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[MSE Wendy]

This thread relates to the Mortgage Life Insurance article.

Click reply to discuss.

[_Andy_]

I find the slating of CI cover and recommending people not to take it very, very poor advice and potentially dangerous.

[payless]

I find the inclusion in that article of a broker that massively spammed these boards as questionable.

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People using execution only routes should be aware that not all policies are the same

Difference in how the covers reduces over time

Guaranteed, reviewable or annually reviewable/renewable

Differences in claims definitions ( mainly an issue on CI policies)

This on top of items mentioned in the article... in particular sole/ joint policies and how they can be written differently, and trusts... yes they can send you paperwork however do it wrong and it could work out a very expensive mistake

[lisyloo]

I find the slating of CI cover and recommending people not to take it very, very poor advice and potentially dangerous.

I think that PHI is a MUCH better product than CI and that CI is not a particularly useful product.
I think it's dangerous that people with CI might think they have coverage when they are ill when in fact they only have coverage for a small number of illnesses.

It's all about understanding your needs vs understanding the coverage the products offer.
I think CI coverage is poor because it's specific illneses and a lump sum.
A lump sum is fine for making suitable alterations to a house or getting care or alternative treatment, but it's little use in providing an income for someone long term.
PHI on the other hand provides a long term income if you can't work (which illness is not specified just the inability to work).
That makes far more sense to me.

[dunstonh]

In fact, in most cases, (and do forgive the virtual shouting for necessary emphasis)...
"It's simply a case of the cheaper the better!"

That is largely correct. However, you shouldn't rule out options like guaranteed insurability and the ability to alter the sum assured. Having had a couple of people use guaranteed insurability in the past, had they shopped on price only then they would have lost out financially.

Often the price difference between providers is not that great and going with the one with guaranteed insurability and options can be the most efficient option even if it costs 25p a month more than one that doesn't.

The FSA is currently investigating quote portals that list premiums by price to ascertain whether this means it is advice or not. The quote portals deny this but there is a concern that price is being too heavily focused on at the expense of options and features. Especially when many of the quote portals list yearly renewable term, reviewable and guaranteed in the same list which basically means YRT will come out top (as first year premium is nearly always cheaper, then reviewable then guaranteed).

I'm not a big fan of critical illness policies. Many believe they will "pay out if you get a serious illness and can't work". Yet that isn't true.

That is not a valid reason for not liking it. It's a bit like saying " I am not a fan of aeroplanes as they are no good for the school run in the morning so you shouldn't have aeroplanes".

If you have an income replacement need then take out a permanent health insurance. I agree that PHI should be prioritised above CI most of the time. However, statistically, its around a 1 in 5 chance of death before retirement and a 1 in 6 chance of claimable CI event before retirement (for male). So, the odds are not that different. Especially when you consider that mortgage payment protection (ASU) is around 1 in 12.

most policies only cover a limited range of cancers.

That is not correct. Most cancers are covered. It is a minority that isn't. It can also depend on when it is diagnosed.

Picking a good critical illness policy would take a doctor and financial nerd combined

Not really. There is now an ABI minimum standard. Whilst many providers go beyond the standard and working on price only is not a good move, the data is available to make a decision. All the major independent research software shows this. Maybe nerd isn't the right term but IFA would be.

Is it worth getting quotes from direct sellers too?
All brokers cover the same main life assurers, but they don't include the direct sales policies from the likes of Tesco, Direct Line or Sainsburys. Yet their prices are consistently more expensive than the cheapest brokers, so whilst for belt and braces you could include them in your quotes, I've never yet heard of a case where it's worth it.

The supermarkets sell rebranded plans. i.e. Tesco used to sell Norwich Union until they switched to Direct Line (which they part own). From my experience, IFAs could undercut the supermarkets easily on like for like terms. (remembering that the discount brokers are effectively IFAs operating on a discounted business model).

If when you get a quote it shows you can save, all you need to do is set up the new cover and once you've got confirmation, end your existing policy; though a quick check of its terms and conditions first never goes amiss.

Older critical illness plans or life cover which includes CI tend to have greater coverage than modern plans. I cannot remember the year that the changes were made but it would have been around 2000/1.

If you die the life assurance forms part of your estate

Only if it is on single life, single owner basis. If it is joint life, first death or life of another then it wont. Although considering trust use is important.

It may be worth noting the there are usually multiple trusts available to use to suit circumstances. Two most popular are flexible trust and absolute trust.

[sammyjammy]

I hope this is the right place to ask this, I've got mortgage term assurance with critical illness insurance, I'm single, mortgage currently £65k over 12 years, I'm paying £14.75 through Zurich which I stupidly let my broker organise, I know that some people say if you're single you don't need it and the CI doesn't cover as much as you think but now I've had it a while I'm reluctant just to cancel it so.... (I'll get to the point in a minute ) I've just got a quote to move it and the quote says that my requirements don't meet the minimum monthly premium of £6, I've upped it and upped it and to get it to qualify I would have to ask for £100k cover over 20 years...... obviously its loads cheaper (I'll obviously check the policy terms and conditions before I sign up) but I'm concerned that the policy covers more than my needs, what would happen if I claimed? Am I allowed to ask for more cover than I need? Would they limit my claim to what is actually left on the mortgage?

Grateful for any help after my waffling and rambling.

Sam

[TEDDYRUKSPIN]

The above are correct. How can you say critical illness cover is rubbish and a waste of money?

Permanent health insurance also goes in to underwriting and will only pay 50%-60% of your gross income until maximum 65 years. This is also judged on the type of job you have and even then most of the time, the cut off point is 60 years. Not to forget, the 50% supposedly income you will receive will be less if you claim disability allowance or incapacity allowance. Worse still, you will always have to obtain a sick note every month to prove you are too ill to work.

