Thinking of cancelling my life insurance

Discussion in 'Frugal Tips For The Home' started by Ammo_Ram, May 12, 2014.

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  1. Ammo_Ram

    Ammo_Ram Newbie

    I feel like I'm spending a fortune on my life insurance. At the moment I am covered for a substantial amount which my broker recommended. I have critical illness cover as well as life insurance on first life first death payments which means if me or my partner die or are diagnosed with a critical illness we will receive a payment. My question is as follows - is it better to save the money in a high interest bearing account compared to spending this money on insurance. Both of us are healthy and we do not have a history or terminal illness in our family. Look forward to some insights.
    james oduor, Miles, Sadia and 2 others like this.
  2. Shobir

    Shobir Administrator Staff Member

    Admin Post
    Hey @Ammo_Ram, I can see your dilemma here. Personally I would keep the insurance but I would reconsider the amount that you are insured for. Before you chose the policy did your broker do an affordability and suitability questionnaire? You should work out how much insurance you need to cover all the payments if death did occur. You should also check to see if you are over-insured. If you only need $200k in the event of a death to pay off liabilities is it worth paying insurance for $500k?

    Also as you said there was no history of terminal illness in your family maybe you could remove this component from the insurance policy? from what I understand the critical illness cover on an insurance policy is where most of the expense is. Removing the CIC might reduce your premiums to make the policy more affordable.
    Ammo_Ram, james oduor, Miles and 2 others like this.
  3. Simrin

    Simrin Newbie

    I would be inclined to keep the policy active. It is painful to see money go for insurance but think how grateful you would be if the unthinkable were to happen. Personally I do not like buying insurance from brokers. The fee and commission of these brokers elevate the premiums. Some of these brokers receive upfront payments and trail payments as long as the policy is active.

    One point to consider would be how the policy was set up. Was the policy set up after searching the whole of market or was the policy set up with a tied advisor who only recommends products from a few insurance providers. I am thinking you have the latter more expensive policy. I would rethink how much insurance is really needed and then use a whole of market comparison site to find cheaper insurance. Once you set up the new insurance you can cancel the existing one. This should save you some money which could be saved as you suggested in a profit bearing account.
    Shobir, Ammo_Ram, james oduor and 2 others like this.
  4. Sadia

    Sadia Administrator

    Hey @Ammo_Ram, sometimes its cheaper to have two separate policies compared to just one. I can certainly see your argument for cancelling the insurance. If you have a family history of no terminal illness I would suggest you remove this from the policy. Also if you have a long life expectancy looking at past history you might want to consider cancelling the policy and just opting for accident insurance. Brokers love to scare people so their commissions and fees are higher. Some do provide an excellent service but I have found that they try innovative ways to overinsure people. Let us know how you get on.
  5. Miles

    Miles Newbie

    I've never paid for life insurance. All my grandparents and parents lived to a long age and died from natural causes. I always workout and exercise and pay attention to what I eat and my stress levels. Unless I have an accident I think I have a good chance of living. Cancel the insurance and only insure yourself for what you need. Accident insurance is something you should consider.
    Shobir, Ammo_Ram and james oduor like this.
  6. james oduor

    james oduor Newbie

    From what you've told us it seems like you don't really need insurance. If you're fit and have a good history of health straight life policy with accidental insurance will suit you. Just scrap the critical illness on the policy and put the savings into a high profit account.
    Shobir and Ammo_Ram like this.
  7. Ammo_Ram

    Ammo_Ram Newbie

    The broker didn't really have a questionnaire and just asked me what I wanted. I also have a feeling that I'm over insured which is why I might have to download one of these financial questionnaire to find out exactly what I need. Thanks for the advice.
    Shobir likes this.
  8. Ammo_Ram

    Ammo_Ram Newbie

    I think the broker was tied to a few providers. I will check this out by giving him a call. Just did a quick quote on a comparison site and found similar policies which are cheaper. Looks like I was paying through the nose.
    Shobir likes this.
  9. Ammo_Ram

    Ammo_Ram Newbie

    Yes you are right. Just did another quick online quote and two policies are cheaper compared to one. Not sure why? Anyway thanks for the advice. If I do cancel the policy and set up new ones I will save a lot of money.
    Shobir likes this.
  10. Ammo_Ram

    Ammo_Ram Newbie

    I will look into this. I wasn't aware that accidental insurance was sold separately and thought it was a part of life insurance. Any financial institutes that do this?
    Shobir likes this.
  11. Miles

    Miles Newbie

    The American Fidelity Accident Insurance Company specialises in accident insurance. I would check it out.
    Shobir likes this.
  12. Shobir

    Shobir Administrator Staff Member

    Admin Post
    Found this useful video which explains how to chose life insurance. Thought it was relevant.

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