Is it worth keeping my life insurance policies?

Life insurance: Is it worth keeping my policies?

I have two life insurance policies with Liverpool Victoria. The latest statements show the surrender value on one has halved and the death value has dropped by over £100.

It seems I would have been better off surrendering them in January 2011 and putting the money in a savings account. Is it worth keeping them? D.W., Bexhill-on-Sea, East Sussex.

Your policies are what are known as ‘whole of life’. Ordinary term life assurance lasts for a specific number of years, but whole of life should have some value however long you live. It aims to achieve this by having a mix of investment and insurance.

The idea is that the investment element will provide enough extra money to cover the increased cost of insuring you as you get older.

These policies have often disappointed. Money Mail frequently hears from readers who are told that either they must double the amount they pay in premiums each month or the life cover will halve.

However, you have not done too badly until recently. Yours are old so-called penny policies. You took one out in 1953 to insure you for £17 and another in 1963 for £27.

You pay 75p every six months to cover both policies. The policy starting ‘156’ now has £247.69 death benefit — nearly four times more than you have paid in.

The one starting ‘27C’ would pay out £159.23 — 11 times more than you have paid in.

If you surrendered them, they would pay out £214.69 and £103.74 respectively.

LV=, as the firm calls itself these days, says your death benefits have been cut as a result of poor investment returns.

These benefits could well fall again if investment conditions do not pick up. When deciding whether to keep them, consider whether you need the money, whether your dependents need the benefits and how you would feel if the value fell again.