Life assurance - worth carrying on?

[ten0rman]

Note to Mods: Please move to a more apt board if one exists. This board seemed to be the nearest to what I want. Thanks.

I think I know what I want to do so I think I'm possibly looking for assurance that I'm doing the right thing. Also am I missing something?

Back in 1971 I took out a small life assurance policy on my wife. This was just after we had got married so I rather think it was meant to assist in funeral costs if she died early. The terms of the policy are: Sum Assured: £1000 without profits. When payable: On the death of the Assured. Premium: £3.20 per quarter (now £11.50 p.a.). Period during which payable: Until the assured reaches 90 (ie in 2041) or earlier death.

Now, actually this next bit says more about me than it does about the insurance co, and doesn't really have anything to do with it other than to explain just why I've come to this decision.

The insurance co gives various means of payment, but does not allow direct bank transfer for UK citizens. It does, though, allow it for overseas customers so as the overseas reference was identical to that for UK customers, I decided to use the quoted sort code etc. Needless to say, the insurance co were unable to sort it out until I told them what I'd done. They've now sent me a letter saying that I can't pay that way, and suggesting direct debit. I don't like direct debits! And yes, I know etc etc, but we are all individuals etc.

So after all that, I'm now thinking that it isn't worth the candle, as they say. £1000 for a funeral? Or even towards a funeral. Frankly, it's peanuts. Plus, of course, our children have long since left home so it's not as if we're short of brass, well not as we were in the 1970's. Another rather annoying factor is that if I kept it up, I'd be 97 when I finally stopped paying! So, what I'm thinking is to just let it lapse next year. That is, unless there is some other reason as to why it should be kept up.

There is just one other point. The letter I received saying that they had not received the payment said this: "The value of the units already allocated to this policy will continue to reflect the relevant daily bid price, but no more units will be added if you do not resume premium payments." To the best of my knowledge, this is not a unit linked policy - I've had one of those in the past and whilst with the other policy I received annually a statement of units allocated, I have never received anything like that with this one.

So, am I missing something? Or is it just a waste of money? Thoughts?

ten0rman

[Alaric]

So, am I missing something?

If you decide to cancel it, it should have a surrender value. The problem you might face is that anyone at the insurance company who understood how this type of policy worked and what the options to terminate were has long since retired.

[ten0rman]

Hi Alaric,

TBH, my understanding of this policy has always been that it was a cheap, no frills, policy which was designed just to payout on death. I believe they used to be called industrial policies many years ago.

I have had a quick look through the policy document and the word "surrender" did not leap out, but I'll have another look. When all said and done, I've paid for the next 11 months now, so there's no rush.

ten0rman

[swill453]

So, am I missing something? Or is it just a waste of money? Thoughts?

If you look at it in purely financial terms, it's probably worth carrying on. Sorry for being blunt but it's a gamble that your wife won't live to be 90, at which point it'll pay out £1000. Between now and then you'll pay premiums of no more than about £260.

But you say the amount is peanuts for you - if I was in that position I'd definitely ditch it, not pay another penny and forget about it.

Scott.

[ten0rman]

Well Scott, that is the point - how long have we got considering that she's 67 & I'm 75. Somehow, I don't think I'll be around to see her 90th birthday. In fact, I don't really think either of us will see 90.

Another point of course is my peanuts comment. I've been very lucky, although I didn't realise it until only recently. I've got a good pension, dare I say final salary based, plus we both have our state pensions so we have more than enough coming in to live off. And we don't anything at all, credit cards effectively zero and fully paid off each month, no mortgage, no loans. What that means is that in a few months time (and that's only because we used the savings for our new caravan), we should have sufficient saved from income for either of us to pay for the funeral of the other without any problems. That's why I describe it as peanuts.

There is another point. I expect to die first. So who, if anyone, is going to continue to pay the premiums? And assuming someone does, who is going to claim and get the £1k when she eventually dies, assuming she goes before her 90th birthday.

ten0rman

[Avantegarde]

You need to get hold of your policy documents and also ask the company what the terms are for early surrender. The fact that they talk about units suggests to me it is an investment policy of some sort (despite saying it is "without profits") and so should be worth (after 47 years) far more than the measly £1,000 guaranteed payout. Even if you have paid no more than £3.20 every quarter, your total subscriptions on their own should have come to more than £600 already. If the policy really is not worth more than £1,000 I reckon you were conned. My compound interest calculator tells me that with just an average annual 3% rate of interest (or investment return) on contributions of £12.80 per year, after 47 years you would now have a pot worth worth £1,375. Interest at 5% per year would have given you £2,521.

[Dod101]

I am not sure that 'conned' is the right expression but the OP has not said who the insurers (or assurers to be technical) are. That would have some bearing on my comments. Furthermore this may well be some form of term assurance in which case it would have no surrender value. The premium is modest even by the standards of 1971 so it may not have any investment value although the reference to the allocation of units is a bit odd.

The OP's reference to an 'industrial' policy is significant. These were 'Man from the Pru' types of policies and were very poor value because of the high costs involved in maintaining them. Phoenix is now holding a load of them which is why their policies in run off do not represent, and never did, very good value.

