QUESTION TIME

Your questions answered by a panel from Coopers and Lybrand
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I borrowed pounds 6,000 over eight years from the Associate Mortgage Corporation. At that time I paid an additional premium of pounds 560 to protect against redundancy and sickness, but did not receive a copy of the policy.

I subsequently became ill and was retired on medical grounds. But when I tried to make a claim I was told the policy had expired as it was only taken out for five years.

I would have thought that a five-year protection policy on an eight-year loan would amount to an unfair clause. Please can you advise.

Redundancy or sickness cover can be taken out for a specified time scale of your own choosing. The premium charged reflects the level of risk and the duration of the cover provided.

In this instance I agree that having the cover for only five years when your liability was for longer does not make sense.

However, it is not impossible for this situation to have arisen.

It could well have been a genuine mistake by the Associate Mortgage Corporation's representative. But when you agreed to the premium of pounds 560 you should have had sight of the contract and it should have shown that the expiry date was after five years.

You should write to the Associate Mortgage Corporation and ask it to review its files, looking at the original meeting notes to see whether there was any indication at the time the policy was to be for eight years.

However, as the policy has now lapsed and as it was some time ago it is unlikely they will still have them. If there is nothing in writing, I am afraid it is very much down to your word against theirs.

This kind of error emphasises the need to read in detail any contract before signing it and I would recommend you keep copies of policy schedules to enable you to check policy cover at a later date if necessary.

I have a Tessa that I took out nearly five years ago and is due to mature early next year. Can I reinvest all the proceeds in a new Tessa?

Tax Exempt Special Savings Accounts (Tessas) first became available in January 1991 so the first accounts will be maturing next January.

The rules allow you to roll over the capital you invested in the first Tessa,up to a maximum of pounds 9, 000, into a new Tessa.

However, you cannot roll over the interest as well so you will have to find an alternative home for this.

Other than this the same rules apply to the new Tessa as the old one, that is a maximum of pounds 9,000 capital invested over 5 years. You can only hold one Tessa at a time.

Readers should send their questions regarding financial and investment matters to our panel of experts at Question Time, Personal Finance Department, The Independent, 1 Canada Square, Canary Wharf, London E14 5DL.

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