What mortgage insurance do we NEED?

kev207

Hi folks. finally on the cusp of buying a house after looking and saving for 3 years with my girlfriend. the area that still remains a bit of a mystery to me is insurance. listen to one person and they'll say you need everything and listen to someone else and they will say you need nothing but buildings and contents.

we have no dependents so what is the value in getting life assuracne at this stage? especially as if I died my girlfriend would sell the house anyway.

i've dismissed critical ilness cover out of hand as I think most people do.

then there is mortgage payment protection. surely if our mortgage allows payment holidays and one or other of us was to be made redundant we could just take a payment holiday instead which would probably last longer than the insurance would pay out for??

we're trying to keep our monthly payments down as low as possible. we are paying £575 rent at the moment fairly comfortably. the mortgage will be costing us about £600. what should I be looking at on top of that to be paying out in insurance to make things manageable but also be sufficiently covered.

any help greatly appreciated.

regularsaver1

Most companies, if they allow payment holidays, would allow up to six months. If you are off sick, you could be off longer, - so think about this need.

Some mortgage lenders would add the payment holidays to the term, but some will not, and so your payments will go up as a result - is this ok with you?

Going by the market, if you did die, do you think it would be that easy for your girlfriend to sell the house, and how long would that take. And would you want her to be doing this and possibly getting into debt within the mean time, while she would be very stressed.

People do dismiss Critical illness cover, and its more expensive than life cover, probably because people are more likely to claim during the term of their mortgage. However, some people unfortunatly cannot work as a result and then have to dela with this and mortgage.

Ask your self these questions, insurance is about meeting needs. If you don't feels its appropriate then don't take it - but review your situation later.

Obviously a compulsory insurance is the buildings if a house.
Good luck

dunstonh

The stats for someone having a critical illness before the age of 65 are around 1 in 6. This compares around 1 in 5 for life cover and 1 in 16 for a long term illness. (note, that was issued by one provider and i dont know if that was something based on their own claim stats or the UK in general).

i've dismissed critical ilness cover out of hand as I think most people do.

You are incorrect in that assumption.

we have no dependents so what is the value in getting life assuracne at this stage? especially as if I died my girlfriend would sell the house anyway.

And where would she go and live then? Is the property on joint ownership or tenants in common? Depending on how you do it, she may not end up owning your half of the property if you die. regularsaver1's comments are spot on too. If it takes 6-12 months to sell, your girlfriend would have to meet the mortgage payments or go into arrears. That would kill her credit status.

If you are young and there is a life cover need, which it looks like there is, life cover is dirt cheap and with guaranteed premiums, the amount is set at the outset for the next 25 years.

then there is mortgage payment protection. surely if our mortgage allows payment holidays and one or other of us was to be made redundant we could just take a payment holiday instead which would probably last longer than the insurance would pay out for??

Payment holidays are usually a month or two. If you then have savings of a number of months budget, then you may think this is not necessary.

Insurance is a waste of money....until you have a claimable event. I have seen people who have gone into debt and have to move downmarket and lower their lifestyle because they didnt insure themselves correctly. This his often ended up with split relationships and even poorer health because of the financial concerns. I have also seen those that have go through traumatic events with no financial concerns because the insurance was there. So, insurance is a pain in the neck to pay until you have that claim.

mountainofdebt

To be honest I think it is very much an individual's choice as to what insurances they take out - and that is very much influenced, in my opinion, by your circumstances.


Life Insurance - what makes you think your girl friend would want to sell the house of you died; as has already been said, she has to live somewhere. I do know of cases though where people decided not to take out life insurance becasue their employers offered a death-in-service multiple. However when they got made redundant a few years later, they needed to sort something out and very often it cost them more because they were older etc. Also I bet many of them hadn't made a will so unless they had specified that this payment was to go to their partner, there was a danger that it could have just gone into the melting pot.

Critical Illness - We've got it (you don't have to die or be dying from it you know!) and I know I would rather be worrying about my recovery than whether or not the mortgage was going to be paid off. What sort of sickness pay policy do your employers operate? Most I would imagine only offer some sort of sick pay for a limited time and then you are £68.20 - could you pay the mortgage if only one of you were on this sort of income?

Income Insurance - Well how easy - really! - would it be for you to get another job on a similar salary?


hth to make up your mind

kev207

thanks for the replies, think I am more confused now though! - some further info.

we both work for local government and have pensions under the local government pension scheme. this pays out 2x final salary if you die in service. this would certainly be enough to pay off at least half of the mortgage. does this change things?

payless

dunstonh wrote:

The stats for someone having a critical illness before the age of 65 are around 1 in 6. This compares around 1 in 5 for life cover and 1 in 16 for a long term illness. (note, that was issued by one provider and i dont know if that was something based on their own claim stats or the UK in general).



.

BUT From a major insurer's ( FP) brochure
You have at least a 1 in 4 chance on claiming Income

Protection throughout your working life Source: Munich Re

suppose it really depends on how the numbers are counted / spin they want to put on it

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I must admit if restricted by budget , I feel (long term sickness) Income Protection is a often a higher priority than Crit Illness.