There was a good and much-needed hatchet job on whole-life insurance in the Daily Mail last month:
Funeral plans aggressively advertised to older people – often during daytime TV ads – have been exposed as a raw deal.
More than 4.5 million people hold these plans — otherwise known as whole of life policies — which pay out a guaranteed lump sum on death.
Firms try to tempt customers with ‘free’ gifts from pens and carriage clocks to M&S vouchers. But many will end up paying more in premiums than the policy will pay out and would have been better off using a savings account.
One of the most popular plans is promoted by chat show host Sir Michael Parkinson. He has been the face of Axa Sun Life’s Guaranteed Over 50 Plan for two years.
It pays out a guaranteed lump sum on death to cover funeral expenses and other costs. A key attraction is there is no medical and it guarantees to accept anyone aged between 50 and 85.
It also comes with a car satellite navigation system, flatscreen TV or pocket camcorder, plus £25 M&S vouchers.
Some experts question whether any of these funeral plans, offered by firms such as the Co-op, Aviva and LV= are a good deal unless you’re in very poor health.
You’d have to live to only 75 with the Axa plan before you would have paid in more in premiums than the guaranteed payout. The average life expectancy of a man is 78 and 82 for women. With the best-paying policy for a 50-year-old male — Engage Mutual — you’d have to live to 83 before you’ve paid in more than you’ll get out.
But you’d still be far better off in a savings account.
700,000 people have been duped the Axa plan. Extraordinary how the contemplation of death suspends the critical faculties. The contemplation of Parky, too.
……………………………Parky……………………………
Something we at The Natural Death Centre are going to be campaigning on. A genuine outrage. Strange to be pipped to the post by the Daily Mail, My enemie’s enemy is my friend? Not quite..
No he/she is NOT, Rupert. But in its ceaseless pursuit of rectitude the Mail is, I guess, sometimes right. It’s a monkeys-and-typewriters thing.
Really good to know the NDC will be campaigning on this — as on what you so brilliantly term the standardised quirky individual funeral plan too, I hope?
Someone needs to do the math on these vile and wicked schemes. Math has never been a forte of mine, even when it came in the plural.
The article completely misses the reason why the vast majority of people take out these policies. Peace of mind, not financial benefit. Peace of mind that their family and loved ones don’t have to worry about making funeral arrangements or having to pay for a funeral. If you did just a basic amount of research, most customers would tell you this.
It is a form of insurance that unlike car and home insurance (where only a small minority ever get back more than they pay in premiums) at least everyone’s funeral policy will pay out one day.
@Simon. Yes, this is one way of doing it. The point is, it is not the most cash efficient way — there are better ways. I agree that it is a good thing to leave enough money to pay for your funeral. But why should arranging a funeral be a worry to those left behind? A great many people regard arranging a funeral as their opportunity to engage with what has happened and show how they feel about their dead person. One of the many iniquities of funeral plans is that they consign the bereaved to standing around like lemons.… Read more »
I thought the idea was to pay a lump sum, or a few instalments at most, to cover your funeral director’s costs when you die – I can’t see how that would land you in the red. However, the ‘what you get for what you pay’ strand of this argument goes over my financially challenged brain – as you can tell. But I’m happy to subscribe to any old assertion, right or wrong, even if it comes from the Daily Mail, that you’re not getting what you pay for with these scaremongering schemes if it paints them in a bad… Read more »
“Peace, of mind or spirit or any other faculty, is an inner contentment with life, not a commodity to be traded,” says Jonathan, dangerously eloquent as usual, because commoditisation is a life-denying gangrene that infects so much of our lives in the more-or-less affluent world – and it’s invading death too, or at least, how we live with death and mark it when it comes. Commoditisation is fed and watered by marketing and advertising, which in turn are powered by shrewd psychology. But in the financial sense this issue is surely quite simple, even to an economic simpleton such as… Read more »
Gloria’s comments about needing to die well before average before this makes economic sense is true. The other unpleasant fact about these schemes is that in most of them if you miss ONE payment you forfeit the lot. Bear in mind that many old people are uncomfortable with direct debits, prefering instead to maintain some sense of independence by paying everything week by week at the post office, so all it needs is one untimely trip to the hospital after a fall and bingo, trebles all round at Parkie’s house.
Jeez, I didn’t know that Rupert. Sometimes the world seems a lovely place, other times it appears to be just so full to the brim with rip-off artists and high-status inviolate thieves that you just want to kick something.
“Some people rob you with a six-gun, some with a fountain pen.” W. Guthrie. And the latter are much more successful – having a field day just now.
Screw the lot of them.
I think some people need to consider that there are many opinios about these products.
Anyone who is stubborn enough to think their opinion alone is the only opinion which is correct, is potentially accusing 4.5 million people of being stupid or at least mis-guided.
I suspect (but I don’t know)that a sizeable percentage of these people are happy that they have one of these policies.
But then again, that is just my opinion!
Thank you for this bit of balance, Simon.
You know what they say, Simon: “4.5 million lemmings can’t all be wrong.”