Ark life insurance

Haroldinio

My father got a letter from them to say that they are increasing his E30 a month premium to E90. If he doesn't like that they are going to decrease the lump sum payed out by a third. If he does nothing they will cancel the policy and he will get nothing. He's had this policy for nearly 15 years.
Has anybody had a similar experience? It feels wrong.

NIMAN

Haroldinio wrote: »

My father got a letter from them to say that they are increasing his E30 a month premium to E90. If he doesn't like that they are going to decrease the lump sum payed out by a third. If he does nothing they will cancel the policy and he will get nothing. He's had this policy for nearly 15 years.
Has anybody had a similar experience? It feels wrong.

Seems a strange, and big, increase.

Well if its a life policy, I assume it only pays out on his death, so saying that "they will cancel the policy and he will get nothing" is fair enough. These policies never have any value while you are alive (meaning no refund is due - perhaps you mean he will get nothing should be die?).

Has his situation or health changed in any way?

Has he tried shopping around to see what sort of quotes he's getting? A 30 to 90 increase seems excessive.

Haroldinio

Yes it does seem excessive. No his situation hasn't changed. I've read the letter a couple of times to make sure it wasn't a mistake. It's one of those "We have just reveiwed your policy and due to the current climate" type letters.
Yes it does only pay out on death so he won't get any benefit of it anyway but to get nailed with such an increase is a bit of a shock.
I haven't tried looking around yet but i don't think i'll be able to find anything due to his age.

coylemj

Haroldinio wrote: »

My father got a letter from them to say that they are increasing his E30 a month premium to E90. If he doesn't like that they are going to decrease the lump sum payed out by a third. If he does nothing they will cancel the policy and he will get nothing. He's had this policy for nearly 15 years.

I'm a bit confused here. On the one hand you're saying that if he doesn't increase the premium, his benefits will be reduced, then you say that if he 'does nothing,' they will cancel the policy???

If he doesn't increase the premium, doesn't that count as 'doing nothing' so how can there be two possible outcomes for the same inaction?

Haroldinio

coylemj wrote: »

I'm a bit confused here. On the one hand you're saying that if he doesn't increase the premium, his benefits will be reduced, then you say that if he 'does nothing,' they will cancel the policy???

If he doesn't increase the premium, doesn't that count as 'doing nothing' so how can there be two possible outcomes for the same inaction?

He's currently paying E30 per month. If he continues to pay 30 then the lump sum payed out drops to a third of what it is now.
If he wants to keep the current lump to be payed out then he has to increase his monthly payments to E90.
If he doesn't let them know soon then they cancel the whole policy.
Hopefully that's a bit clearer.
I know insurance companies can change all the time but not by huge amounts like this.

coylemj

This sounds like a 'whole of life' policy which is where there is no benefit payable until the policyholder dies. This is as opposed to a policy which matures when the policyholder reaches a certain age or a set period of time has elapsed since the policy was taken out, the latter being known as 'term life' assurance which is the type of policy you take out at the insistence of the lender for mortgage protection.

My understanding of a 'whole of life' policy is that as long as you keep paying the agreed premium, the benefit that was set when the policy was taken out cannot be reduced. The deal as I understand it is that the initial premium is set based on the policyholder's age when the policy is taken out and the agreed benefit on death. The actuarial assumption is that the policyholder will pay that premium until the day that he dies at which stage the benefit is payable.

Gingernuts31

coylemj wrote: »

This sounds like a 'whole of life' policy which is where there is no benefit payable until the policyholder dies. This is as opposed to a policy which matures when the policyholder reaches a certain age or a set period of time has elapsed since the policy was taken out, the latter being known as 'term life' assurance which is the type of policy you take out at the insistence of the lender for mortgage protection.

My understanding of a 'whole of life' policy is that as long as you keep paying the agreed premium, the benefit that was set when the policy was taken out cannot be reduced. The deal as I understand it is that the initial premium is set based on the policyholder's age when the policy is taken out and the agreed benefit on death. The actuarial assumption is that the policyholder will pay that premium until the day that he dies at which stage the benefit is payable.

