Life Insurance

[Semple]

I have 2. I also have life insurance

Lol why the hell have you been arguing against the principle of life insurance, when you now agree that it is a good thing to have no matter how minimal the risk is that you'd need to collect on it.

That's not at all how insurance works. I work with the industry and they make next to no profit from policies.

What they do is take all the money coming in and invest it wisely. The money from those investments is what makes it a lucrative business.

Half of the buildings in city centres like offices and shopping centres are owned by insurance companies.

They are essentially property management companies.

For example legal and general own cala homes. That's just an example of which there are many.

Then there is re-insurance and loads of other things they do so even if the worst does happen they are covered.

There was a program on BBC called Manctopia about the development of some of the biggest buildings in the center of Manchester. I'm sure it was Legal and General who had paid £300million for a skyscraper with hundreds of apartments ranging from basic upto penthouse costing a few million. I think they sold the lot of them as well, so it seems like easy money to make in fairness - just needs that huge amount of capital to stump upfront.

 

[FoxEye]

That's not at all how insurance works. I work with the industry and they make next to no profit from policies.

What they do is take all the money coming in and invest it wisely. The money from those investments is what makes it a lucrative business.

Half of the buildings in city centres like offices and shopping centres are owned by insurance companies.

They are essentially property management companies.

For example legal and general own cala homes. That's just an example of which there are many.

Then there is re-insurance and loads of other things they do so even if the worst does happen they are covered.

So if they make no/almost no money from insurance premiums, as you say, why would they bother to sell policies, vs being a pure investment company (of which there are many).

And if, as you say, they are "essentially property management companies", then what happens if the property market crashes?

I mean it seems odd on the one hand that the core of your business makes so little/no money that your income is derived from an alternate source, but you keep the core of your business as is rather than jettisoning it to focus on what actually makes money?

Curious.

 

[Psycho Sonny]

So if they make no/almost no money from insurance premiums, as you say, why would they bother to sell policies, vs being a pure investment company (of which there are many).

And if, as you say, they are "essentially property management companies", then what happens if the property market crashes?

I mean it seems odd on the one hand that the core of your business makes so little/no money that your income is derived from an alternate source, but you keep the core of your business as is rather than jettisoning it to focus on what actually makes money?

Curious.

I can't divulge any more than I have but let's say if someone gave you £20 million up front as an example and you only need to pay out £1.5 million per month back.

You would have to be stupid just to have that £20 million sitting in an account doing nothing.

 

[Theophany]

Legal & General's UK Property fund is over £2.7 billion in size. It's mandate is to invest directly in property on a commercial basis. You can see the ten largest developments they are invested in on the fund's factsheet:

https://fundcentres.lgim.com/srp/li...ty-Fund_31-08-2020_UK-INST_UK-ADV_UK-PRIV.pdf

They would've probably had more substantial holdings at the beginning of the year, but property funds ran into liquidity problems meaning they're trying to liquidate holdings to pay back redeeming investors.

 

[Psiko]

So if they make no/almost no money from insurance premiums, as you say, why would they bother to sell policies, vs being a pure investment company (of which there are many).

And if, as you say, they are "essentially property management companies", then what happens if the property market crashes?

I mean it seems odd on the one hand that the core of your business makes so little/no money that your income is derived from an alternate source, but you keep the core of your business as is rather than jettisoning it to focus on what actually makes money?

Curious.

The answers to your questions are not simple!

Some policy types may make profit standalone, some may not. It depends on many factors. The insurance market is quite competitive. Competitive pressures will drive down margins such that the profit from the policy plus the expected gains on investment over the life of the policy makes it still worthwhile for the insurer - sometimes this means the policy is profitable by itself and other times it does not. For example, for a long term policy like an annuity (you pay a big lump sum up front and the insurer promises to pay you x per month until you die) then they know your money is locked in with them for a long time and so they do not need to make money before investment returns. But for a motor policy, they only have your premium for a year, so may need profit irrespective of investment returns.

