Life Insurance - Offer too good to be true? Someone please explain to me where the catch is?

[Deactivated] on 08/12/2013 - 17:23
Last edited 30/12/2013 - 19:55 by 1 other user

So - Woolworths called and offered life insurance to me.

Over numerous phone calls - they claim that I can take out life insurance for $1.5 million.

The cost is $30 per week. As long as I continue to pay the premium - they will pay out $1.5m to my nominated persons or next of kin.

They say that premiums do go up - but only around a $1 or $2 per week each year.

I work out that - say I live for another 50 years - this will make my payments approx:

(50 years x 52 weeks x $30 p/w) + (50 years x 52 weeks x $2) = $78000 + $5200 = $83200

But say payments end up for some reason totaling a lot more @ $100 000.

This still doesn't add up. I'm given the opportunity to invest $100k to get $1.5m and I also get to pay for it over time in installments.

I asked how they make money off it - they say "We sometimes get people who stop paying. We also get people who keep the insurance there only while they're paying off their mortgage and then they stop the insurance once they know it has been paid."

I just can't believe that there are enough people stopping payments for them to benefit - you would need 15 people to stop paying for 1 person to get paid out.

I ask about exclusions and they say - no exclusions - even if you commit suicide.

Am I missing something here?

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Comments

  • ukmark on 08/12/2013 - 17:52

    Easy, they won't insure you past 65.

    • [Deactivated] on 08/12/2013 - 18:26

      Yep, some will insure to age 70 but I've never seen a life insurance policy that covers anyone past either 65 or 70. With good reason…that's when they have to start paying up a lot more.

      If you are unlucky enough to qualify for your $1.5M then you will have met your demise well before your life expectancy.

    • Holysmoke on 08/12/2013 - 19:35

      From their FAQ's:

      1. How long can I keep my cover?

      A: Your Woolworths Life Insurance is guaranteed to be renewed for life provided that you pay your premiums on time. You can be covered for Woolworths Total and Permanent Disability Insurance until you reach age 65.

      Also,

      1. What is not covered under Woolworth Life Insurance Policy?

      A: The Benefit Amount will not be paid if the Life Insured dies, or has a Terminal Illness as a result of intentional or self-inflicted harm occurring on or after the date the cover is accepted and within 13 months of the Commencement Date of the Policy.

  • mskeggs on 08/12/2013 - 17:56
    +1

    Well, you would need to be dead to claim ;-)
    I agree this is too good to be true.
    Get the premium increase thing in writing, that is the bit I expect will have the sting. "Only about $1 or $2" until you are 50 an then it starts going up $100 per year.
    And check they don't exclude people after a certain age.
    They should be able to supply a product disclosure statement.
    If they can't/won't it doesn't sound legit.

  • mskeggs on 08/12/2013 - 17:59
    +1

    Also, I just checked my life insurance via super. It charges me $28 a month for about $500k, so this premium is significantly higher than others in the market. And if you buy this insurance via Super the premium is paid with pre-tax dollars.

    • ukmark on 08/12/2013 - 20:10

      Life insurance is USUALLY tax deductable anyway, so being paid with pre-tax dollars isn't that important - assuming your tax is done correctly at the EOFY.

      • kiitos on 10/12/2013 - 22:23
        +1

        I don't think it is - perhaps you're thinking of Income Protection insurance?

    • Kevan2 on 11/12/2013 - 08:06

      All on right track. aaarrrnnn is right. Check with your providers ukmark, claim a deduction on premium then someone may pay tax on benefit payout? Seems time to review again. Super holding of your insurance is it Death or is there other benefits. So now check benefits - Death TPD and income protection. I would not have any cover in income protection that does not [perhaps in two policy super + external] pay a benefit to 65 in. Cash flow considerations also should be entertained. Can you ensure that you will be always pay premiums , to keep the cover,for some of the considered insurance, if not super accumulation can pay premium at some costs. HOWEVER go see a number of FINANCIAL PLANNERS you can decide if you pay them for any interview or insurance placement.

  • dragong87 on 08/12/2013 - 18:17
    -1

    if i understand this correctly i think the calculations might be a little off….
    if the premium goes up $1-$2/week every year in 20 years, ($30 + $2 x 20 = )$70/week ($70x 52 weeks = $3640/year) and in 50 years your premium would be $30 + $2 x 50? so $130/ week? so almost $6000/year…?

  • bich.light on 08/12/2013 - 19:16
    +1

    I think you're doing the math wrong as well… I would correct you but I forgot all about series and sequences crap from year 12 already xD

    • ukmark on 08/12/2013 - 20:08

      How did I miss that, I guess I didn't look at the figures.

      The actual amount paid is over $200k assuming the weekly premium increases by $2 every year.

