# Any Life Assurance experts here?



## parish (Jun 29, 2006)

Just been looking through a LA policy we have and I'm wondering whether it is still worth paying as, reading between the lines, it may not pay out in the event of death.

It is a policy with Scottish Life called a Self Assurance Mortgage Policy. We took it out in 2000 and it runs until 2022. It was to cover the repayment part of our mortgage (we have Endowments that cover the rest).

SWMBO and I have now split up and therefore no longer have a joint mortgage, although we each have our own mortgage.

It appears to me that if one us were to die then it might not pay out as there is no joint mortgage to pay off.

The benefit clauses state:

*Benefit Amount*

Subject to the Special Provisions set out in this policy benefit schedule, if either of the lives assured dies during the cover period, a lump sum benefit will beome payable under the policy.

The amount of the benefit paid out in the event of a valid claim, will be £40,000, reduced on each policy anniversary date in line with the capital outstanding on a loan being repaid by level monthly installments of capital and interest over the term of the cover. For this purpose, the loan on the cover start date will be the same as the amount shown above and the interest charged will be at a rate of 10% p.a.

*Benefit Payment*

Subject to the Special Provisions set out in this policy benefit schedule, the benefit will be payable to the owner or his legal representatives, On payment of the benefit, the cover will terminate and no further premiums in respect of it will be payable. Where the premiums in respect of the cover have been paid after the date the benefit became ayable under the polcy, these will be refunded.

Nowhere does it state that the survivor is the beneficiary under the policy, so in our present circumstances would the policy pay out and, if so, would it pay

My mortgage (or part thereof)
My wife's mortgage (or part thereof)
Lump sum to my wife
Lump sum to my children (as the beneficiaries of my will)


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## CupraRcleanR (Sep 2, 2007)

Complicated:

The policy is pretty much redundant as circustances have changed since you took it on mainly being you and your Doris have split and I assume you no longer have an interest in a jointly owned property and that you have gone your separate ways.

Therefore there is no "insurable interest" now. Basically, I would again assume that on your new properties with mortgages you have your own individual policies or with new partners?

The Life Assurance policy you have will probably been on a Decreasing Term Assurance Basis and will not have a cash in value.

I would stop paying prems as it seems to be serving no particular purpose.

*Alot of assumptions in my answer but any ques please ask. *


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## CupraRcleanR (Sep 2, 2007)

*Benefit Amount

Subject to the Special Provisions set out in this policy benefit schedule, if either of the lives assured dies during the cover period, a lump sum benefit will beome payable under the policy.

The amount of the benefit paid out in the event of a valid claim, will be £40,000, reduced on each policy anniversary date in line with the capital outstanding on a loan being repaid by level monthly installments of capital and interest over the term of the cover. For this purpose, the loan on the cover start date will be the same as the amount shown above and the interest charged will be at a rate of 10% p.a.*

This bit is just saying that as the mortgge was "capital and interest" or a Repayment mortgage, as you make your monthly payments you also are paying off a little of the balance each month so if you were to die ten years in it would pay off the outstanding balance say £20,000 not the full £40,000. does that make sense?!!!!!LOL

The second section basically says if one of you dies it will pay out but then the policy is stopped along with the cover and the contributions you make stopped. Finished, Finito, Kaput!

This policy is not "Fit for purpose" anymore so it is worth reviewing with your Financial Adviser. If its cover for the kids you want its "Family Protection cover" (that doesn't mean Condoms!). Obviously the cost is based on your age so as you are older now than when you took the last policy it will be abit more expensive.


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## parish (Jun 29, 2006)

So if I were to fall off my perch tomorrow my missus would get the payout and vice versa, even though we no longer have a joint mortgage?



CupraRcleanR said:


> *This bit is just saying that as the mortgge was "capital and interest" or a Repayment mortgage, as you make your monthly payments you also are paying off a little of the balance each month so if you were to die ten years in it would pay off the outstanding balance say £20,000 not the full £40,000. does that make sense?!!!!!LOL*


*

Actually, it would (should) be a lot more than £20k after 10 years as the bulk of the mortage repayments are interest in the early years so the capital reduces very little. IIRC, the cross-over point - where more of the monthly repayment is capital than interest - is about 3/4 term. I take your point however and understand that by having a reducing payout the premiums are lower.

