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    • carter0268
    • By carter0268 5th Oct 17, 3:48 PM
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    carter0268
    Mortgage protection life insurance once mortgage paid
    • #1
    • 5th Oct 17, 3:48 PM
    Mortgage protection life insurance once mortgage paid 5th Oct 17 at 3:48 PM
    I have been lucky enough to pay off my mortgage early and called my insurance provider to check what happens to my mortgage protection now. I was told it was not attached to the mortgage so if I die, there will still be a payout to my estate, reducing year by year. I am quite happy to continue paying if this is the case but can't find anything in my terms and conditions to confirm it. Does anyone know if this is usual for a mortgage term life assurance?
Page 1
    • dunstonh
    • By dunstonh 5th Oct 17, 4:56 PM
    • 89,852 Posts
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    dunstonh
    • #2
    • 5th Oct 17, 4:56 PM
    • #2
    • 5th Oct 17, 4:56 PM
    Life assurance and mortgages are not directly linked. The payout would go to the estate if single life or the other owner if its a joint policy.

    Only issue is if its a decreasing term assurance. There comes a time when the decreasing term assurance largely becomes pointless as the sum assured would be so low.
    • Aretnap
    • By Aretnap 5th Oct 17, 5:03 PM
    • 2,781 Posts
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    Aretnap
    • #3
    • 5th Oct 17, 5:03 PM
    • #3
    • 5th Oct 17, 5:03 PM
    I have been lucky enough to pay off my mortgage early and called my insurance provider to check what happens to my mortgage protection now. I was told it was not attached to the mortgage so if I die, there will still be a payout to my estate, reducing year by year. I am quite happy to continue paying if this is the case but can't find anything in my terms and conditions to confirm it. Does anyone know if this is usual for a mortgage term life assurance?
    Originally posted by carter0268
    That's the norm I believe.

    A bog-standard decreasing term life insurance policy provides a payout which decreases over time in accordance with a set formula, which is supposed to roughly mirror the rate at which a mortgage would be paid off. In practice though it could end up being a bit higher or a bit lower than the outstanding mortgage, depending on what interest rates have done over the timescale and whether you've been making overpayments etc.

    The mortgage protection version (at least the one I was sold when I bought my house) does the same thing - but comes with an additional guarantee that if the outstanding mortgage is greater than the sum paid out under the set formula, it will pay out a bit extra to ensure that the mortgage can be paid off in full.

    Obviously if you no longer have a mortgage the additional guarantee becomes irrelevant, but the policy still works as a bog-standard decreasing term policy (albeit presumably slightly more expensive than a bog-standard one would be).

    It's probably not a bad time to think about what you need in terms of life insurance, as you may have financial commitments beyond the mortgage (eg dependant partner/children), and as above if the policy only has a few years to run and you're in good health then it's probably poor value as the potential payout becomes very small towards the end of the policy. On the other hand if you have developed significant health problems since you took the policy out then it's likely to be better value than any new policy you could take out, so would be worth holding onto.
    • carter0268
    • By carter0268 7th Oct 17, 6:52 PM
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    carter0268
    • #4
    • 7th Oct 17, 6:52 PM
    Thank you both for your help :)
    • #4
    • 7th Oct 17, 6:52 PM
    Thank you, that is reassuring advice. I will keep it going for now as the current payout value is still a lot more than I was expecting it to be!
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