Critical illness cover work different. This provides a lump sum, specified to some specific critical illness. Yes, it will not pay out on some causes, and that is because they are not critical! 80-90% off the time, depending on the company, this will pay off a massive lump sum and clear your mortgage.
I have seen alot of customers who have benefitted from this.

Also, from the above, you have told the customers to churn! This is greatly frowned upon. From 2006, no cover from date, are like for like for critical illness cover. You have been warned. All critical illness cover prior to this would pay out for key hole surgery. It is irresponsible to ask people to start switching policies and especially when they are not technically and medically minded.

I completely disagree on some part of your discussion. Not all critical illness cover are the same from lender to lender. Some have very poor payout rates and this reflects on the cost (premium).

As for life assurance, you are correct that you can obtain cheaper throughout the net. But what if the customer does not answer the questions correctly? I have mystery shopped alot of these online sites and no way are the medical question suffice enough! They will underwrite them at ordinary rates every time. When a person or family makes a claim, they will just say you did not pay the correct premium and answered the questions right! Then they will not pay out.

The FSA will soon stop search engines on selling life cover and alike! All these covers will soon no longer be on an execution basis. This area is not easy and a full factfind should always be carried out. Therefore, in the near future full advice is required and hence, these sites will be pulled off the market.


All in all, I disagree with these comments. This is very poor advice and should be changed immediately.




Sammy!! You cover is cheap! If the broker carried this out for you, the likely hood is that it is one of the ok life covers. Don't mess about with it and especially when it is only £15.

[HomeJames]

Hope someone can advise me we have a mortgage of £19000 which we hope to pay off in the next 3-4 years we currently pay £25.96 in mortgage assurance we both have life policies for in excess of £100000 each and death in service benefits from our employers. We have no dependants therefore we are wondering if we could save ourselves some money and cancel this policy what do you think?

[John in pinner]

Having spent nearly 50 years in Life Assurance planning I would say.
1) Get proper advice from a good independent broker - go to several to compare. There is no such thing as the perfect plan, they vary and can all be correct! You shouldnt have to pay anything if you go to a good IFA.
2) Get the broker to produce a plan for you personnally after an analysis of your situation - you cant do this your self by picking up a leaflet at the supermarket!
3) Dont ever do joint life - have your own cover, especially if you are not married.
4) Just because the mortgage is cleared doesnt meant that your debts end - you need to fund to run the house.
5) Review your insurances every two years or so - and dont cancel anything tilll it has a proper replacement.
6) Insurance is to protect against something that may happen - what are your priorities?

[Englishbloke]

Disgusting! How can you recommend against CI insurance!! I recently received a 190k pay out when I was diagnosed with cancer at 31 years old. Thank god I took the policy which only cost me 31 pounds/month.

As long as you are completely honest on your application (and ask to see your medical records if you aren't sure about anything) then it is very straight forward, you don't have to be an MD to work it out like suggested in the article! Plus the new guidlines protect the consumer very well, there was no challenge to my claim.

[HockeyDuo8083]

Should you just get Mortgage Life Assurance and not bother with Life Assurance?
Sorry it's all very confusing

[dunstonh]

Originally Posted by HockeyDuo8083

Should you just get Mortgage Life Assurance and not bother with Life Assurance?
Sorry it's all very confusing

Mortgage life assurance is life assurance. Its just one of the 15 or do different types of life assurance policies you can get. Generically, it is called decreasing term assurance but some providers have given them marketing names such as mortgage life assurance as thats what most people use decreasing term assurance for.

You think thats confusing, try explaining to the client why you are using a product called mortgage life assurance when its not actually for a mortgage need (but a decreasing need)!

[HockeyDuo8083]

Thanks dunstonh.

So basically we each need to have Life Assurance and Critical Illness Cover. OH has both these already through work so I just need to get them.As a couple we will need to take out Mortgage Payment Protection Insurance and Buildings & Contents Insurance.

Have I missed anything?

I take it there can be a clause in the MPPI that covers Redundancy??

[Malcmandy]

Relatives have a Decreasing Mortgage Insurance on their Spanish property, the annual amount of which is now expensive due to the euro.
Would it be best to cancel this and take out another form of insurance, in this country? Possibly a life one ?

Thanx

[puskas17]

Hi their wondering if anyone could help out at all please or have some advice. I took a life insurance policy out to pay off my mortgage. Last year I retired and paid my mortgage off. My question to you guys is, should I continue to pay the policy till end of term or cash it in just now? My mortgage was £30,000, current policy benefits are £17,500 with 4 years remaining. Many thanks

[dunstonh]

should I continue to pay the policy till end of term or cash it in just now?

When are you going to die

Also, you say cash it in. That suggests an invesmtent element and not pure term assurance. You will need to consider the cost of early surrender against paying ongong premiums and the potential benefit.

[JasonTheKnight]

Hi!

Hopefully not tooo stupid a question... if I'm taking out life assurance on a new repayment mortgage, do I take it out for the value of the mortgage itself (ie the x% of the house price we're borrowing), or the total repayment cost of the mortgage (ie including the 25 years of interest)?

Many thanks!

Jason

[yelf]

I think people with specifc questions should post them in their own thread otherwise it will get mnessy.

This is a poor article with poor advice. To say CIC isnt important is stupid. You're far more likely to make a CIC claim than a life claim. PHI may pay out if you are ill due to a CI, but it will hardly be enough to cover the mortgage with much spare.

The article writer clearly has other reasons for writing this than helping peopel, and MSE shouldn'e have posted it.