FWIW, we have split on completely amicable terms so it isn't a question of trying to make life difficult for her but it's whether there is a better option out there? The only other thought I have is that we have paid about £9k in premiums and since we both share that it does seem right that one of us stands to get some of their money back.*


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## CupraRcleanR (Sep 2, 2007)

I agree on all the points you raised. YOur last point is particularly relevant as one of you could benefit from the death of the other. She may come at you with a pick-axe tommorrow!!! On a serious note thats why alot of people would scrap the policy and start again. But its usually the situation of "I don't want that bltch getting anything if I die" type situations.

Also I'm not sure that coz you've split and have no debt together you have no "insurable interest" in each other. That's a technical term that all Life Assurance policies need to qualify for at the beginning of the policy. I'm not sure if the policy would stand-up in the event of a claim so get some specialist help would be my advice.

Sorry I can't be of more help.


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## parish (Jun 29, 2006)

CupraRcleanR said:


> Also I'm not sure that coz you've split and have no debt together you have no "insurable interest" in each other. That's a technical term that all Life Assurance policies need to qualify for at the beginning of the policy. I'm not sure if the policy would stand-up in the event of a claim so get some specialist help would be my advice.
> 
> Sorry I can't be of more help.


Thanks for your input. That last point you make is an interesting one. I've spoken to SWMBO and she feels that it would probably be better to scrap it and take out individual ones with the kids as beneficiaries. I'm going to ring Scottich Life tomorrow and talk to them a a first step.

I just hope Sod's Law doesn't kick in; we cancel the policy, then two months later one of us turns up our toes (and goes to join the choir invisible.....  )


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## matt strike (Jan 2, 2009)

I'd consider scrapping the policy and taking out a new one as although you are older than when you took the policy out (which generally increases premiums) you may not need the same level of cover and premiums have dropped quite significantly in the last few years.

On the other hand, if it's just life cover and it was only for £40k at the start I can't see it costing much. Check with the provider that it's still valid (CupraRCleanR makes a good point about insurable interest), if it is it may be worth keeping if your still on good terms with the ex, assuming its a joint policy the money will be paid to her if you die - she could then use it for your children in some way.

What to replace it with can get a bit complicated. Depending on what you want the policy for will determine what the best course of action will be. Is it to provide money for your children in the event of your death or is it to pay off a mortgage? Or is it something else?

I'd recommend speaking to an independent whole of market adviser, but you need to know what it is you want to protect against (e.g making sure you mortgage is repaid if anything happens to you).


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## parish (Jun 29, 2006)

A very good reply matt :thumb:

TBH, we don't really need life cover. Originally it was to pay off the mortgage if one of us died thus providing security for the survivor. Now, however, we each have a house and although we both have mortgages they are - or were when we bought 18 months ago - only around 50% LTV so there is a good chunk of equity in both and, since we are no longer together, the security aspect is no longer an issue.

We both agree that it's all for the kids and that, when we get round to it, our wills will both leave everything to them. If I could find a life policy for a reasonable price that will give them a bit extra and, if I live to see it mature, a nice bit of cash for me then I'd go for it. We've got a couple of these already which were originally intended to provide enough for funeral costs or a nice little chunk of cash when they mature.

Like you say though, need to speak to a IFA to work out what's best.


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## 1animal1 (Aug 20, 2008)

most of stuff has been said, the insurable interest as mentioned above is only required at the start of the policy, ongoing it isnt an issue (although double check belt and braces).... the 10% clause is offered by most insurance firms, its basically to cap their liability if your interest payments go over 10%

say you start paying more interest then less of the mortgage gets paid (capital content) which means upon them paying death benefit they would in theory have to pay out more to pay the mort off. It does look like they are reducing the amount yearly by the capital that would be paid off a 40k mort with a 10% interest rate - this then gives you the sum that would in theory pay out upon death regardless of whether the mort is still there or not

best bet is contacting them like you have said but if you decide to keep it (depends what terms you have split and cost of cover) make sure you confirm it wih an IFA - dont go to the banks for a review!! 