I agree with Avantegarde. tenOrman needs to get hold of the policy document and read it carefully. It will provide the info needed. It is the contract after all. On the face of it though, I think I would stop paying the premium anyway. If it has any investment value, it will be made 'paid up' and if it does not, (just like any other form of insurance) it will have done its job for the last 40 odd years. £1000 either way is not going to change anything to a material extent.

Dod

[Alaric]

The fact that they talk about units suggests to me it is an investment policy of some sort

More likely that those replying lack the understanding of a 1971 contract. Unit linked policies were quite rare in those days and those that existed treated the life assurance element as an add on to get a favourable tax treatment.

Typically a contract as described by the OP would require premiums only to be paid to the age of 90 (!). After that age the sum assured is payable on the death of the life assured regardless of whether premiums are paid.

Back in the 1970s, it would have been axiomatic that as payout was certain, that there would have been a surrender value. Intervention of numerous regulators in the years since may have made a surrender value less likely to be offered.

[Dod101]

Nothing to do with the subject but the word 'Axiomatic' reminds me of some John le Carre book.

Dod

[ten0rman]

The term "units" was only mentioned in the non-payment letter I received recently. I have never understood this policy to be unit linked.

And yes, in today's climate and bearing in mind that I was at that time a relatively financially naive 28 year old, it could well be classed as mis-selling. But c'est la vie, it's not, in my mind, worth bothering over.

The company is indeed Phoenix who appear to have taken over from Pearl, the originators of the policy.

Incidently, in connection with the above, I seem to think the policy was "sold" to me by a doorstep collection agent, who, it turned out, was embezzleing various premiums. I'm not saying that had anything to do with it, but it does make one think, especially as when I cashed in a Pearl endowment policy in favour of a new setup by GRE, he played holy war over it. Of course, what I should have done was to keep up the Pearl policy as well as taking out the GRE, but then 50 years later, hindsight etc.

I'll have a good read of what I've got.

Thanks.

ten0rman

[Dod101]

Hi tenOrman

What you say makes absolute sense. Door to door selling is what made these policies so expensive to run and had a bearing on the financial outcome. Phoenix itself was never a competitive product and it consolidated a lot of these policies from like companies. I do not now remember all the names but the Pearl was certainly another of them. Subject to your collector running off with the funds (or not) I doubt that there was any mi-selling. With hindsight you can say that but at the time, £1000 was quite a lot of money and that was a good cheap way of getting cover.

I do not agree with Alaric that it is axiomatic that the policy will have a surrender value. It entirely depends on what sort of policy it was and the document will tell him.

Dod

[ten0rman]

Hi folks,

I have now had a read through the various bits of paper I have. Excluding the renewal notices, I have a docket holder which on the front states "Pearl Assurance Company Ltd", and further down, "ORDINARY BRANCH POLICY". (I'm using capitals here because that's how it appears on the docket holder.)

As previously stated, the actual Policy of Assurance states "Sum Assured £1000 Without Profits".

On the front of the actual Policy, there are shown two special conditions. One refers to changing the end date for payments to one of 29, 34, 39 or 44 years after the starting date along with an increase in premiums. Given that the annual premium is currently £11.50 as against the original of £3.20 quarterly (£12.80 p.a), then this option has not been taken up. The other special condition refers to a doubling of the sum assured in the event of death prior to age 65. As my good lady is now 67, then this no longer applies.

On the back, in the small print, there is this:

3. After due payment of all premiums in respect of the first three years next after the date hereof this Policy may be surrendered to the Company for cash the amount of which will not be less than thirty per cent. of all premiums paid (exclusive of those in respect of the first year of this Assurance and of any extra premiums) together with the cash value of any bonus additions to the policy. Alternatively at the option of the person entitled to the benefit of this Assurance an equivalent paid-up Policy will be granted.
This suggests to me that there is the possibility that it might be worth something in the order of £180 give or take. Also, I've never had any indications that there may be any bonus available.

I also have two booklets, and a covering letter which explains the change from Pearl Assurance to Phoenix Assurance.

So, to sum up, it looks to me as if there might be a small surrender sum available; that it probably isn't worth carrying on, but as this years premium has been paid, I might as well not do anything until next years premium is due.

Regards,

ten0rman

[Dod101]

Interesting. Without Profits means that there is unlikely to be any bonus as they now call any addition but if you can get 30% of the total premiums paid returned to you, then why not and if I were you I would start the process now as it may take some time. There is no advantage in waiting that I can see. Phoenix has not got a brilliant reputation for service so you might want to set the wheels in motion.

Dod

[ten0rman]

Thanks Dod & everyone else. I'll let it stew over inside what passes for a brain these days, but I must admit that surrendering it and in effect getting rid of it means one less thing to worry about so that is very tempting.

If I can think on, which probably won't be that difficult after this thread, I'll let you know what the eventual outcome is. But if, as Dod says, Phoenix service is as slow as he implies, then it won't be for quite some time. Plus I want some cogitating time.

Regards,

ten0rman