How much mortgage life assurance

bobmoo79

I'm a FTB, 29, buying first house with partner on mortgage of 150k.

I know it's a good idea to get decreasing term life assurance for the period of the mortgage, but how much?

Do I just need to arrange it for the initial loan amount, 150k or a larger amount that includes additional interest?

Also, is it really worth adding critical illness cover? The monthly premium increases significantly to say the least!

Many thanks

bob

cattie

The longer a mortgage is running, the lower the interest.

When I had decreasing term on my mortgage, I was advised just to cover the actual amount of the mortgage.

Critical illness is something you need to make your own mind up about. More important initially to my mind is an income protection policy that will cover you for a year or so should you lose your job or become too ill to work.

dogbot

My partner and I are 24 and also starting to buy our first place.

This i just my opinion and of course you have to make your own mind up, but I think decreasing term life policies are possibly a false economy. You could pay a bit more now for full blown life cover since starting now will be cheaper (because you are relativly young).

That way you ensure you (or rather your partner) are protected now for your liabilities and have some protection in place later for your family (should you find yourself with one). You can ensure the protection lasts longer than the term of the debt to take account of your changing circumstances too (e.g. buy another house, extend the term).

Of course the premium differential might be such that decreasing term is by far the better option, and you can up the difference in to get rid of some more of the capital debt.

Our IFA was of the same opinion. He has also strongly advised against joint policies so we can always take them with us should anything go awry.

The other thing to consider is what benifits you get though your work. If you have a death in service benifit, which is quite common, then you might not need to take out life cover now.

stephenni1971

When a decreasing term policy is taken out your adviser ( be that bank or IFA ) will choose an assumed rate of interest on your mortgage ( in many cases 10% ) - this would ensure you should always have sufficient cover until your mortgage is paid off.

bobmoo79

Thanks for the help guys, I appreciate it.

:T