Also, insurers and investment managers are intimately linked. Many of the biggest investment managers were once part of insurers. They started off managing the insurer’s balance sheet and thought to themselves “hey, I’m quite good at this investment stuff, why don’t I raise third party money too and charge them a fee”. Now they’ve got so big that they are being separated from the original insurance business (e.g. Prudential and M&G). In that respect, you are quite right - they are “jettisoning it” to focus on what they are good at, but instead they will just outsource the management of their investments. But they still make investment returns and those returns will form a good chunk of their profitability.

And on your property market question, in absolute terms they may have what seems like a lot of money invested in property, but it is a really small part of their overall capital. Insurance companies are heavily regulated. They are constrained in what they can invest in. A lot of it will be boring stuff like government bonds. They will have highly diversified portfolios and will reinsure risks that they don’t want to bear.

 

[jaybee]

So how much do you guys roughly pay a month for your life insurance fixed term cover? I just had a quote for a joint one for £39 which surprised me as I hear of many people saying it's very cheap, more in the range of £10-20 a month. To be fair, during the quotation screens it did not give me the option to do decreasing term, so I think this may be a guaranteed lump sum of the total of my mortgage. My mortgage is huge, having only just bought my first house in the south east. I also wonder if adding my wife adds to the cost more as I had to answer yes to one of the risk questions where one of her parents under the age of 60 had cancer.

I will definitely be getting at the minimum a single cover decreasing one for myself for the duration of my mortgage but wondered something....

Say I have a mortgage for total of £300,000 still remaining over 25 years, do I put the total cover down as £300,000 ? Or can I put it down as more, and any left over would get given to wife? i.e. Would it onlu be used for mortgage and any left over is a waste? Also, is there not an overpayment charge if it is all paid off through a life insurance payment? So say I die tomorrow and it's £300,000 outstanding and I had put £300,000 down as cover, would my mortgage provider charge an overpayment and it end up not covering it or do life insurance payoffs guarantee it will pay it off and not attract the charges?

 

[Theophany]

So how much do you guys roughly pay a month for your life insurance fixed term cover? I just had a quote for a joint one for £39 which surprised me as I hear of many people saying it's very cheap, more in the range of £10-20 a month. To be fair, during the quotation screens it did not give me the option to do decreasing term, so I think this may be a guaranteed lump sum of the total of my mortgage. My mortgage is huge, having only just bought my first house in the south east. I also wonder if adding my wife adds to the cost more as I had to answer yes to one of the risk questions where one of her parents under the age of 60 had cancer.

I will definitely be getting at the minimum a single cover decreasing one for myself for the duration of my mortgage but wondered something....

Say I have a mortgage for total of £300,000 still remaining over 25 years, do I put the total cover down as £300,000 ? Or can I put it down as more, and any left over would get given to wife? i.e. Would it onlu be used for mortgage and any left over is a waste? Also, is there not an overpayment charge if it is all paid off through a life insurance payment? So say I die tomorrow and it's £300,000 outstanding and I had put £300,000 down as cover, would my mortgage provider charge an overpayment and it end up not covering it or do life insurance payoffs guarantee it will pay it off and not attract the charges?

Check the T&Cs of your mortgage for early repayment charges. You can insure to whatever amount you choose, but the monthly premium will reflect that and unless you're taking out the policy with the mortgagee as a noted interest, in theory the full payout of the policy could go to your wife without the mortgage being repaid.

 

[booyaka]

So how much do you guys roughly pay a month for your life insurance fixed term cover? I just had a quote for a joint one for £39 which surprised me as I hear of many people saying it's very cheap, more in the range of £10-20 a month. To be fair, during the quotation screens it did not give me the option to do decreasing term, so I think this may be a guaranteed lump sum of the total of my mortgage. My mortgage is huge, having only just bought my first house in the south east. I also wonder if adding my wife adds to the cost more as I had to answer yes to one of the risk questions where one of her parents under the age of 60 had cancer.

I will definitely be getting at the minimum a single cover decreasing one for myself for the duration of my mortgage but wondered something....

Say I have a mortgage for total of £300,000 still remaining over 25 years, do I put the total cover down as £300,000 ? Or can I put it down as more, and any left over would get given to wife? i.e. Would it onlu be used for mortgage and any left over is a waste? Also, is there not an overpayment charge if it is all paid off through a life insurance payment? So say I die tomorrow and it's £300,000 outstanding and I had put £300,000 down as cover, would my mortgage provider charge an overpayment and it end up not covering it or do life insurance payoffs guarantee it will pay it off and not attract the charges?

