GRIPES

[rgmwa]

Good idea. They pay for what will ultimately benefit them and you keep your pension money. 

[Jerry_Atrick]

6 hours ago, Marty_d said:

I have always considered life insurance a scam.

As you say Peter, if you've been paying premiums for 45 years and you've worked out you could still save the amount of the payout in 7 years, imagine how much you would have now if you'd never paid them anything.

I understand this point of view, but that is not what life insurance is for. It is not an investment (although admittedly, it is often sold as an investment or, I think in Aus, term life policies have an investment component - but even then, it is not really a good investment). 

 

It is designed to cover your lost ones in your younger periods of life, when you have debt and possibly a young family, should you aas the income earner die (usually unexpectedly).  It is designed to provide the cash benefit for them to pay off the debt and maybe live off an annuity to approximate lost income. Again, it is a premium on the risk they have to payout; in the same way you pay your car insurance but if you never have a crash, you don't get the market value of your car when you hang up you licence, nor do you get some payout at the end. 

 

In itself, it is not a scam, but it is fair to say they way it is marketed to become a scam.  And that is because it is marketed as an investment to payout on a foreseeable death when it is likely no one needs the money, rather than the unforeseen risk of an early death. 

 

From your perspective, Peter, the above is good advice if it guarantees a payout on  your reasonably foreseeable death (ie. not accidental).. May want to check the policy to be sure.. because it will be a big disappointment if the policy excludes non-accidental death. 

 

Although too late for yourself, the normal advice would be to set up a diminishing value insurance policy that reduces over time in accordance with your reduction in debt (mortgage) over time.. If you remortgage or take on more debt your policy should allow you to adjust the payout (and the premium will adjust accordingly). In theory, as the payout reduces, the premium reduces as well... and when the mortgage is paid off, there may be a residual payout available to cover creating an annuity for income. 

 

You should use the reducing premiums to sink into proper investments where you can allocate to funds that more meet your investment needs. That has no of the exclusions of a life insurance policy and its payout is usually guaranteed (if its performance isn't - i.e. there is usually something left even if it was a bad investment).