Other things to consider.... if it has critical illness, although you havent mentioned....

just really clarify most of the above, worth noting protection pricing is on its a**e at the moment, may be a good time to get another unless yours has flexible options


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## matt strike (Jan 2, 2009)

parish said:


> A very good reply matt :thumb:
> 
> TBH, we don't really need life cover. Originally it was to pay off the mortgage if one of us died thus providing security for the survivor. Now, however, we each have a house and although we both have mortgages they are - or were when we bought 18 months ago - only around 50% LTV so there is a good chunk of equity in both and, since we are no longer together, the security aspect is no longer an issue.
> 
> ...


No problem, glad to be able to help. I'll let you off with being mean to me regarding my bill gates comment on another thread 

There's loads of options of what you can do now that weren't as readily available or known about when you took out the policy, for example, it doesn't have to be a lump sum, it can pay a monthly benefit which does habe it's uses and is generally cheaper.


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## 1animal1 (Aug 20, 2008)

didnt realise these could be taken as income Matt?


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## matt strike (Jan 2, 2009)

1animal1 said:


> didnt realise these could be taken as income Matt?


They are generally known as Family Income Benefit, also have a few other names. Not all providers offer them but they are growing in popularity. Works very similar to any other life policy but rather than paying a lump sum of say £50k, you can pay £1000 for the next 20 years instead. Also, rather than just paying into your estate it is common to name a beneficiary (similar to if the policy was in a trust but without the hassle) for the income to be paid to. Usually used if people have children but has many other uses.


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## parish (Jun 29, 2006)

I called SL today and they pretty much confirmed what's been said here.

The policy isn't actually linked to a mortgage, it is just designed to cover the (decreasing) capital on a repayment mortgage which keeps the premiums down.

It is still valid and in the event of either of us dying the other would get the payout.

The lady was extremely helpful (and had one of those soft lilting Scottish accents that sound soooo sexy) and said that we could either continue with it as-is, convert it into a single person policy for either of use (with an adjustment in the premiums) and that we can nominate the kids as the beneficiares whether we keep it as-is or change it.

One of their experts is going to call me back with more detailed info.

Thanks for everyone's input :thumb:


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## 1animal1 (Aug 20, 2008)

matt strike said:


> They are generally known as Family Income Benefit, also have a few other names. Not all providers offer them but they are growing in popularity. Works very similar to any other life policy but rather than paying a lump sum of say £50k, you can pay £1000 for the next 20 years instead. Also, rather than just paying into your estate it is common to name a beneficiary (similar to if the policy was in a trust but without the hassle) for the income to be paid to. Usually used if people have children but has many other uses.


oh right, didnt really see it as family income benefit, although i wouldnt have said this is one of those from the description?..... from what i know of these, they are becoming less popular, i can name several providers that used to sell them but have since closed themselves to new business... mainly due to the rise in income protection, ci and life - the family income benefit policies cost far too much when compared (they still have limited use)... i'll have to dig my old fpc2 book out to confirm:thumb:


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## matt strike (Jan 2, 2009)

1animal1 said:


> oh right, didnt really see it as family income benefit, although i wouldnt have said this is one of those from the description?..... from what i know of these, they are becoming less popular, i can name several providers that used to sell them but have since closed themselves to new business... mainly due to the rise in income protection, ci and life - the family income benefit policies cost far too much when compared (they still have limited use)... i'll have to dig my old fpc2 book out to confirm:thumb:


At the moment we're finding they can be a more cost effective alternative to life cover but it depends on what the policy is to be used for. A few more providers seem to be offering them recently, although it depends on how you look for them. Some providers aren't advertising it as FIB, it's just an option on the cover of their standard life policy (monthly benefit as opposed to lump sum) and a few providers (LV mainly) don't seem to have it on comparison sites even though they do offer it and all their other products are there. Makes it a pain in the backside when researching for clients.

