Do I Need Mortgage Insurance?

Heidi_2

I have worked for a large company for 30 years and get a 'deaith in service' benefit that is paid to my dependants if I die. This figure is currently around £140k. My house is worth £260k and my outstanding mortgage is £120k. I have a self assurance mortgatge policy with critical life benefit that will pay out £110,00 (decreasing) if I die; my critical illness cover would pay around £20k
My company sick pay scheme is 6 months full pay and 6 months half pay
I don't think I need the mortgage protection policy and am doubtful about whether the critical illness cover is necessary either
Can anyone advise me please - I live on my own and could do with saving unneccesary premiums
I was sold the policy by an independant 'professional' who was aware of all the cicumstances above; but a friend of mine recently wondered why I needed extra cover given the company benefits my dependants would get.

dunstonh

I was sold the policy by an independant 'professional' who was aware of all the cicumstances above; but a friend of mine recently wondered why I needed extra cover given the company benefits my dependants would get.

You say you live on your own but you have dependents. Where are they?

Conrad

If it was me I would'nt bother.

AndyWallace

dunstonh wrote:

You say you live on your own but you have dependents. Where are they?

And are they dependant? I also see you have highlighted 'professional' as if that was tongue in cheek?

Ask yourself these questions:

1. If I get burgled, will I be glad to have 'contents' insurance on my belongings?
2. If my car breaks down, am I glad I took out AA Roadside Assistance?
3. If I have a heart attack and am unable to work any more, what will I do in either 6 or 12 months time when my pay stops?

Your MPPI may cover you for 12/24 months should you be unable to work due to no fault of your own. You would need to check the policy and make your own mind up on that.

Andy

regularsaver1

Its all being well that your death in service benefit can repay mortgage - but there would not be a lump sum left to give to your dependents

and my dad is in a skilled professional position - was made redundant (didn't ever think it would happen with MOD) - took him a good few months to get job with same skills and income - also a problem now he is much older and now diagnosed as having angina under the age if 50

so never say it will never happen to you

Conrad

AndyWallace wrote:

3. If I have a heart attack and am unable to work any more, what will I do in either 6 or 12 months time when my pay stops?

Andy

Andy one of my biggest irritations with the FS industry is the way in which it brainwashes advisers into believing life ends without insurance.

Its simply not the case. As a broker I meet people all the time who have suffered serious illness / accidents and those without insurance in the end get looked after by the state far far better than the industry would have us believe.

As an example a guy I know who exagerated a work accident got a payout from the employers, gets all his mortgage interest paid - indeed hes now just moved to a more expensive house (£350000) which the state are paying for, he has 2 or 3 foreign holls per year etc.

He also gets a free car, parking badges and so on.

It is just so naive to assume people will end up with nothing.

I see this time and time again. I also am accutely aware of the appaulling claims ratio on income protection and critical illness policies and the way in which insurers force people back to work, in a way the state doesnt.

Please dont give me the offical indusrty stats on state benefits they are totaly misleading.

Have you seen how many disabled cars there are at your local Tescos? This is an indication that disabled people are generally well looked after.

INSURANCE IS A FOOLS PARADISE. Dont forget I used to (and am still authorised to) sell protection, but I felt it was on the whole an immoral way to make a living.

Of course you wont agree, just as IFAs didnt agree with me 15 years ago when I stood up in semminars arguing endowments were a con.

regularsaver1

So you don't sell ANy insurance then Conrad?

to be responsible to your clients, surely you have to have a discussion around insurance?

AndyWallace

Conrad wrote:

Andy one of my biggest irritations with the FS industry is the way in which it brainwashes advisers into believing life ends without insurance.

Its simply not the case. As a broker I meet people all the time who have suffered serious illness / accidents and those without insurance in the end get looked after by the state far far better than the industry would have us believe.

As an example a guy I know who exagerated a work accident got a payout from the employers, gets all his mortgage interest paid - indeed hes now just moved to a more expensive house (£350000) which the state are paying for, he has 2 or 3 foreign holls per year etc.

He also gets a free car, parking badges and so on.

It is just so naive to assume people will end up with nothing.

I see this time and time again. I also am accutely aware of the appaulling claims ratio on income protection and critical illness policies and the way in which insurers force people back to work, in a way the state doesnt.

Please dont give me the offical indusrty stats on state benefits they are totaly misleading.

Have you seen how many disabled cars there are at your local Tescos? This is an indication that disabled people are generally well looked after.

INSURANCE IS A FOOLS PARADISE. Dont forget I used to (and am still authorised to) sell protection, but I felt it was on the whole an immoral way to make a living.

Of course you wont agree, just as IFAs didnt agree with me 15 years ago when I stood up in semminars arguing endowments were a con.

lol. You've been waiting for this and I don't mind being attacked by you.

All I would say is that you won't get a disabled badge for your car if you have a heart attack, at home, nor a payout from your employer. You may not be unable to 'work' if you have a heart attack. But you might not be able to lift and carry like your current job demands.

As for claims ratios I would like to add that the Abbey pay out on 95% of all Income Protection claims, with the 5% rejected claims coming from inconsistencies in the application.

As on another thread, I reiterate the term 'uberrimae fidae'.

The bottom line Conrad is that people who need to claim are either 'glad' they had insurance or 'gutted' they didn't.

Andy.

toonfish

Conrad - you are skating on thin ice with your personal vendetta against insurance. There are hundreds of thousands who were damn glad they had it.

I would suggest that it is immoral not to offer your clients the protection they might need, and hope you can sleep well when the inevitable happens to one of them and their family have unnecessary stress and complications to deal with.

Heidi_2

dunstonh wrote:

You say you live on your own but you have dependents. Where are they?

I have a teenage son who lives with me half the week and with my ex the other half. My ex is as well provided for as I am and if anything happened to me my son would obviously live with his father full time. One of the responses to my original message said that there would not be a lump sum but if my house is worth £260k and my mortgage is 'only' £120k plus the £140k death in service payment I can't see the need for a separate life policy? I do get the option next year to take out critical illness cover via a salary sacrifice scheme so I could always do this as it would be cheaper than an independent policy

dunstonh

Teenage son means less demand on childcare unless your ex has a job which means he would have to take time off or employ someone to help out if your son had to live with him full time. Life cover isnt look like a strong requirement at this point.

Critical illness cover is. I am finding (and other advisers on the board have said the same when this subject has come up before) that I am dealing with more CI claims than life assurance claims. One of my clients had a heart attack a some months ago and has now had their mortgage paid off due to the CI policy which was great news as he can no longer work in his previous occupation. He is working but less hours now and in a lower paid job. Had there been no CI policy, they would be struggling financially and in a stressful position which is not ideal when you have just had a heart attack.

I do get the option next year to take out critical illness cover via a salary sacrifice scheme so I could always do this as it would be cheaper than an independent policy

May or may not be cheaper. If the group scheme has been placed with an expensive insurer then the gross premiums could be higher and if the premium is subsidised by the employer, there could be additional tax as a benefit in kind.