Is this excessive - broker commission

riverboat2001

Two mortgages
property 1/95k
property 2/178k

Both interest only, so level term.

Property 1 mortgage life insurance
Property 2 mortgage life insurance
Both set to run for ten years, although property 1 will be sold and clear property 2 mortgage within 2 years

male 52 smoker (stopped 4 months ago)
female 45 non smoker

Policy cost £127 per month

Broker gets £2620

We were there for a good two hours going through it all, but even so that seems a lot of money.

Both very new to this, is there anyway to get the commission ourselves?

PS Broker got our mortgages and has already had a good comission, but worth every penny on this advise.

lisyloo

That commission is for the life of the policy.
Also they have given you free advice at their own risk (inevitably a number of customers will not take a policy so they have to cover the time when they don't get paid as well).
They probably have to do some work "behind the scenes".

Yes you can get a policy on line without advice and some companies will even give you a rebate as they aren't paying commission (Cavendish rings a bell).

Only you can decide whether you are morally hapy with taking the advice for free and then not paying for it or whether you think they have been paid enough already and whether you are basis that judgment on sound reasons (do you actually know how many years they've spent training or how much research they had to do on your case?).

I don't have any axe to grind, just mentioning some things you might not have thought of.

riverboat2001

Yes, i'm aware of a moral obligation, and think that this is right, but
they have already earned almost £1k in commision on the mortgage.

I plan to shop around and change my cover each year, i assume this is the best thing to do, just like gas and electricity.
so would it be best to change the term to TWO years. (Broker is aware of plan to be mortgage free in two years.)

Would this A/ reduce my monthly payment whilst still reataining the same level of cover.
B/ still ensure that the broker gets some commission for the time spent?

dacouch

riverboat2001 wrote: »

I plan to shop around and change my cover each year, i assume this is the best thing to do, just like gas and electricity.
so would it be best to change the term to TWO years. (Broker is aware of plan to be mortgage free in two years.)

Would this A/ reduce my monthly payment whilst still reataining the same level of cover.
B/ still ensure that the broker gets some commission for the time spent?

Shopping around each year for life insurance is not normally a good idea, this is because each year you will be older and thus more likely to need to claim on the policy

riverboat2001

Just another quickie....
Had a look at the Cavendish website and got a quote from Aviva (same as broker) of £86pm for ten years (used ten years to compare with broker.

We can basically answer NO to every question apart from my dad having a heart attack about 50ish and partners dad dying of heart attack at 42yrs....don't know how much these would bump up the premium.

It seems quite difficult to get a proper quote as the only place to put these "issues" is on an actual application form!

property.advert

Cavendish all day long. Why pay some patsy thousands for a price driven product which is so simple ?

riverboat2001

Right, i've decided that paying £127pm with the broker getting £2600 commission, or paying £60pm via Cavendish is not a difficult decision.
But i don't understand why the quotes are so far apart, would i have been in effect paying that commission via my monthly payments?

mikey72

riverboat2001 wrote: »

Right, i've decided that paying £127pm with the broker getting £2600 commission, or paying £60pm via Cavendish is not a difficult decision.
But i don't understand why the quotes are so far apart, would i have been in effect paying that commission via my monthly payments?

Only for the first two years normally. (Looks like about three in this case) After that the difference is extra profit for the insurer.

Burridge60

There appears to be a misunderstanding about the payment being received by the broker. The Insurers will normally pay initial commission over the first 48 months of a contract and then a renewal commission at a much lower level for the remainder of the term.

The actual payment of the £2600 is a capitalised but discounted sum of the initial 48 months commission and as such is a matter between the insurer and the broker and is disclosed to you on the KFI. If you took the broker policy and switch insurers after a year he would have to pay back the unearned portion on the indemnity commission. If the Broker chose to he could have more money over the lifetime of the policy than to take it as a lump sum upfront. Life Assurance is a "permanent" contract and cannot be canceled by the Insurer unless you fail to pay the premium or non disclosure is proved. Household insurance is an annually renewable contract and if they didn't want your business any more they are not compelled to allow your renewal. Your increasing age and possible health changes might make changing insurers more difficult to achieve in practice and is not to be undertaken lightly and your existing cover should be maintained until your new cover is accepted and in place. You might however wish to re broke your cover once you qualify as a non smoker.

Cavendish may have rebated some of the commission they would have otherwise received to bring the premium down but should still state this amount in the KFI what their earnings are for the plan (which you haven't posted here).

Aviva's Mortgage Life Insurance is not level term but a reducing cover plan linked to the profile of a repayment mortgage. Your Broker might well have quoted level cover but if you asked Cavendish for MLI then you have a reducing cover plan and may account for the premium difference.

vaio

riverboat2001 wrote: »

Right, i've decided that paying £127pm with the broker getting £2600 commission, or paying £60pm via Cavendish is not a difficult decision.
But i don't understand why the quotes are so far apart, would i have been in effect paying that commission via my monthly payments?

where do you think it comes from?

riverboat2001

Burridge60 wrote: »

There appears to be a misunderstanding about the payment being received by the broker. The Insurers will normally pay initial commission over the first 48 months of a contract and then a renewal commission at a much lower level for the remainder of the term.

The actual payment of the £2600 is a capitalised but discounted sum of the initial 48 months commission and as such is a matter between the insurer and the broker and is disclosed to you on the KFI. If you took the broker policy and switch insurers after a year he would have to pay back the unearned portion on the indemnity commission. If the Broker chose to he could have more money over the lifetime of the policy than to take it as a lump sum upfront. Life Assurance is a "permanent" contract and cannot be canceled by the Insurer unless you fail to pay the premium or non disclosure is proved. Household insurance is an annually renewable contract and if they didn't want your business any more they are not compelled to allow your renewal. Your increasing age and possible health changes might make changing insurers more difficult to achieve in practice and is not to be undertaken lightly and your existing cover should be maintained until your new cover is accepted and in place. You might however wish to re broke your cover once you qualify as a non smoker.

Cavendish may have rebated some of the commission they would have otherwise received to bring the premium down but should still state this amount in the KFI what their earnings are for the plan (which you haven't posted here).

Aviva's Mortgage Life Insurance is not level term but a reducing cover plan linked to the profile of a repayment mortgage. Your Broker might well have quoted level cover but if you asked Cavendish for MLI then you have a reducing cover plan and may account for the premium difference.

Cavendish charge a flat fee of £35 for each policy.
http://www.cavendishonline.co.uk/life/

The Mortgage Broker (providing this insurance quote) will get :
£2626.04 immediately and then £3.18pm after month 44

We know we need a level term (ie NOT decreasing) amount of cover, and contact Cavendish and a few others on Monday to confirm this.



Perhaps we are getting confused about the terminology and type of insurrance

Surely apart from the level term part it should be just standard life insurance, whereby if one of us dies the other will get the £273k to pay off the mortgage, is that correct?