Mortgage life assurance discussion

Former_MSE_Andrea · 8 November 2004 at 3:13PM

This discussion relates to the Mortgage life assurance article.

To ask a question or discuss the article just click reply.

dunstonh · 8 November 2004 at 4:14PM

Most banks main sales technique for MDLA is fear, hitting people with the thought of burdening their descendents with debt. This is devious as the basic rule is debts die with you, they do not encumber your descendents.

Disagree with that.

If it is a joint mortgage, the joint person is liable for the debt.

The debt remains after you die, then the debt is secured by the property and the property will be sold to clear the debt if there are no other assets to clear it.

Therefore if your wife, for example, is dependent on you and there is no life cover and no assets to clear the mortgage, then the property will need to be sold. (replace wife with partner and/or children or anyone else for that matter).

The article does not clarify the difference between secured debts and unsecured debts and is therefore misleading.

So it is purely a case of the cheaper the better.

Not necessarily. The article mentions guaranteed premiums and reviewable premiums. There are also yearly renewable term plans (NDF being a common one). However, it fails to mentions that there are bolt ons to life plans such as critical illness, waiver of premium, terminal death benefit.... Some may be included in the premium, some may be chargeable add ons.

Where critical illness or waiver of contribution is added in, the number of conditions covered can vary quite a bit. Waiver can also vary to cover own job only or any job. If you are going to pay for something, its worth checking that it is going to cover you.

Having checked the quotations, I am interested to see you recommend and award companies who can be beaten by contributers on the forums. It would have been nice if you had said that the article was planned and allow the forum contributers to offer their recommendations of companies with good quotes or even their own company and then a comparison made then.

MSE_Martin · 8 November 2004 at 4:34PM

Sorry DD - but i rather solidly disagree with much of what you've said.

1. Sales by fear. Having been involved in/presented documentaries with hidden footage on exactly this subject let me say almost every time these policies are sold it is on the fear factor, it is inappropriate and wrong. I've heard hideous horror stories.

That does not mean getting a policy is wrong, in fact the article advocates that, just the bank's sales technique is wrong.

2. On the specific point you raise about joint debt you are of course quite correct. Which is why it is in the article - maybe you missed it?

3. This is an article on Mortgage life assurance - not level term assurance (which is covered separately). There is no need to go into secured and unsecured debt in this piece it adds unnecessary confusion

4. Add-ons. This is not a piece on add ons. I'm not much of a fan on most add ons anyway - and consider income protection the most important one and oft cheaper bought separately.

So again let me state clearly if you are buying mortgage life assurance then it is the cheaper the better (with the exemption of the guaranteed and reviewable issue as stated in the article)

4. Who can beat these quotes? Do tell. I don't know any that can.... I would be interested to hear.

And as for "allowing forum contributors to discuss their suggestions" what do you think this is? That's why it links from the article and is called "discussions!"

To be honest I've had such criticisms raised before, commonly by the IFA sector, who are rather disenchanted with the idea of people buying straightforward products without advice and thus depriving them of commissions.

Yours in a mite frustrated

Martin

safari_2 · 8 November 2004 at 4:53PM

Good article. I've got a couple of points to add

1) Check the small print about what gets paid out. Some of the ones I looked at pay off the "outstanding mortgage".

This means that if you're overpaying on a flexible repayment mortgage then you'll be getting less benefit for your premiums. Conversely, if you underpay for 10 years, will you get more than what you would have got under normal repayments?

I'm also not sure what happens if you have an offset mortgage like the RBS One account. If you've got a £100k mortgage and £60k savings offsetting it does that mean that the insurance will only pay £40k?

2. It might also be worth mentioning that a lot of employers provide death in service benefits that pay out a multiple of your salary which could be used to pay off a mortgage.

dunstonh · 8 November 2004 at 5:46PM

1. Sales by fear. Having been involved in/presented documentaries with hidden footage on exactly this subject let me say almost every time these policies are sold it is on the fear factor, it is inappropriate and wrong. I've heard hideous horror stories.

Sales should be made to cover the need. That is right. Some people need to be shown the events of what may happen if they dont do something. That again is right.

I think what you are suggesting is when you hear that people have been told that their son who lives somewhere else becomes liable for the debt. That is lies, it does get said and shouldnt happen. Is that what you are referring to?

