tighnamara said:
If it is a new policy it is not really "overnight" increase, you would have been 27 when taking out the previous policy.
The risk / likelihood changes quite a bit for a new term from age 57.
He doesn’t say it’s a new policy although using the term “renewal” hints at the rates aren’t guaranteed. As I said unless he can advise the original terms and type of policy, the question can’t be answered.The risk / likelihood changes quite a bit for a new term from age 57.
craig1912 said:
alscar said:
That doesn't sound right.
Generally premiums get fixed when you take out the policy and unless you change something like the term or the sum assured it remains the same premium each month ?
Even if yours is inflation linked and /or that increased term or have suddenly taken up a dangerous hobby to treble at 57 doesn't sound right at all especially if on an existing rather than new policy ?
Could quite easily be correct if it s an old type policy with an investment element. Quite often the premiums were based on an optimistic return and if those returns don t happen then they review the rates.Generally premiums get fixed when you take out the policy and unless you change something like the term or the sum assured it remains the same premium each month ?
Even if yours is inflation linked and /or that increased term or have suddenly taken up a dangerous hobby to treble at 57 doesn't sound right at all especially if on an existing rather than new policy ?
Trebling at 57 though one imagines it would be somewhat difficult to get a cheaper quote elsewhere too ?
Even if you are correct it still seems one helluva of an increase !
alscar said:
Ah ok I didn't know that.
Trebling at 57 though one imagines it would be somewhat difficult to get a cheaper quote elsewhere too ?
Even if you are correct it still seems one helluva of an increase !
The risk they were taking at 27 was incredibly low though assuming no known health conditions. The risk at 57 (scary that it's close) is significantly greater. Depends what triple actually equates to and of course there are various comparison sites available for the OP to see what's reasonable.Trebling at 57 though one imagines it would be somewhat difficult to get a cheaper quote elsewhere too ?
Even if you are correct it still seems one helluva of an increase !
scot_aln said:
The risk they were taking at 27 was incredibly low though assuming no known health conditions. The risk at 57 (scary that it's close) is significantly greater. Depends what triple actually equates to and of course there are various comparison sites available for the OP to see what's reasonable.
Indeed which is why the OP needs to give fuller details as think that part is the easily understood bit.The inference ( to me at least ) was that it was a renewal and nothing had changed per se.
So I am aware the risk at 57 is significantly more than at 27 , but the sum assured which wasnt anywhere near what it is now it has been increased annually along with the premium .
However my point would be it’s not a significantly greater risk being 57 than 56 .
Anyway having spoken to them it seems the plan apparently reviews every 5 years and the first 5 years were heavily discounted premiums (my advisor sold his business and the people who bought it never bothered getting in touch with me after acquiring it) so I didn’t know that it was initially heavily discounted and the plan has been playing catch up ever since hence the huge amount increase .
However my point would be it’s not a significantly greater risk being 57 than 56 .
Anyway having spoken to them it seems the plan apparently reviews every 5 years and the first 5 years were heavily discounted premiums (my advisor sold his business and the people who bought it never bothered getting in touch with me after acquiring it) so I didn’t know that it was initially heavily discounted and the plan has been playing catch up ever since hence the huge amount increase .
There is a lot to be said for guaranteed premiums! Here is an AI summary and a couple of links below but a Whole of Life policy with renewable premiums isn’t great for covering IHT liabilities as the time when it’s needed the premiums become unaffordable.
“ A whole of life reviewable premium policy offers lower initial costs but with premiums that can significantly increase over time, usually reviewed every 10 years and then every 5, as the insurer adjusts for your growing age, inflation, and claims costs, potentially making it unaffordable or forcing a cut in your cover, unlike guaranteed premiums which stay fixed. These policies are often used for inheritance tax planning, providing a guaranteed payout but require careful monitoring to ensure premiums remain manageable.
How Reviewable Premiums Work
Initial Low Cost: Premiums start cheaper than guaranteed policies because the insurer anticipates future increases.
Regular Reviews: Premiums are reviewed periodically (e.g., after 10 years, then every 5).
Premium Increases: At each review, the premium is recalculated based on:
Your increasing age (cost of life cover rises with age).
Inflation.
Insurer's claims experience and expenses.
Potential for High Costs: Premiums can jump dramatically, sometimes becoming more expensive than a guaranteed policy would have been.
Key Considerations
Guaranteed vs. Reviewable: Guaranteed premiums are fixed for life, offering certainty, while reviewable premiums carry the risk of unaffordable increases.
Inheritance Tax (IHT): A popular use is to cover IHT, but you risk losing the cover if you can't afford the increased premiums.
Options if Premiums Rise: You might need to accept reduced cover or stop paying and lose the policy entirely.