Agree with this statement. I took out a "whole of life policy" in 2007 and each year it has gone up but only by 2 or 2.50 a year since but yet the payout on death has increased by 42,000 and will keep increasing once i keep paying. Sounds like the company is taking u for a ride. Id query with the insurance federation or the body that deals with life insurance policies to see if they can 1/ legally make that much of a jump in premium in 1 go and 2/ if they can actually decrease benefit on death if he doesnt do what hes told. Sounds very iffy to me.

coylemj

OP, the point is this: if an insurance company can sell someone a 'whole of life' policy and subsequently either raise the premium or reduce the benefit, it means the policyholder has bought a 'pig in a poke' and it makes nonsense of the whole system.

All they have to do is sell someone a policy with great benefits and low premiums and then when he gets too old, jack up the premiums to force him overboard and they book the profits. I just can't see that they can get away with this.

I'd talk to the Insurance Ombudsman if I was you.

Edit: I just read the Irish Life information booklet on whole of life insurance and the description matches my assumptions above. I know you're father's policy is with Ark Life but I think that's now part of Aviva and they don't explain things in great detail on their website.

However there is an option to include some element of indexation (inflation-proofing) of the benefits and this can lead to an increase in the premiums. If your father's policy is for a fixed sum that is never going to change and payable only on his death then I don't think they can change the benefits or the premium, maybe you could check this out and clarify the situation.

Pablo Sanchez

As above it sounds like a whole of life policy. These policies are reviewed regularly- normally on the tenth anniversary and then every 5 years until the 70th birthday where the reviews become annual.

The company are saying that based on your fathers age (and the rates that apply for insuring someone of his age) he is not paying a sufficient premium for the policy to be sustainable until the next review. Without going into too much detail the performance of the investment side of the policy is likely to have been majorly affected in the downturn of the markets since 07/08, and this would be a major factor in the huge increase of premium.

Personally i would be slow to advise anyone to take out these types of policies, as one gets to their older years the premiums inevitably rise out of the reach of most.

I believe that if your father 'does nothing', then he will continue to pay his 30 a month and the actual level of cover they will provide him will be reduced dramatically. Its not a scam but maybe its time for him to review his cover to see if there are better options out there for him. Its likely that as the years go on they will continue to recommenced premium increases at every review and if he continues to pay just the original 30 premium, the cover they will actually provide him will whittle down to a insignificant amount.

His 30 a month may by him a term policy which will give him the security that his premium and cover will be fixed for the term he chooses.

My two cence.

Browney7

Pablo Sanchez wrote: »

As above it sounds like a whole of life policy. These policies are reviewed regularly- normally on the tenth anniversary and then every 5 years until the 70th birthday where the reviews become annual.

The company are saying that based on your fathers age (and the rates that apply for insuring someone of his age) he is not paying a sufficient premium for the policy to be sustainable until the next review. Without going into too much detail the performance of the investment side of the policy is likely to have been majorly affected in the downturn of the markets since 07/08, and this would be a major factor in the huge increase of premium.

Personally i would be slow to advise anyone to take out these types of policies, as one gets to their older years the premiums inevitably rise out of the reach of most.

I believe that if your father 'does nothing', then he will continue to pay his 30 a month and the actual level of cover they will provide him will be reduced dramatically. Its not a scam but maybe its time for him to review his cover to see if there are better options out there for him. Its likely that as the years go on they will continue to recommenced premium increases at every review and if he continues to pay just the original 30 premium, the cover they will actually provide him will whittle down to a insignificant amount.

His 30 a month may by him a term policy which will give him the security that his premium and cover will be fixed for the term he chooses.

My two cence.

Spot on. Was going to write something similar

coylemj

Isn't there a life policy which involves paying a flat premium for the rest of your life and which pays an agreed amount when you die, regardless of the stock market performance?

I understand that policies which involve some of the money going into an investment fund can be affected by market underperformance but in the Irish Life booklet there is a whole of life policy which has fixed premiums and a fixed benefit on death.

Mac50

Would this be a Whole of Life plan - if so, typically these type of plans have a review period built in (Had a whole of life plan previously).. I had my plan reviewed for me and when I was told by my planner of the review dates and expected premium hikes, I got a big shock.. Realistically i did not need life cover for the rest of my life but I wanted cover to age 65, maybe a bit longer.. Anyway, instead of giving the insurance company my money, I replaced this plan with an alternative plan with certainty of cover and premiums until 65... There will be no big surprises at least.. Read the policy document carefully to see what it is he actually has... AND get advice...

coylemj

Mac50 wrote: »

Would this be a Whole of Life plan - if so, typically these type of plans have a review period built in (Had a whole of life plan previously)..

