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.