Life Assurance. Should I Sell?

[awakened]

Thinking I should surrender my Life Assurance policy and get into hard assets like Gold, just in case the provider goes belly up. When runs on banks start, it could get very bad, very quickly.

Any thoughts?

[AFKAFSinLOS]

Don't confuse insurance with investing... It depends on your type of policy.

For real insurance, eg term insurance, chances are that the event you want to cover is still there, so hold on. After cash, protecting your life(style) comes next, with investments further on...

If its a "whole life", "participating life", or any of those "investment+life assurance" combined, I'd probably say don't buy them in the first place. For anyone who's already bought them, consider very seriously stopping contributions and investing elsewhere, and even cashing them in for something worthwhile. Worthwhile = real insurance + real investment... separately

Edited July 14, 2008 by AFKAFSinLOS

[GuestHouse]

Cashing in may be the best option (and often is) but a couple of things to consider.

First and foremost, if you have moved to live in Thailand since you took out the insurance policy you may find that your policy does not pay out on the basis that you have moved overseas - So check the small print on this.

If the policy excludes moving overseas (many if not most do - particularly older policies) then certainly consider cashing in.

However, if your policy is still valid despite moving overseas then take a look at the cover you get versus the premiums you are paying.

As AFKAFSinLOS says, do not confuse Insurance with Investing.

If your policy has been running a long time (ie you bought when you where much younger) you may find you are getting a very good Cover/Premium ratio.

The question then to ask is - Do you need Life Insurance - if you have dependents then staying with the insurance may be a good option.

It may not be how much more you can make with an investment, but how important a lump sum would be to your dependents if you die.

[awakened]

I have life assurance (with profits) taken out 25 yrs ago. My decision revolves around whether life insurers are likely to roll over. If I wait until there is a crisis chances are FP wont have cash and will stop policyholders cashing in. On the other hand I'll be writing off 50,000 UKP worth of death payout for the kids.

If a deep depression is coming, I want my assets accessible.

I'll check on the moving abroad clause. Didn't know that.

[AFKAFSinLOS]

I have life assurance (with profits) taken out 25 yrs ago. My decision revolves around whether life insurers are likely to roll over. If I wait until there is a crisis chances are FP wont have cash and will stop policyholders cashing in. On the other hand I'll be writing off 50,000 UKP worth of death payout for the kids.

If a deep depression is coming, I want my assets accessible.

I'll check on the moving abroad clause. Didn't know that.

Awakened,

What you have written is very common re "with profits"/endowment/whole life/particiapting insurance policies, and highlights the earlier point. You are concerned about the investment, but want the insurance. As a general rule: keep insurance and investments separate.

Are you aware that for a 50 year old guy, you could get level term life assurance of GBP 50,000 for around 12 pounds a month? (Assuming you qualify as GH mentions, while living abroad)? Just google any of the insurance supermarkets and pick a reputable insurance name you trust. If you want to do locally, Thailand tends to be a bit more expensive, and less choice but there are some good insurance firms here.

So if unhappy with your investment, and you feel safer somewhere else, cashing the policy and paying separately for insurance to protect your family is a real option.

Now compare that 12 pounds estimate cost of life assurance to what you are paying for your policy...Your 12 pounds is purely protection and only pays out if you die. But: The difference in what you are paying now could be invested elsewhere in investments you are more comfortable with. These will likely give better and safer returns if done wisely...

Two notes on with profits: check whether there are any penalties on withdrawal, eg market value adjustments (MVAs), where they adjust down your fund value because you want your money. Secondly these are volatile times in the markets. While with profits have many things wrong with them, such as MVAs and lack of transparency, they do have the advantage that they smooth investment returns, so in tough times like these you should be cushioned a little from adverse markets. The disadvantage though is they hold back some of your return in good times to pay for it...

[awakened]

Very helpful replies. If I sell, it will be on the second hand policy market, where I will get perhaps 10% more than the surrender value.

I've done this before and sold to Members of the Association of Policy Market Makers. If there's a better way to deal with these companies than just accepting the first offer, I'm all ears. Always wondered whether I might have got more if there were some auction I could go to.

Since there is a second hand market, I presume not everyone thinks they are such a bad idea?

I tried the investment bit and got hammered in the U.S. markets. Even after 3 years of trading I still haven't got it sussed. When the naked shorts attack a stock stock, you're toast.

Many thanks to you both.

Edited July 15, 2008 by awakened