Mortgage life insurance

bobbych783

Hi All

Myself and my partner are currently looking at mortgages and life insurance. Life insurance premiums for a policy over 5 years are half that of a policy over 25 yrs.

Does a life insurance policy have to be over the the same period as the mortgage. Or can we take out a life insurance policy for say, 5 years, if we expect to move the mortgage. Then take out a new life policy as it is needed?

koexelek

You can do whatever you like, as the mortgage and life insurance are not linked in any way

stephenni1971

Does a life insurance policy have to be over the the same period as the mortgage

In most cases there is NO requirement for life cover to be in place as a condition of the mortgage - it's your decision therefore if you want to take the risk - or pay the premium and have cover.

Or can we take out a life insurance policy for say, 5 years, if we expect to move the mortgage. Then take out a new life policy as it is needed?

You could do that if you want - however

Life cover rates are based on your age, the older you get the more expensive the premiums are likely to be for the same cover.

If you take out a 5 year policy, and in that time you suffer from an illness such as cancer, you may not be able to take out a new policy or may have to pay vastly increased rates.

If there is a desire for cover then why take the risk? Taking out a 25 year policy will virtually always be cheaper than a succession of 5 year policies.

Also make sure you dont take a long term policy with regular reviews, this gives the insurer the opportunity to increase the premiums as they see fit and you have no choice but to pay them or let the policy lapse. Guaranteed term cover will fix your payments for the entire life of the policy.

lisyloo

You can do it over 5 years but there are a few disadvantages,

1) It's highly likely you won't move when you expect (we moved after 12 not 5 when everyone told us you never stay in your first house for longer than 5). Things rarely work out as expected.
2) It will be more expensive to take out a new policy simply because of your age. Whilst it;s half price now, long term it might be a worse decision.
3) If you contracted a disease in that five years that affects your life expectancy (say Multiple sclerosis) then this will be excluded from a new policy but would have been covered on your existing one for 25 years if you took it out before diagnosis.

On the other hand, you might consider the price reduction to be worth it.