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Life is not always simple – neither is life insurance

Terence O’Halloran is such a regular correspondent of yours that I have often wondered how he finds time to write any business. The contents of his letters show that he is a man of firm and fixed ideas. Grey does not appear to be a shade that he recognises.

In his latest letter (Money Marketing, January 13), he extols the virtues of selling whole-life insurance to 20-year-olds rather than term insurance.

I have to say that, in my view, in the great majority of instances, life insurance of any sort of probably surplus to requirements for someone who is 20. Many people of that age will be at university and will be struggling to survive financially and are consequently likely to be building up substantial debts.

Therefore, the financial priority for some will probably be the reduction of the debts they are accumulating. I am, of course, excluding 20-year-olds who have dependants.

For any 20-year-old, a further priority will almost certainly be saving a deposit for a mortgage and subsequently meeting the repayments.

On a wider front, taking into account people of almost all ages – certainly up to retirement – there will be at any point in time a number of financial needs and, because only the very wealthy will be able to afford to fully fund all of them at the same time, a balance has to be struck.

This is why, for the great majority of people, I believe that term insurance is far more appropriate, simply because it is substantially cheaper than whole-life insurance and means that monies saved by virtue of paying cheaper premiums can be used towards trying to satisfy other financial needs.

As we must all surely know, proper pension provision must be one of the most important requirements and, in very simple terms, every pound saved through purchasing term rather than whole life is a pound that can go into a pension contract and can, of course, be grossed up by 22 per cent. In many cases, additional relief of 18 per cent will be available.

While reiterating that for most people, most of the time, a balance has to be struck, the ideal situation is to find oneself with sufficient income and/or capital when commencing retirement, so that in the event of death any dependants will be properly provided for by virtue of the fact that investments and pensions are in force.

Speaking as a 59-year-old whose retirement (praise be) looms on a not too distant horizon, I am very pleased that while I was younger, with two children who are now adult and financial independent, I maintained completely adequate term insurance and have therefore benefited from the fact that there is considerably more in my pension fund than would otherwise be the case.

Life – and certainly the giving of the financial advice – is nowhere near as simple as Mr O’Halloran suggests.

Glynn Downton Professional Investment Management Services,


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