With no refence to your age/wife's age etc it's very hard to say whether it's expensive or not.

Also don't forget that's a quote at this stage - it's not accepted until underwriting has been completed and potentially more information is required.

 

[Deleted User 298457]

Is there any direct-to-insurers that give a kick back for signing a policy?

I want something more than a free parker.

Edit: Looks like the going rate for 30-40 quid is about £225 cashback.

 

[booyaka]

Is there any direct-to-insurers that give a kick back for signing a policy?

I want something more than a free parker.

Edit: Looks like the going rate for 30-40 quid is about £225 cashback.

Cashback on insurance is simply a case that insurers generally just add the cost of the "kickback" to the plan.

So if you go direct (clear cookies/history etc) - they will quote a very slightly different rate, than if you go via any of the cashback sites. It's pretty standard stuff (usually goes the same for car insurance etc)

I would be considering the insurer/payout/claims history of the company well before worrying about getting some cashback on a life assurance policy.....

 

[Theophany]

Is there any direct-to-insurers that give a kick back for signing a policy?

I want something more than a free parker.

Edit: Looks like the going rate for 30-40 quid is about £225 cashback.

Cheapest way I've found for doing it for friends and family is to waive the commission I'd otherwise receive. You get an identical policy with the same level of coverage but for as much as £10p/m less.

As @booyaka says, there's usually a stage in the process where somebody is getting a kickback and unless they waive it, you'll end up paying for it.

 

[Deleted User 298457]

Cheapest way I've found for doing it for friends and family is to waive the commission I'd otherwise receive. You get an identical policy with the same level of coverage but for as much as £10p/m less.

As @booyaka says, there's usually a stage in the process where somebody is getting a kickback and unless they waive it, you'll end up paying for it.

Can you hook me up? Or is it worth the 25 quid for a broker?

 

[Theophany]

Personally I'd say it's worth the £25 so you know exactly what you're getting, what you need and what is worth having vs what's an expensive and possibly useless addon. You also have recourse if you believe you've been missold the policy at a later date.

I would love to help a fellow OcUK'er out but crossing the streams of 'that utter moron who posts as Theophany' and my professional life is a bit risky.

 

[booyaka]

Can you hook me up? Or is it worth the 25 quid for a broker?

Personally I'd say it's worth the £25 so you know exactly what you're getting, what you need and what is worth having vs what's an expensive and possibly useless addon. You also have recourse if you believe you've been missold the policy at a later date.

I would love to help a fellow OcUK'er out but crossing the streams of 'that utter moron who posts as Theophany' and my professional life is a bit risky.

haha - same here

 

[Psycho Sonny]

So how much do you guys roughly pay a month for your life insurance fixed term cover? I just had a quote for a joint one for £39 which surprised me as I hear of many people saying it's very cheap, more in the range of £10-20 a month. To be fair, during the quotation screens it did not give me the option to do decreasing term, so I think this may be a guaranteed lump sum of the total of my mortgage. My mortgage is huge, having only just bought my first house in the south east. I also wonder if adding my wife adds to the cost more as I had to answer yes to one of the risk questions where one of her parents under the age of 60 had cancer.

I will definitely be getting at the minimum a single cover decreasing one for myself for the duration of my mortgage but wondered something....

Say I have a mortgage for total of £300,000 still remaining over 25 years, do I put the total cover down as £300,000 ? Or can I put it down as more, and any left over would get given to wife? i.e. Would it onlu be used for mortgage and any left over is a waste? Also, is there not an overpayment charge if it is all paid off through a life insurance payment? So say I die tomorrow and it's £300,000 outstanding and I had put £300,000 down as cover, would my mortgage provider charge an overpayment and it end up not covering it or do life insurance payoffs guarantee it will pay it off and not attract the charges?

There is no early repayment charge if either of you die.

Because of things like life insurance. There may be if you don't have insurance and one of you die and are forced to sell. There may be in that situation I've never looked into it before but life insurance policy paying the mortgage is usually an instant exemption.