Obviously you know what you're talking about, but as always in financial services change is on the way, you mentioned the rise in IP which I fully support in many situations as opposed to CI which is both expensive and quite restricted, but a new policy is emerging, Serious Illness Cover (or SIC for short - it's just too cheesy), apparently (according to Pru) it's going to change the market, and already has in S Africa. So our current discussion could be completely redundant in a few months anyway!


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## 1animal1 (Aug 20, 2008)

i'll keep my eyes open for it mate, will have a look on exchange when i get to work 2moz, although the reason i havent seen it is prob down to it being an option like you say.... whats the story with the serious illess then? i dont think CI is a waste of time - its better since the ABI made more standard definitions, but there are lots of FA's selecting it purely on the amount of things conditions it covers, think bupa has the most conditions although when you look into these a good percentage are false - one of them wont pay out unless you have brain surgery to fully diagnose CJD - if you had CJD firstly theres nothing you can do about it, last thing you want is a 50/50 life op just so your CI pays out. Another is for a heart bypass where you need to have two heart tubes expanded more than 70% each.....a surgeon wouldnt touch you with one requiring more than 50% let alone 2 at 70%!! most have them to sway advisers and/or networls into using them for their panels. I think the most revolutionised product ive seen lately is the simplified life product, save you loads of time without having those 30 page underwriting guides to fill in


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## matt strike (Jan 2, 2009)

are you referring to Norwich Unions simplified life? It's pretty good (and cheap) if everythings straight forward, pita if anything comes up on a doctors report or medical, but that NU for you.

I'm not saying CI is bad, I use it a lot, it's just that it's hard to compare like for like cover, esp. conditions, one provider says 32, another says 34, the 32 may actually cover more as the 34 may have listed heart attack three times depending on type whereas the provider listing 32 conditions has only listed it once. Also, you've hit the nail on the head with CJD, heart surgery is another one. We habve one of the few hospitals that can do keyhole rather than full surgery for some heart conditions, some policies will still pay out for keyhole heart surgery, others would need you to have your chest opened up.

BUPA does have the most conditions at first glance, and you pay for it too. I'm generally recommending AXA & Scot Prov at the moment, I don't have any particualr brand loyalty they just seem to be offering a good mix of cover, service, underwriting and cost at the moment. Although I do use everyone.

My last point, for now ;-) , is CI doesn't cover the two major things - stress and back injury, IP does.

I don't use exchange anymore, now using assureweb, for protection quoting it is better, but as say, not without it's faults (it says LV don't do FIB for one).

Can I ask what you do (currently an IFA, or insurance broker etc or formerly)?

Serious Illness - easy to dismiss as Assure shows it under life & cic but with graded payouts (eg certain conditions pay out 50% of cover, others 25% etc, similar to an accident policy), however, what isn't so obvious is that core and core plus CI are all covered 100% of sum assured. It covers about 97 illinesses if I remember right, and doesn't cost much more than CI (if at all). It also has a huge array of add-ons, flexible options and IP, unemployment etc.

It's PruProtect which is a joint venture between Prudential and someone else (how useful am I? It's been a long day).

blimey, this is an essay, hope you find it interesting / useful, about 99% of people probably think we're wierd


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## 1animal1 (Aug 20, 2008)

yup cheers Matt, will keep my eye out for it...im a consultant mate, done my stint advising before commiting to where i am now.... wanted to go full IFA but as you know...its a do or die thing and you have to be confident of your existing client relationships as a back bone to the business(especially given current conditions), plus what with the RDR coming up etc etc... really respect those that took the plunge though

Tim


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## matt strike (Jan 2, 2009)

I figured it would be something like that, couldn't quite firgure it our as you clearly know your stuff but you just didn't come across as an IFA.

RDR - fabulous plan by this wonderful government and the FSA. Here's my take on the thought process - 

"We want the public to percieve advisers like solicitors and accountants rather then moeny grabbing thieves. How shall we do it? Well, we could inform the public that a huge amount has changed over the last few years, regulation is tighter than ever, we're banning and fining those in breach like there's no tomorrow, the levels of testing are higher than ever, advisers have to do annual tests on all areas they practice and money laundering too (solicitors and acountants don't do any of this), most of the bad eggs have now gone and the quality of advice given and options to the clients over fees etc is better than ever. etc etc

Or, let's make them do more exams but still not tell the public so the perception remains unaltered but we've made advisers do exams for business areas they have no desire or intention of advising on.

