Annual premium - Period of grace?

I'm sure the Pru will tell you if it's about to lapse. If you paid it now I can't think there'd be a problem. In any case, if you leave it to lapse, it is likely they would reinstate it as long as you filled in a health questionnaire saying you were still fit.

Also, I have just read on their site that Prudential have

The 'profits ' you refer to are the profits of the company whereas the 'profits' of a 'with profits' policy are the profits of the fund. So the answer to your question is 'no'. However, the Pru's bonus position is improving after the lean years and though it varies depending on the actual policy you've got, you may find that the answer is 'yes' but for different reasons.

But why encash it? If you don't want it you might be able to sell it for a better figure.

Rob Graham

I suspected this might be the case.

though it varies depending on the actual

The lean years seem to have gone on and on. The policy was originally a Scottish Amicable policy before it was taken over by the Prudential. Annual bonuses always seemed to be considerably less than the annual premium paid. Although, of course, I have to take into account the life assurance aspect of the policy, which is why I have kept it now that I no longer have a mortgage (living in rented property).

better figure.

I think by now that most people must know that they can probably get more for selling a policy than surrendering it and yet I read that eight out of ten policies are still surrendered rather than sold on. I wonder if this is because most people dislike the idea of a complete stranger having an interest in their life. It might be an irrrational fear but there it is.

Ellis

You've unwittingly raised an interesting point. You seem to be taking for granted, and I'm sure you're not alone in this, that if you're renting you don't need life insurance, whereas when you own a mortgaged property you do. But if you think about it, this doesn't make any sense.

The purpose of life insurance in connection with a mortgage is that when you die your loan debt is paid off, thus relieving your dependants of the burden of having to continue to pay off the loan and interest thereon now that they are living in reduced circumstances cashflow-wise.

Why should the burden of having to continue to pay rent not be similarly extinguished? It's just as heavy, so the circumstances are very similar indeed.

I live alone and dont have dependants as such. However, I entirely agree with the general thrust of your argument. The endowment assurance policy is both a financial investment and a life assurance policy. As a financial investment I would have dumped it years ago. But the life assurance is very important to me. It is not a large policy. It pays 17000 on death and will mature in about 6 years time with an estimated 14,500. As long as I have it I feel good about the fact that I will leave no debts behind. For that reason alone I think it wise to keep the policy going: so I think I will just pop out and post the premium now. If the policy did lapse and I had to answer questions on my health, as Rob suggested, then I dont think a 7 year history of heart problems would go down very well.

Ellis

IMHO they would probably have told you before letting it lapse, I would pay it and see what happens.

In this case, then it is probably 13 months just like my SA policy, but if you pay more than a month late you have pay a small % extra to make up for something or other.

tim

13 months is a lot longer than I had thought. I suppose the small % extra is to take in to account depreciation of the (unpaid)premium. The cheque is now in the post so hopefully there will be no come-backs. In future I think I will get my act together and pay on time. Delays can obviously lead to problems of one sort of another. Thanks to all for your replies.

Ellis

In message , Ellis writes

Its generally because :

most policies are not of a type for which there is a market (e.g. they are unitised)

most policies are with crap companies that nobody would want to buy

the current environment for with profits policies makes the future so uncertain that buyers are not as keen as they used to be

it is a very illiquid market.

"john boyle" wrote

Why can't "unitised with profit" policies be sold on?

Normally because the unit price reflects their "value".

And there is no Terminal Bonus - which, in the past, has increased the With Profit pay-outs considerably.

"Doug Ramage" wrote

Only in the same way as a surrender value reflects the "value" of a conventional WP policy? Future bonus units being added is just like future reversionary bonuses being added to a conventional WP policy...

"Doug Ramage" wrote

Certainly not true in the case of the provider I was thinking about (at least, the intention is to declare terminal bonuses - even if these turn out to be zero!).

[OK, in the example I was considering, the life office calls them "final" bonuses instead of "terminal" bonuses - but they are really the same thing.]

In message , Tim writes

Because nobody wants to buy them. :-)

This is because there is no 'terminal bonus' and the fund will only grow by reversionary bonuses.

In message , Tim writes

I think you will find that this final bonus is reflected in the unit price.

John, in all fairness - I actually used to work for the life office in question, and helped write the computer systems that adminsiter those contracts - so I ought to know how they work! Believe me, the final bonus is *not* "reflected in the unit price" - not least because the unit prices are *constantly* 1.00 (bid) and 1.05 (offer).

Premiums buy normal units (at 1.05 offer price - then worth 1 each). Every year, the reversionary bonuses are added by adding "bonus" units (worth 1 each). When surrendered/matured, the value is calculated as "normal units x 1" + "bonus units x 1" + final bonus (on the scale existing at that time).

"john boyle" wrote

There *is* a terminal bonus (called "final" bonus") on at least one provider's policies - which is in addition to reversionary bonuses. Please see my other post.

In message , Tim writes

Fair comment, I think I know the LifeCo you mean!

The way you describe is not the usual way of working for 'unitised' with profit funds. I notice that the 'final' bonus is also added when surrendered. This is the key. These policies will only tempt a buyer in the TEP market if the buyer believes that the final maturity value will show a good enough return on his investment, (taking into account purchase price, remaining premiums, reversionary and final bonuses). In

*general*, unitised policies give full value for 'terminal' bonuses on surrender, making them unattractive to investors. Does the co. to which you refer do/did this?

The final bonus on surrender (at least when I was around!) was calculated as a fraction of the scale figure. So a policy surrendered after 10 years of a (say) 20 year term, would receive less than a 10 year term policy maturing - even with equal premiums. And then after the above calculation, (on surrender) the "units+bonuses" figure is compared to a MVA-type value which is used instead if less.