Where is my £35,000 cover?

The Daily Telegraph - Your Money - - READERS’ LETTERS -

In 1986, my dear late wife and I placed £4,000 with an as­sur­ance com­pany for a “whole of life” pol­icy for us both. Af­ter my wife died, I as­sumed that our daugh­ter and son would share the £35,000 when I died.

I kept track of it as it moved around from provider to provider, even­tu­ally ar­riv­ing with Re­As­sure.

The fi­nan­cial ad­viser, now re­tired, as­sured me ev­ery­thing was still OK, even though I no­ticed re­cently that the amount was ap­par­ently going down dras­ti­cally.

I am now nearly 91. Can you help me over what has be­come a very wor­ry­ing sit­u­a­tion? NB, YORK­SHIRE

In fact, the let­ter you re­ceived re­cently from Re­As­sure told you that the pol­icy had ex­hausted it­self in 2010. In the ab­sence of fur­ther pay­ments be­ing made into it, the pol­icy should have lapsed then, as it was going to now. Re­As­sure had writ­ten to you, say­ing: “To al­low you time to con­sider your op­tions and to make al­ter­na­tive ar­range­ments, we will con­tinue to pro­vide cover for a fur­ther three months from the date of this let­ter, at which point the ben­e­fit will lapse and the pol­icy will ter­mi­nate.”

The pol­icy had been set up to pay £35,000 on the sec­ond death. The £4,000 pre­mium was to sup­port this ben­e­fit at the time.

In the early stages, when peo­ple are younger, fewer units from the un­der­ly­ing cap­i­tal need to be sold to pay for life cover.

Mean­while, in the­ory, the money in the fund is sup­posed to in­crease, sub­ject to fund per­for­mance, but that strikes me, with hind­sight, as be­ing a dream from cloud cuckoo land.

The pol­icy should have been re­viewed af­ter 10 years and ev­ery five years fol­low­ing that.

This was fairly typ­i­cal of these poli­cies that were of­ten rather pushed by some fi­nan­cial ad­vis­ers in the Eight­ies, I sus­pect, with an eye more on the com­mis­sion than the ad­van­tage to their clients. Also, in this era there were fears that life ex­pectancy could be shorter, so this kind of life as­sur­ance seemed more at­trac­tive to cus­tomers.

What of­ten comes as a shock to those with such poli­cies is how more money is needed to sup­port the un­der­ly­ing fund and, if it isn’t paid, how the cover di­min­ishes as they get older.

In your case, due to an (as it turns out for­tu­nate) ad­min­is­tra­tive er­ror, the re­views were never car­ried out. I ap­proached Re­As­sure and, as in­for­ma­tion was not con­veyed to you, Re­As­sure now ac­cepts that you were not able to make in­formed de­ci­sions and could rea­son­ably have ex­pected that the £35,000 life cover would con­tinue.

Re­As­sure said: “We are sorry for any con­cern this has caused Mr B.

“Al­though the one-off pre­mium was not enough to pro­vide for the con­tin­u­ing life cover, we ap­pre­ci­ate the spe­cific cir­cum­stances of the case, so have de­cided we will hon­our the orig­i­nal cover amount of £35,000 when a claim is made.”

I un­der­stand Re­As­sure will also send you a gift of a ham­per, wine or flow­ers, to be cho­sen by you.

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