The sum assured would reduce to £17,700 if they left the monthly premium at £35.
Mr and Mrs T chose to increase the premium to £42 per month to preserve the original level of cover.
At each annual review until 2016, the monthly premium stayed at £42.
But in March 2016, Mrs T was notified that the monthly premium needed to increase to £118.80 to keep life cover at £20,000.
She chose to keep the monthly premium at £42 and as a result the life cover under the policy was reduced to £13,250.
But just a year later she was told £42 was no longer enough to support the sum assured of £13,250 and she needed to increase this premium to £78.10 per month.
As she chose to keep the monthly premium at £42 her life cover reduced to £10,380.
A further review in March 2018 then concluded that her monthly premium of £42 wasn’t sufficient to support life cover of £10,380 and she needed to increase this premium to £105.88 per month or life cover would reduce to around £4,500.
This sum was now guaranteed provided she continued to pay £42 per month but the policy would no longer pay a surrender value.
At this point, she felt the whole advice she received with her late husband in 1994 was questionable.
A spokesman for Canada Life pointed out Mrs T already held a "reviewable whole life policy since 1987, so she would have known how they worked and the premium did increase at the very first review."
Canada Life also argued the situation was created by Mrs T continuing policies A and B after the mortgage had been repaid.
Canada Life stated it was appropriate to provide advice that fully protected Mr T if Mrs T died first, as she was a higher earner plus both policies only required an increase in monthly premiums at very recent reviews.
However the Financial Ombudsman Service pointed out the adviser would have known in 1994 that, as Mr and Mrs T grew older, these policies would become progressively more expensive to fund and/or fail to give a worthwhile surrender value due to the increasingly greater mortality charges for life cover.
Canada Life was ordered to compensate Mrs T.
Ombudsman Kim Davenport said: "My view remains that the simplest, and most appropriate, advice for Mr and Mrs T in 1994 was to leave policy A for the benefit of their daughter and to take out a 15-year, joint life decreasing term assurance policy for £25,000, payable on first death for which the adviser quoted a monthly premium of £95.
"The amount payable from this policy (equivalent to the amount still owing on the mortgage) when Mr T died in July 2007 would have been £4,282. There was no need for Mr and Mrs T to have taken out policy C at all."