Health Changes: Your current health isn't considered at review, but future health changes (if you tried to get a new policy) could be much worse, making the reviewable option a gamble.
Recommendation
Financial experts often suggest choosing guaranteed premiums for long-term security, especially for IHT planning, to avoid the risk of premiums becoming unaffordable later in life. ”
https://www.reassure.co.uk/uploads/2015/12/Keeping...
https://www.financial-ombudsman.org.uk/businesses/...
“ A whole of life reviewable premium policy offers lower initial costs but with premiums that can significantly increase over time, usually reviewed every 10 years and then every 5, as the insurer adjusts for your growing age, inflation, and claims costs, potentially making it unaffordable or forcing a cut in your cover, unlike guaranteed premiums which stay fixed. These policies are often used for inheritance tax planning, providing a guaranteed payout but require careful monitoring to ensure premiums remain manageable.
How Reviewable Premiums Work
Initial Low Cost: Premiums start cheaper than guaranteed policies because the insurer anticipates future increases.
Regular Reviews: Premiums are reviewed periodically (e.g., after 10 years, then every 5).
Premium Increases: At each review, the premium is recalculated based on:
Your increasing age (cost of life cover rises with age).
Inflation.
Insurer's claims experience and expenses.
Potential for High Costs: Premiums can jump dramatically, sometimes becoming more expensive than a guaranteed policy would have been.
Key Considerations
Guaranteed vs. Reviewable: Guaranteed premiums are fixed for life, offering certainty, while reviewable premiums carry the risk of unaffordable increases.
Inheritance Tax (IHT): A popular use is to cover IHT, but you risk losing the cover if you can't afford the increased premiums.
Options if Premiums Rise: You might need to accept reduced cover or stop paying and lose the policy entirely.
Health Changes: Your current health isn't considered at review, but future health changes (if you tried to get a new policy) could be much worse, making the reviewable option a gamble.
Recommendation
Financial experts often suggest choosing guaranteed premiums for long-term security, especially for IHT planning, to avoid the risk of premiums becoming unaffordable later in life. ”
https://www.reassure.co.uk/uploads/2015/12/Keeping...
https://www.financial-ombudsman.org.uk/businesses/...
craig1912 said:
isn't great for covering IHT liabilities as the time when it's needed the premiums become unaffordable.
You'll never know when it's going to be "needed" until it's too late.What we still need is more info' about what this policy is/was and the real trend of cost vs cover.
Panamax said:
You'll never know when it's going to be "needed" until it's too late.
I know but, more likely to be needed when older (when premiums become unaffordable).Sounds very much like a Unit Linked Reviewable Rate Whole of Life Policy. Big commissions payable when it was taken out as well as a low start option making it more affordable in the early stages but, storing up trouble for later.
Seems a little strange, IHT planning 30 years ago when OP was in their 20’s.
craig1912 said:
Big commissions payable when it was taken out as well as a low start option making it more affordable in the early stages...
Seems a little strange, IHT planning 30 years ago when OP was in their 20 s.
I think the first line may explain the second line. But is it fit for purpose now?Seems a little strange, IHT planning 30 years ago when OP was in their 20 s.
I had not heard of reviewable policies until reading this post.
Years ago there were basically two main types of life assurance policy.
TERM ASSURANCE - A good policy for covering a risk of death occurring during a fixed time period.
Ideal to cover say 20 years while children are growing up.
Low premiums (that are fixed throughout) made possible because few policies ever have a claim.
WHOLE LIFE POLICY - The premium is fixed for the entire life of the policyholder, as is the agreed amount to be paid at the time of death.
Not very satisfactory (except for the person receiving commission) because inflation results in the eventual pay out being derisory.
These reviewable policies might be a combination of term assurance and whole life.
Perhaps with a regular review say every 10 years, each individual contract only lasts that long, but with a renewal feature whereby the sum assured and consequently the premium is reset to match the policyholders age at that time.
Rather like taking out term assurance every ten years, so for each subsequent period, the next premium would be based on age at the time. Obviously as we become older the risk of demise begins to increase rapidly and consequently so would the premium.
The best solution is take term assurance often when a first child is born because an early demise would be very serious for family finances.
After that period has passed, just use savings and investment to accrue our own pot of emergency cash. There is no need for life assurance in later life, although some would use it to mitigate Inheritance Tax, by nominating a beneficiary. That use would not involve taking out a policy at a young age though.
If anyone suffers from daytime TV, the adverts tell us we must have an assurance policy to pay for a funeral.
Note they offer guaranteed acceptance without any medical test. Think about that and you will realise the con.
I think they do give a free pen though, so that is probably to use when signing your money away.
Edited by Jon39 on Friday 12th December 23:14
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