Level term assurance or mortgage protection?

Loobysaver

I am a single Mum in the process of remortgaging so I can take my ex off the deeds.

I am thinking of taking out a level term policy (rather than a reducing balance mortgage policy) to pay the balance of the mortgage if I die and to have some extra for my children too.

Can anyone answer my questions please:

1 Will the term assurance proceeds automatically be used to pay the mortgage off before the balance goes to my children or is this something I have to specify in a will?
2. Is it advisable to get the term assurance policy written in trust for my children? If I do and I die before they are 18, will the money be kept until they reach 18 and/or will some of the money be used to pay the mortgage off first?

I am just getting confused how this all works if I die. I.E do the mortgage company put a claim in for the life assurance to clear the mortgage debt etc?

Any advice would be appreciated.

koexelek

Mortgage companies rarely assign life policies any more, so that means that the claim proceeds go to your estate, not the lender.

You really need to make a will to sort it all out.
If you died, and the mortgage did get paid off, who would look after the children ?
If you put in it trust, when do you want the children to be able to access the cash.

Worth speaking to a good will writer to get the best advice

Loobysaver

koexelek wrote: »

Mortgage companies rarely assign life policies any more, so that means that the claim proceeds go to your estate, not the lender.

You really need to make a will to sort it all out.
If you died, and the mortgage did get paid off, who would look after the children ?
If you put in it trust, when do you want the children to be able to access the cash.

Worth speaking to a good will writer to get the best advice

Thank you. I am considering writing a will when the remortgage goes through.

So if the policy was written in trust and I died before the children were 18, would the money be untouchable by the mortgage lender to pay the debt off then? As I understand it, life assurance written in trust means it doesn't form part of your estate? Or have i got the wrong end of the stick there???!

koexelek

No, you are correct about the way trusts work.

If the money was in trust for the children, the mortgage company could not get hold of it...... but would you not want the mortgage to be repaid if your children were to inherit the property ?

Loobysaver

koexelek wrote: »

No, you are correct about the way trusts work.

If the money was in trust for the children, the mortgage company could not get hold of it...... but would you not want the mortgage to be repaid if your children were to inherit the property ?

Yes I would so therefore the trust option wouldn't be the best option would it?

My children are my main beneficiaries anyway but I will get a will drawn up anyway to cover all eventualities.