      It is insurance so you don't leave your love ones in the proverbial if you die early. It is not a guarantee you will make money for your next of kin when you die at a ripe old age.

      Also, it is a pretty poor deal, it is much cheaper for me with TAL, and based on your 50 extra years life expectancy, we are about the same age :)

  • netsurfer on 09/12/2013 - 02:49
    +2

    Catches:

    • As soon as you stopped paying them on time, you lose all your entitlement.
    • For $1.5 millions, they will ask you to do some physical exams and quite possibly blood test. You must pass those tests.
    • The premium depends on your age. If you let them "increase" the premium per year, you definitely have to pay a lot more as you get older. There is also an option to pay a flat rate, but that premium figure will be a lot higher.
    • It is actually quite common for people to stop the insurance after a while. Most people buy it to ensure they don't leave debt to their love ones.
    • $1.5 millions in 50 years' time won't worth as much as $1.5 millions now.
    • They take your money and invest in something. So, when you calculate how much you are paying them, don't forget to factor in interest (compound interest).

    Most people buy this type of insurance to protect their love ones from any unexpected accident. Once their dependents can care for themselves and they are debt free, they often stop paying for the insurance.

  • heartychat on 09/12/2013 - 08:51

    Wow. I'm not going to comment on whether this is a good deal or not, but I just wanted to say this topic is pretty amazing to me.

    Why did woolworths call in the first place? How did they get your details? I get the impression that you are in you 20s or 30s, and probably shop at Woolworths with an every day rewards card. Is that right? That would mean they have data mined all your purchases and looked at your location, age etc and then come up with the conclusion that you're a low risk prospect for life insurance.

    Just thinking about the whole concept of the amount of personal information out there can be frightening and mind blowing at the same time. Amazing.

    • terlalu on 09/12/2013 - 09:08
      +4

      You'd think that after data mining all your info and found you're at a HIGH RISK they'd call you anyways and tell you to go see the doctor

      • MITM on 27/12/2013 - 23:00
        +1

        They'll keep High Riskers details for when they can sell prescriptions … coming to a Woolworths near you.

        Ring..ring.. "Hi there, we noticed you're due for a heart attack by the amount of generic food you've bought from us. Can we interest you in some generic drugs we import from India ? We have a 2-4-1 special today only"

  • Scrooge McDuck on 09/12/2013 - 09:37
    +1

    If the weekly premium increases by $2 each year then the total amount paid would be:

    $(2 * 50 / 2 + 30) * 50 * 52 = $208,000

    This simple calculation completely ignores inflation so the true cost would be much higher.

  • Kevan2 on 09/12/2013 - 12:09

    . 1. ensure that you use compound cals for the $2 increases.

    1. get quotes elsewhere, on line and face to face at no costs. the bank staff/or affiliates will be willing.

    2. term insurance is not an investment. it is like car insurance. die or tpd you are paid out. no investment funds. there are ways to be both.

    3. talk to your super provider.

    4. dont forget to talk about where you want money to go. there are traps.

    any how insurance if you can get it now at standard rates is like a red light special. you may not get it later, it could be dearer later/loaded premiums. you can always reduce cover/costs but may not be able to increase costs.

  • IJustKnowStuff on 16/12/2013 - 12:23

    For you number anal retentive out there, the exact cost of $30/week for 50 years, factoring in the weekly amount going up by $2 a year is…drum roll please: $205,400.00

    So far Scrooge McDuck has been the closest.

    Though I'm pretty sure it would go up more than $2 per year sometimes.

    EDIT: I did include a table with all the payments, but it filters out the tabs and multiple spaces so it just looks silly.

  • ShannonIngram on 16/12/2013 - 21:42

    Call up and get a quote from them as a 60 year old for life insurance. Then you'll see how much their 1 or 2 dollars per week really is. Premiums tend to go up significantly as you get older.

  • Kempe on 18/12/2013 - 15:18

    I used to sell insurance 20 years ago and only one in seven policies went the distance.
    Various reasons why people cancelled from being "stolen" by another company to change in lifestyle, divorce, unemployment etc or wanting a new car/house/holiday

  • demiurge on 21/12/2013 - 12:49

    Truly a deal to die for.

  • MITM on 27/12/2013 - 23:09

    $1.5m for my life. I wouldn't sleep at night wondering who would want it the most, unless I had more than $1.5m of debt. Adding a new car on the never never would let me sleep better.

    The point of death cover is to leave no debts behind, not a jackpot for the family.
    Having the right amount of cover ensures minimal premiums.
    TPD/Trauma cover is the jackpot for self - unfortunately.

  • anna10 on 30/12/2013 - 14:21

    "The point of death cover is to leave no debts behind, not a jackpot for the family" is not the case if you are sole provider for a young family. They will still need school fees, house rates and a million other needs after the earner carks, and they may not be able to get on their feet for some time.

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