Life Assurance or Mortgage Life Insurance

guardianangel

Hi,

I'm a little lost and would appreciate some advice...

I'm 25 and single, in the process of buying a house, I need to purchase one of the above for my mortgage. As I am single, would it be better to purchase the mortgage one and then in the future when I have a family to then purchase the life assurance. Or would it be better to purchase the life assurance now?

Or have I gotten confused altogether.

Thank you

xx

Cazza

It is rare for a mortgage company now to insist on Life Insurance - I can't think of any that have done so for years! Why do you want to take out Life Insurance? As a single person with no financial dependents, it's not the type of insurance an adviser should be recomending unless you have a clear need.

I think it might be more appropriate for you to find out about insurances such as Critical Illness cover and Income Protection?

lisyloo

Why do you need to purchase one of the above?

I'm not saying you are wrong, but want to understand your reasons.

Depending on your deposit, employment benefits, pensions etc.
You could simply have the house sale cover the mortgage.

guardianangel

lisyloo wrote: »

Why do you need to purchase one of the above?

I'm not saying you are wrong, but want to understand your reasons.

Depending on your deposit, employment benefits, pensions etc.
You could simply have the house sale cover the mortgage.

Sorry, I forgot to mention, I am a first time buyer. Working full time with no pension at the moment. the Mortgage advisor advised me to purchase Mortgage Life Insurance to cover the money I am borrowing.

Cazza

guardianangel wrote: »

the Mortgage advisor advised me to purchase Mortgage Life Insurance to cover the money I am borrowing.

The Mortgage Adviser should tell you why they are recommending this, from your original post it doesn't sound to me like good advice. Do you have any financial dependents? You should have been given a document by the adviser setting out all their recommendations in writing and giving reasons for these, if not ask to see it and find out why they think you need this insurance.

guardianangel

Cazza wrote: »

The Mortgage Adviser should tell you why they are recommending this, from your original post it doesn't sound to me like good advice. Do you have any financial dependents? You should have been given a document by the adviser setting out all their recommendations in writing and giving reasons for these, if not ask to see it and find out why they think you need this insurance.

I don't have any financial dependents, the only doc I was given was the one with the quote - I'm assuming you aren't referring to that.

Cazza

Nope, although that is something that you should have been given, so that's good!

Insurance is there to protect you and your dependents if something unexpected happens. Life Insurance is important for many, many people. If you were taking out a joint mortgage with a partner or you had children, then there are people dependent on you to pay the mortgage. There are other circumstances where Life Insurance is justified, but any insurance package needs to be tailored to the individual. Generally, it is unusual for a single person with no financial dependents to need Life Insurance. BUT, your adviser should have completed a full Factfind and therefore knows a great deal more about you than anyone on an internet forum does! You need to go back to your adviser and ask them what exactly it is in your personal circumstances that has made them believe Life Insurance is neccessary. Repaying the mortgage if you die is not a reason - if you die, the property would be sold and the mortgage repaid from your estate - you don't have a partner or children who would still need a roof over their heads. The adviser needs to be able to give specific justifications which are personal to your circumstances.

lisyloo

if you die, the property would be sold and the mortgage repaid from your estate

I think it's a bit more complicated than that.
In theory this is correct, house sale covers the mortgage.

However there are a few pit falls.
If your LTV is high and prices fall, it's possible that the house price will not cover the debts.
Your beneficiaries don't have to take on the house, they can simply leave the lender to repossess.
But lets suppose the beneficiaries take it on and it takes a while to sell.
They will have to maintain it, cut the grass in the meantime etc. and then prices could fall causing them a loss. So it could cause your family members some grief potentially.

So important question are
Do you have "death in service benefits" at work?
If you don't know then check your contract, ask your HR dept or check your handbook.
Also what is you LTV? i.e. how big is your deposit?
Do you have other assets? e.g. savings investments?

If there are no employment benefits and no savings and your deposit is low then you may want to take a policy to cover your family.
However you don't HAVE to do this.

guardianangel

As an employee I get death in service benefits. I am only borrowing £65k and only have savings but thats it.

Does this mean that life assurance wouldnt suit me but it would be good to take out mortgage life insurance?

dunstonh

You dont need life assurance if there is nobody who will be financially worse off in the event of your death. If that is the case with you, which it sounds, then the sale of a life assurance policy is a mis-sale.

lisyloo

I don't think you need life assurance.
You have no-one else to worry about - no dependents.
Your mortgage should be paid of by the sale of the house plus death in service benefits.
Even if the house price fell then your employee benefits hsould cover any shortfall.
So what do you think you need it for? You won't need any money when you're dead.

Of course you could get sick, have an accident or get made redundant.
So those are things you need to think about as well.