What insurance or assurance do we need

puddy

I am soon to be buying a house with my partner, Im completing on my sale next week and hope to be completing on the purchase the week after or thereabouts.

I know that we need contents and buildings insurance but we were offered 'life insurance' by the lender which we havent taken up because I wanted to look at best buys. However, I have now discovered that there is mortgage assurances, level term assurance etc.

Neither of us have dependents and we both work. the mortgage is for about 50k and for another 14 years. What should we be applying for in case of either of us ending life early?

stephenni1971

At the very least you should consider life insurance that would leave the remaining partner with enough money to clear the mortgage if the other partner died.

If, as it seems, you have a repayment mortgage, then decreasing cover ensures the amount of insurance you have drops roughly in line with the reducing amount outstanding on your loan.

As you are not married, it is essential you make sure if you do this that you either rewrite your wills or put the policy into trust for your partner. This is because under current laws a partner has no legal entitlement to the proceeds of a policy on death, unless they are mentioned in the will.

Level term assurance keeps the amount covered the same until the end of the term.

You could also consider Critical Illness Cover so that in the event of a qualifying critical illness ( cancer, heart attack, stroke and various others ) you would get a lump sum which you could put towards mortgage.

There's no right or wrong to this, some people are happy with no cover or the very minimum. Others prefer to have all options covered, but one thing for sure you will not get the best deal by your mortgage lender. They will be selling from their own range of products. Using an Independent Financial Adviser will mean you have access to the 'whole of market' and should be able to find the most suitable deal.

puddy

thanks, i know already theres no point going for critical illness cover, between the two of us we have or had nearly every illness that would discount us from qualifying or from the provider paying out, so im not bothering.

however, i dont understand the difference between life insurance or assurance and mortgage assurance. i know one is specifically for the mortgage and so decreases(?) as time goes on wheras one is just a lump sum, so what is the best one to get if its solely to pay the mortgage off if one of us dies.

yes, its repayment mortgage

no, we're not going to bother going through our lender.

yes, we're going to make wills and also have a declaration of trust because the ownership of the house is not equal

stephenni1971

so what is the best one to get if its solely to pay the mortgage off if one of us dies.

If the only aim is to clear any outstanding mortgage then decreasing would usually be the most common choice.

somewhatnew

Hi

With a mortgage there are two things to think about:
1. How will a survivor pay the mortgage off if the other person dies?
2. How will you pay the mortgage if you are off work (illness or redundancy)?

I would suggest:
1. A joint life policy to cover the mortgage (I say joint because if one of you dies it avoid probate and pays out immediatly. Basic and effective.). Budget permitting you get to choose level or decreasing cover - ultimatly both will cover the mortgage.
2. Income protection if you are off work ill so that your salary will continue (do check to see how long your sick pay lasts for, this may not be needed).
3. Finally unemployment cover.

Make sure the income protection is a policy that pays on a continuing basis, not one of these cheapo naff ASU policies that you can quoted for online. Income protection normally involves speaking to an advisor as the rates have a number of variables that can affect the cover - chances are if quoted on line its rubbish cover.

Critical illness is an option but make sure you have the income protection first.

puddy

thanks, if income protection is based on what is wrong with you when you're too ill to work, then again, i doubt that a provider would pay out or that we would qualify for the payout. between us we have a plethora of illnesses that we obviously wouldnt be covered for, in addition any illness that we get in the future is either going to be something we have already had in the past, or could be seen to have been caused by something we have had in the past (whether it is not). i have looked in to these schemes and we wouldnt beneffit for them.

with regards to unemployment cover, i hav the sort of job that have high vacancy rates but my partner doesnt necessarily, however, i could run the home on my wages if needed but wouldnt want to obviously.

so a life policy is called what... life insurance, life assurance or mortgage assurance??

sorry to be thick, i really havent a clue. ive never even bothered with contents insurance before!!!

Soubrette

This is old stuff so may be out of date

Insurance is straight forward cover for a set amount of time - you pay premiums and if you both survive the term then the policy ends and you get nothing.

Assurance is when there is an investment part of the cover so hopefully you would get something back at the end of the term even if neither of you died.

If you are paying your mortgage on a straight forward capital and interest repayment then your monthly repayments will pay off an awful lot of interest to start with and a teeny bit of capital. When the interest is recalculated on the remaining capital you will pay an awful lot of interest and a teeny bit more capital and so on until near the end of the mortgage you will be paying an awful lot of capital off and a teeny bit of interest.

So a mortgage protection is set up as a term insurance (no investment part to it so if you both survive the mortgage then you will only have bought peace of mind ) where the sum paid out in the event of death decreases (hopefully) in line with the capital outstanding on your mortgage.

If you don't feel confident with your knowledge on insurance then I would recommend getting in contact with an Independent Financial Advisor and discussing your options.

Independent is better than an inhouse advisor as the former should have a good range of products within the whole market to choose from but an inhouse advisor will try and push their own company's products.

Sou

OshayAway

Strictly speaking it is life assurance but the term is really interchangable with life insurance so either is fine. Mortgage life assurance / insurance simply means it's been taken out to protect a morgage balance, normally (not in every case) mortgage term assurance / insurance is decreasing term in line with a repayment mortgage.

You mention prior health problems, depending what it is, it could affect the underwriting of your life cover as well. Often the health questions for life only cover application are the same as critical illness applications.

somewhatnew

Hi again

If you have had previous health problems or have current health problems then do speak to an advisor. This is really important - find an independant broker online (make sure they provide advice and are whole of market rather than tied to an insurer) or speak to your IFA. Don't go with the cheapest price, go with the policy that is best for your circumstances... sometimes they are the same, sometimes not.

Depending on what the condition is/are the cost of the insurance can go up and could take more than a month to underwrite if the insurer decides to contact your Doctor... you may well not be able to get the cover in place for your exchange.

The term insurance refers to providing cover for an event that might happen (so a policy for the morgage is insurance as you may die within the timescale) while assurance is the provision of cover for an event that is certain to happen (so a Whole of Life policy is assurance because one day you will die). But as OshayAway mentions the terms are interchangeable and the distinction between them is being lost.