My quoting wasnt really about that bit though but the last sentance that said debts die with you when this is not the case with secured loans and mortgages are secured and we are talking about mortgage life protection.

The article appears to have been edited as that first grey box only had that first paragraph and not the following two when i read it.

4. Add-ons. This is not a piece on add ons. I'm not much of a fan on most add ons anyway - and consider income protection the most important one and oft cheaper bought separately.

Fair enough and with my official hat off i would agree with you on some of the add ons. However, some people do proceed with these and some are useless, some are useful. The main point was terminal illness which some companies include in the base price, others do not. I believe standard life is one of the companies that doesnt include it in the base price but charge it as an extra. Often the premiums from an IFA or quote portal will have only a few pence difference in the best priced companies and and a options may be worthwhile considering to work out the difference, rather than price.

4. Who can beat these quotes? Do tell. I don't know any that can.... I would be interested to hear.

I put them into my own company website and it was coming out 2nd on some, third on others. Usually only pence in it.

To be honest I've had such criticisms raised before, commonly by the IFA sector, who are rather disenchanted with the idea of people buying straightforward products without advice and thus depriving them of commissions.

I personally dont care if people buy them direct or indirect. There is enough distribution channels to suit all sorts. However, there are differences and the differences are not always clear. If things like servicing, underwriting, included benefits etc are not of interest then fair enough buy direct.

Commission has little to do with it. Those that want the service, get it and pay a little more for it. Those that dont have the facility to get it cheaper and do it themselves. No-one forces an individual to pay by commission.

If someone was to pay me £45 to do execution only life cover via my portal, then i would put it through as zero commission. Especially when you look at those examples and realise that an £8pm quote paid £48 commission but payable as £1pm for 48 months.

dunstonh · 8 November 2004 at 6:36PM

As for when you say your own website came second or third, who was that comparing it to?

It was coming out between Lifesearch and Cavendish on most cases.

For example:

the female smoker, 30 NB came out at £7.90pm which is identical to Cavendish without the need to pay £45. That makes it joint top for premium but cheapest as there is no £45.

The male 30NB non smoker came out at £8 which is joint second with Lifesearch.

paul8811 · 8 November 2004 at 7:05PM

I have just got a quote from Cavendish & it comes out as £12.06 for joint cover mortgage life insurance...thats seems a bit cheap to me...have I dont something wrong??

product type - mortgage protection
beneift type - death only
Monthly over 25 years for £200k
No increasing benefit & no waiver of premium

dunstonh · 8 November 2004 at 7:42PM

I have just got a quote from Cavendish & it comes out as £12.06 for joint cover mortgage life insurance...thats seems a bit cheap to me...have I dont something wrong??

product type - mortgage protection
beneift type - death only
Monthly over 25 years for £200k
No increasing benefit & no waiver of premium

Age? smoker or non?

MSE_Martin · 8 November 2004 at 7:48PM

OK DD

Now i understand.

Lifesearch are by no means my number 2. In fact they're way down the list - they're there to show how expensive a "we find the cheapest" can be and as an example of an advisory broker

The list is

Cavendish, then moneyworld-ifa, then the idol, then lifepoliciesdirect, then rebroke

How do you do amongst those?

paul8811 · 8 November 2004 at 7:56PM

Age? smoker or non?

both 29 & non smoker

dunstonh · 8 November 2004 at 11:47PM

I have just got a quote from Cavendish & it comes out as £12.06 for joint cover mortgage life insurance...thats seems a bit cheap to me...have I dont something wrong??

Sounds about right. You figures put in to exchange come out as:

Cheapest on full commission is £15.05
Cheapest on fee basis is £11.80

Cavendish, then moneyworld-ifa, then the idol, then lifepoliciesdirect, then rebroke

How do you do amongst those?

On the examples you quoted, i just checked the top 2. First one equalled Cavendish, second one was a little more.

It should be noted that IFAs will have different rates offered to them from the insurance companies depending on their level of business that they or their network places with that insurer. A good example of that is on this post where a zero commission policy is £11.80 for me but Cavendish is £12.06. In this case it works in my favour as i have better terms with the best priced insurer in this example. However, with different ages, sum assured etc, another insurer can come out top and the terms offered by them could favour another broker.

So, those other companies are possibly offering the best they can get but their terms are not that great from certain insurers.

Mortgage life assurance discussion

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