Whole of life policy shock for pensioners
Pensioners all over the country are facing shock increases in the cost of their life insurance premiums over the next few weeks, as over 270,000 letters are sent out to customers who bought whole life insurance policies over ten years ago.
The letters are bound to be a shock and will mostly affect people who took out whole of life policies in the 1990s, when life insurance cost less than it does now.
The letters, which explain that the cost of providing life insurance policies has increased, demand that many of the pensioners start paying more for their policies on a monthly basis, or face being covered for less.
There are around four and a half million whole of life policies in the UK, and many are sold either by financial advisors, or by advisors working within companies selling products to staff.
Originally customers paid just £10 a month for around £10,000 worth of cover, with the money they invested split equally between an insurance policy which would guarantee the £10,000 payout, and an investment fund which was hoped would provide far more. At the time policies were taken out, many advisors failed to make customers aware that policy prices would increase every five years, after the customer reached the age of 65.
After 70, premiums get reviewed every year, and some customers have now gone from spending £10 a month to over £100 a month, in just over a decade.
The rules of the policy mean that customers can’t get back any of the money they have paid in, and the investment funds have failed and are worth next to nothing.
Refusing to pay the additional premiums will also leave those same customers receiving far less for their families if they were to die, leaving many life insurance customers in a desperate situation.
Independent financial adviser Robert Reid explained, ‘Don’t expect any excess cash — this type of policy was designed in the Seventies and in almost all cases is not fit for purpose.’