Genius


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## 1animal1 (Aug 20, 2008)

yeah its fair to say it hasnt been well received haha, i think the diploma thing is a good compromise as they were originally looking at chartered status for true independents, although not entirely required depending on what areas your business is in...TBH i dont think its as simple as they think, the banks were obviously pushing a lot of it (more people left unserviced by uneducated IFA's  )but not so sure they have the 'push' they had before given the state of things.... bank advisers are the main crooks around now IMO, some know it, some just dont know any better.... factory gate fell on its a**e and most providers have done something to implement this - wasnt a bad idea that!! although any chance of 100% fee based advice was pie in the sky.... back to FA's, theres still the odd bad egg around - probably why they wont entertain grandfathering....agree with pretty much all of what you have said though, everyone has their perspective and nobody is a winner except our wonderful FSA - who you fund

checked up on those policies too!! bit unsure, they dont fill the need of a CI policy i dont think, they seem to be do this or that...revolutionise is their sales pitch isnt it?!.... bit weird given if you lose a hand you get 50% of your amount, then any future claims are dependent on your remaining allowed cover unless you have that option extra on...which i bet doesnt cost a few pence extra..... I dont really count protection as the main part of my business although my preference is still IPP (which i dont get paid on) then life then CI or this (it would come down to premium etc)...whats the difference in prem like?

incidently what is it you do? full IFA?


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## matt strike (Jan 2, 2009)

I started off on my way to be an IFA, then jumped onto the other side of the fence for a while working in mortgage packaging, then decided to go back to advising specialising in mortgages and protection, then due to RDR and the current mortgage market I've picked up the books again - hence my comments about making people study for areas of FS they don't want to advise on.

I know a few mortgage advisers who although they are competitors I think are excellent at what they do, they are really pi$$ed at the FSA as they are giving the impression thay aren't as good as IFA's, whereas in reality they know nore about mortgages tha pretty much any IFA I've ever met. Working in packaging it was an eye opener seeing the difference between IFA's and mortgage brokers and who is generally best at what.

100% fee has a lot of opposition, especially if they try to push a fixed charging structure (eg £500 for all life polices, £750 for CI or whatever) which I've heard a few rumours of.

I love the way banks are pushing this whilst trying to get exemptions for half their staff. Typical.

SIC policies - my initial reaction exactly, although I'm warming to them after a meeting with our regional BDM for PruProtect. Athough they do pay out 100% for CI definitions what happens if you've already made a claim of 25%, then as most of the public would, pi$$ed it up the wall, then have a real claim with a need to repay a mortgage and there isn't enough cover left. I don't know how much extra the cover reinstatement / buyback type thing is, I think it's about an additional 20%. Basic premiums are a few percent higher than CI, or in one case recently it was the cheapest. Overall I think it's a good policy as there is more chance of a client claiming on it, thereby getting something for their money, but it isn't for everyone and it will take time for us all to get used to it and learn about it and it's uses properly. However, if it's sold on quality of cover and features as opposed to cost it defininately has a place in the market. Time will tell and apparently it's now accountaing for a large portion of the market in S Africa where it was launched a few years ago.


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## 1animal1 (Aug 20, 2008)

yup see what your saying..... so what are you needing to get now then? loads different than a few years ago with these CF's, got quite a few of my sales support doing them 

you'll know more about the mortgage side of the IFA market, I only look after a handful of mort firms, my main business is investment/pensions ..... since the comms changed for morts in 2005 (was it 2005 when regualtion changed?), it seems a lot of work for minimal benefit when compared to the other areas - that said its a good way to build relationships and if you know what your doing it can be made very slick process like anything else

not heard the thing about the fixed fees.... that would be ridiculous, must feel from your perspective that someones holding a knife to your throat.

Ah, interesting stuff, will have to see what sort of claim figures they start knocking out to see how profitable it remains..... obviously if it pays more often than a normal CIC policy then it will be great for the custs, seeing the longevity of it is the key i think


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