Only if there is some kind of indexation of the benefit i.e. the benefit payable on death is supposed to keep up with inflation, in which case the premium will go up as time marches on.

Whole of Life plans don't have to have this element included so it is possible to have fixed cover for a fixed premium, this is from the Irish Life booklet entitled 'Whole of Life Insurance'........

Life Long Cover offers you the security that your benefits and regular payments will remain the same over the course of your life (this is not applicable if you choose inflation protection).

Meaning (my interpretation) that the premium and benefits are fixed when you take out the policy and as long as you continue paying the agreed premium, the agreed benefit is payable when you die.

Pablo Sanchez

coylemj wrote: »

Isn't there a life policy which involves paying a flat premium for the rest of your life and which pays an agreed amount when you die, regardless of the stock market performance?

I understand that policies which involve some of the money going into an investment fund can be affected by market underperformance but in the Irish Life booklet there is a whole of life policy which has fixed premiums and a fixed benefit on death.

Im not familiar with any existing policy that promises to pay a fixed amount for a fixed premium guaranteed for the whole of your life- except possibly one of those over 50's plans, but they are basically for very small sums to take care of funeral expenses etc.

However i have seen very old style policies which are whole of life but you only need to pay a premium until your 60th or 65th birthday, however these were probably written at a time when life expectancy may be a decade or two lower then now!

coylemj

Pablo Sanchez wrote: »

Im not familiar with any existing policy that promises to pay a fixed amount for a fixed premium guaranteed for the whole of your life- except possibly one of those over 50's plans, but they are basically for very small sums to take care of funeral expenses etc.

However i have seen very old style policies which are whole of life but you only need to pay a premium until your 60th or 65th birthday, however these were probably written at a time when life expectancy may be a decade or two lower then now!

I actually answered that question in the post just before yours. Irish Life offer a 'whole of life' policy where the benefit and the premiums are fixed...

http://www.irishlife.ie/life-assurance/life-long-cover.html

Pablo Sanchez

coylemj wrote: »

I actually answered that question in the post just before yours. Irish Life offer a 'whole of life' policy where the benefit and the premiums are fixed...

http://www.irishlife.ie/life-assurance/life-long-cover.html

Wow thats a new one one me, looks like a great product but for the life of me i cant see how they can afford to offer it!

The brochure gives the example of a 50 year old man, 400k cover, premium of 457 a month. Assuming he only lived to the normal life expectancy of a male (78)- they would only collect 153k in premiums.

There is a fairly massive % of people with traditional WOL policies who cancel long before death simply due to the reviews going against them, but in this case you would be crazy to give it up once you start it.

Cheers for the info.

Haroldinio

Thanks all. Yes coylemj, initially it did sound like a "Pig in the poke". From what i gather, he's going to have to take a hit one way or the other. The review that Pablo mentioned sounds right. The amounts they reviewed by don't seem fair though. I'll have to get the calculator out now and see which is the best option and go in and have a chat with them.

Liam D Ferguson

For the avoidace of confusion, there are two generic types of "whole of life" policy - "reviewable whole of life" and "guaranteed whole of life".

I wouldn't touch a reviewable whole of life policy with someone else's bargepole. I have outlined my reasons for this here. Unfortunately this seems to be the one the original poster on this thread is referring to. There may be a cash value on this plan if it's stopped now.

A guaranteed whole of life policy is a far fairer, simpler and more transparent proposition. You pay a fixed premium for the rest of your life and the insurance company pays out a lump sum when you depart this mortal coil. Irish Life and Zurich Life offer this type of cover. For younger people, New Ireland also offer a hybrid Term Insurance / Whole of Life policy where you only pay premiums for an agreed term (e.g. 20 or 30 years) but part of the cover continues for the rest of your life.

Having said all this, I think the most important two questions anyone considering life insurance should ask is "Why do I need this level of cover?" and "How long do I need this level of cover for?" At a certain point in your life, if your family are reared, you have no debts and enough savings to pay for a funeral, why would you be paying out every month for a life insurance policy? Make sure that you actually NEED cover and that you're not just being talked into it by some insurance salesman who's only interested in making a sale. Don't get me wrong, there are certain circumstances where people should have whole of life cover, but the need should be established clearly before the sale.

misslt

The size of the increase can depend on how long it's been since the last review, if the mortality experience has changed (ie, they have been putting too low a probability on the possibility of death) but basically as has been said above, the premium being paid is not enough to cover the risk the company has covering the life.