Get your insurance premiums back if you don't claim!

Apr 21, 2004 23 Replies

Very astutely observed, if I do say so myself. It hardly helps your case, though, does it?

OK, say I buy your insurance for £30 a month, and at the end of 300 months I get my £9000 back. But I can get the same cover elsewhere for £10 a month, so suppose I take that, and invest the difference at 5.17%. After 300 months, I've doubled my £20pm, so I have £12000. I think I like that better than £9000.

That's probably what your company does anyway. It uses 1/3 of the premium to underwrite the insurance costs, and pools the rest into lucrative investments with returns sufficient to (say) triple the money. Now your company has lost £3k of my £9k on underwriting, but has turned my £6k into £18k, of which it gives me "my £9k back" and keeps the other £9k. Nice idea. Investing OPM is always a good idea. But what about me when your company's investments crash in year 24?

It's a fair cop! This more-or-less reduces the investment element to a guaranteed equity return bond. Not the kind of investment I'm keen on (inflexible, low relative).

Thom

The company only invests in guaranteed bonds and cash so will not crash. As far as saving 20 per month over that term, it is such a small amount so most people wouldn't bother anyway. Most people would just blow 20 on a take-away for example.>

In message , financefan writes

Who gives the guarantee?

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