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The whole truth

Jason King’s recent letter exemplifies the same arguments that were put forward in the 1970s, by the “buy a term and invest the rest” brigade who used bland figures to substantiate equally bland arguments. Term insurance was the foundation of all insurance but the foundation of life insurance and the concept of whole-life insurance acknowledged the fact that, contrary to Mr King’s argument, many people get to retirement and find they have no life insurance cover and would dearly like some. Dearly being the operative word.

The biggest impediment to taking out life insurance is poor health.

I am 60 years old and I have been working with clients for the last 35 years. The majority of my clients are between 50 and 80 and I have to tell Mr King that we have very few clients who have ever ditched a traditional whole-life non-profit contract or a traditional whole-life with-profits contract.

We have, as he rightly states, had clients who have certainly in the last three years rejected the increases in premiums being imposed on them by life companies because of poor performance of underlying funds.

Indeed, Jason King’s argument only goes to reinforce my long-held view that whole-life non-profit policies and whole-life with-profits policies in all their forms had one very salient point going for them – that the premiums were fixed at inception.

Unitised whole-life, particularly maximum cover unitised whole-life, is merely term insurance with an investment element added,on a trend which was started by Migdal Binium an Israeli insurance company in the late 1960s and Hambro, Abbey and a whole raft of other life insurance companies modified and adapted in later years.

My question to Mr King – if term insurance is such great value, why does only 2 per cent of it ever pay out? If the underlying growth rate for whole-life insurance is going to be so poor, perhaps Mr King can tell me how the underwriters are going to survive in the long term to pay such death benefits as they need to or are they reliant upon an ever-increasing mortality span of life that will decrease the number of claims that they have to pay?The security of a traditional whole-life policy has to be underwritten with assets set against those liabilities over the long term and the life companies have spent the last 20 years endeavouring to get themselves out of the guarantee business and shift the risk to the policyholder.

Whole-life insurance may be more expensive than term but it pays out 100 per cent of the time in return for a paltry premium paid into a contract that at least gives the option to continue the policy and that can be converted to an inheritance tax provision arrangement.I rest my case.

Terence O’HalloranLincoln

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