life insurance or mortgage cover???????

joyb_3

I have recently divorced and bought my own property. My youngest child is 14 years old. I have a considerable amount of equity in my house and was wondering if I should purchase life cover or just have the mortgage protected? Any ideas out there?!

dunstonh

mortgage protected from what?

do you need life cover. i.e. what would happen to your children in the event of your death? If there is a financial need, then you need life cover. If there is no financial need then you dont need it.

If you do have a financial need, you may find that pension decreasing term assurance is right for the mortgage or just a pension term assurance for your overall need.

If you dont use pension term assurance then you would certainly need to have trusts written on the life cover otherwise you could just be paying 40% of the sum assured to Gordon Brown.

joyb_3

thanks for that but could you explain it again as if you were talking to a 5 year old child! All this is new to me and am getting very confused!!!

MortgageMamma

Hello there

Pension Term assurance (for most people) is the cheapest form of life assurance available. You know how if you contribute to apersonal pension you pay your premium net of basic rate tax? well its the same with pension term assurance. Don't get confused by the name you don't actually have to contribute to a pension to be able to take these policies. The sum assured forms part of your annual lifetime allowance for pension contributions which this year stands at 1.5m, so as long as you don't have this amount of money or near to it stashed in apension this is the policy for you. You canot have any health benefits such as critical illness written into this policy. Unfortunately you cannot as far as I am aware go direct to a provider to buy Pension Term Asurance, you have to take financial advice - most financial or mortgage advisors should be qualified to advise you on this but make sure you check.

Another option for you could be family income benefit. Whilst not as cost effective as pension term assurance this policy will pay a monthly amount to your son should you die (you can also add critical illness cover to this policy) it will pay out for the term you specifiy at the outset of the policy, so for example if you child is now 12 you could write the policy to cover you until he is 21 and finished university for continuity of funding if a claim is ever made.

There is a lot more you would need to know abobt each type of policy so please make sure you take advice on this - the tax implications on claims need explaining to you etc.

Hope that clarifies things a little better for you but if ou have any more questions please just ask,
MM