Mortgage protection insurance or life insurance?

Payless_2

Sorry if this question has been asked before but when I do a search on these forums I always end up with mountains of irrelevant stuff:o

At the moment I have insurance that pays my mortgage off if I die but have no life insurance. I want to take life insurance out for myself and my son and I'm wondering if it may be worthwhile cancelling my mortgage insurance and just ensuring that my new life insurance policy will cover the amount owing on my mortgage (which is only about £16,000)

Will my building society be happy with this? Is there any reason to have an insurance policy just to pay off the mortgage?

Any help would be much appreciated

Annisele

I'm a bit confused.

You say that you have "insurance that pays my mortgage off if I die but I have no life insurance" - but insurance that pays off your mortgage in the event of death is life insurance.

Sometimes people have insurance to pay off their mortgage, and then separate life assurance (possibly over a different term) for family protection.

Unless your existing life assurance policy is assigned to your lender (which would be unusual unless you've had the same lender for 20 years or so), then your lender won't care whether you have life assurance or not. However, if you want to pass your property debt-free to your son, then you probably care about the life assurance.

Payless_2

Annisele wrote: »

I'm a bit confused.

You say that you have "insurance that pays my mortgage off if I die but I have no life insurance" - but insurance that pays off your mortgage in the event of death is life insurance.

Sometimes people have insurance to pay off their mortgage, and then separate life assurance (possibly over a different term) for family protection.

Unless your existing life assurance policy is assigned to your lender (which would be unusual unless you've had the same lender for 20 years or so), then your lender won't care whether you have life assurance or not. However, if you want to pass your property debt-free to your son, then you probably care about the life assurance.

Sorry, I'm not very familiar with insurance products.

My life insurance is designed to pay off my mortgage if I die. The payout decreases as the mortgage decreases. Since my father died, it has occurred to me that my son would be left to pay for my funeral etc when I die and I thought I should really have a policy that pays out more than just the remains of the mortgage. Also, as my son is still young I thought that it would be worth getting life insurance for him at the same time as it shouldn't cost much more. I don't have a lot of debts so it is more to give him a lump sum and pay for my funeral.

My present insurance is not from my mortgage provider but I remember them telling me that I had to have insurance to pay the mortgage off if I die. Will another type of life insurance do? Also I have been reading other threads about life insurance where posters have been telling people to go to an IFA to arrange it as the comparison sites aren't very good. Is this true? Won't it cost more to go through an IFA?

payless

Payless wrote: »

Also I have been reading other threads about life insurance where posters have been telling people to go to an IFA to arrange it as the comparison sites aren't very good. Is this true? Won't it cost more to go through an IFA?

slightly strange replying to my namesake-

most comparison sites will charge same as an IFA..( as will direct purcahse) and with an IFA you would usually get advice.

some IFAs ( often online) might offer reduced premiums - usually ( not always) when NOT combined with advice.

Based on your posts I think profesional ADVICE would be a good idea

IFAs almost always offer life cover ( although a few just do investments). Many protection adviers out there ( most mortgage advisers combine protection)

magpiecottage

The policy for the mortgage is fine but you need to be aware that until it pays out, interest will still accrue.

If you do not put it in trust, then the money goes into your estate and can take months to sort out. With a trust, it can pay out virtually immediately. This applies to any life policy not assigned to a lender.

Nevertheless, you should make a will.

I agree, though, speak to an IFA - ideally one who holds the G10 or AF1 qualification.

yelf

You wouldnt be able to take out life insurannce on your son as there is no insurable interest

keldac

I understand what you are saying and I have both. Decreasing life insurance that will pay off my mortgage if I die and also an extra £75K life insurance to help my dh look after the children if I die - or if we both die 150K so my parents can afford to bring them up without worrying!
I'm hoping to be around for quite a bit longer though!

Vincenzo

As has been said, advice from an IFA is required here. The right answer will depend upon your age and health and the age and health of your dependents, your income, any and all debts and your personal preferences.

Personally I never understood the point of taking out decreasing term assurance. The cost of level term (on my quotes) is rarely much more so I always go for the extra cover. I also go for increasing cover (with RPI) otherwise the benefit to your dependents is actually decreasing with time as inflation erodes its value. It may be that that is appropriate but for the sake of the small extra cost I would rather be on the safe side.