Life Insurance/Critical Illness/Mortgage Protection

longlegs79uk

Hi.

I am a 32 year old female who has just purchased her first house. My boyfriend is not yet on the mortgage but soon will be. He has his own pension and life cover.

I have been looking to get the correct cover for at least a month now and so far have been blinded by science.

I understand some aspects of it but no two people tell me the same. I have taken life and critical with L and G but have since been quoted a lower price for the same cover..

I do not have any dependent and not wanting a lump sum, all I want is to cover the mortgage if anything was to happen and to be able to cover the repayment. Do I need life? Do I need critical and life? Do I need mortgage protection only? Please help as this is my first house an experience and still none of the wiser!!!

Cautious_Investor_3

Hi

Some thoughts for you:

1. If you want to repay your mortgage in certain events, in this case death or critical illness, you have two options (a.) decreasing term assurance (DTA), (b.) level term assurance (LTA). The sum assured on the DTA will decrease broadly in line with your mortgage balance, the LTA will stay level, thereby giving you a bit of extra cover as your mortgage balance falls if you have a capital repayment mortgage.

2. LTA is more expensive than DTA

3. Generally if you have an Interest Only mortgage a LTA is more suitable than a DTA, if you have a Capital Repayment mortgage a DTA is the cheaper option and fine if you dont want an additional lump sum

4. Once you have decided between LTA and DTA you have to decide which events the sum assured is paid on, you have two options (a.) on death or (b.) on death or earlier critical illness

5. Option (b.), in point 5, is more expensive than option (a.)

6. Life cover is a pretty homogenous product and price is generally the main driver in provider choice i.e. most people select the cheapest

7. When you select critical illness cover price should be less of a deciding factor. the quality of cover, i.e. number of illnesses covered, definitions of illness etc are generally considered more important than price

8. You may have found a cheaper provider than Legal & General but you need to make sure that the list of illnesses covered are as good. I have a matrix showing what illnesses all the major providers cover, if you send me a private message I'll send it to you

In summary, have a think about what events you want cover for, then select between DTA and LTA. Personally if I have a capital Repayment mortgage I'd rather for for a DTA with life and critical illness cover rather than a LTA with just life cover.

I was an IFA for 13 years, I'm a big believer in critical illness cover, and I have seen how it can really help clients when they need to claim.

I hope this helps and makes sense!

The Cautious Investor

The Cautious Investor

longlegs79uk

Thank you for this advise. I have a repayment mortgage over 33 years.

I have been quoted £33 for a DLT with life and critical cover by a FA and £27 a month by a company called lifesearch. The policy is both with L and G and the same cover but cheaper. How is this? Do I go for the cheapest? Or stick to my bank FA?

Life search are advising me if I cancel within the 1st 2 years I will have to pay £200. I am not going to cancel as I think it is needed when you buy a house.

But then I am being told I need cover for sickness and redunduncy. The minute I get my head round it, someone throws something else in the equation. I really need to sort it out and be comfortably with my decision.

And yes you do make sense and thank you for your advise

Cautious_Investor_3

Ok, if both have quoted L & G, providing that the terms are the same i.e. sum assured, number of years etc then go for the cheapest. The difference in premium is probably something to do with the commission terms offered to the bank.

But do check, get both to quote, lay them out side by side and double check that they are the same.

Re accident sickess and redundancy, these are different covers to the DTA inc life and critical illness cover. Only you will know how safe you feel in your job.

Posted in haste I'm afraid.

The Cautious Investor

dunstonh

An IFA will be better priced than an FA. Lifesearch are execution only so that will be cheaper. However, you get less consumer protection and you have to set it up yourself. If you can do that then you dont need an IFA.

you should never use an FA. There is no reason to. An IFA can always offer better.

somewhatnew

LifeSearch are not execution only - they are IFA's and they therefore offer as much protection as any other company in the business!

In fact for your protection they record all phone calls so if something goes wrong at a later time they can be hauled over the coals for it.

I picked this off their website as well:
We offer several free benefits to clients who protect themselves through us.
- LifeSearch Claims is a dedicated claims handling service, taking your side in managing the insurers when a pay out is due. They routinely speed up and simplify all claims and on several occasions have successfully overturned insurers decisions not to pay out.
- LifeSearch Care provides counselling and information to claimants or those considering a claim. From where to get the best cancer treatments through to bereavement counselling, our trained nurses offer vital help, information and knowledge in a professional and caring way we are mightily proud of.
- LifeSearch Trust offers all clients free arrangement of straightforward trusts. These specify who gets the monies due on a policy and speeds up payment hugely, as well as avoiding Inheritance tax often otherwise due.

It grates me when people make erroneous comments... just because a company is phone based rather than face to face doesn't make them automatically tied or multi-tied.

lordhaldon

somewhatnew wrote: »

It grates me when people make erroneous comments... just because a company is phone based rather than face to face doesn't make them automatically tied or multi-tied.

It doesn't make them bad either. The more distribution channels there are, the more choice people have and the more people get what they need. It is also quite wrong to assume that all Bank and Building Society advisers are ill equiped but most do a good job with what they have. It is their employers that are the greedy ones not them. I know of some IFA's that are still maximising their income through commissions and dreading the prospect of moving to fee based.