Do I Need Mortgage Insurance?

herbiesjp

Just another point - a close friend of mine just received a letter that he was to made made redudant on January 1st 2007. Happy New Year!

He had been there 20 odd years.

The point I am making is that there are no guarantees that you will have the same job for the remainder of your mortgage term. - If you did change you may not be able to get the same benefits as you currently have through work.

More and more people chop and change employers, either by choice or not. So a lot of people decide to set up a policy to take care of the mortgage irrespective of their work arrangements (affordability permitting).

You could say, well I'll set it up up later on if that happens, but then you will be a little older, may have had further medical issues etc and the premiums could therefore become more expensive.

It is all down to personal choice and what you believe to be important to you.

HTH

AndyWallace

Heidi wrote:

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

You have sufficient life insurance to repay your mortgage should you die. The death in service alone will cover this. Your unemcumbered house would then be left to your son, presumably.

The critical illness benefit will help should you get a critical illness. Is this enough to repay your mortgage? Do you want to insure yourself against critical illness?

Your MPPI will probably pay out for 12 months. You will be on full pay for 6 of those and reduced pay for the next 6. After 9 months the Government may assist with interest payments on your mortgage (capped), so there are 3 months (months 6 through 9) where you could be unassisted. What is the worst case scenario here?

I'm not sure you'll ever get a 'recommendation' on here but hopefully this may help you decide what you want to do.

Andy

MortgageMamma

Annoys me when industry professionals such as ourselves are accused of scare mongering to sell insurances. Annoys me even more when I hear a so called industry "professional" saying it. I'd love be a fly on the wall in your office, you would probably be shut down within a week.

IMO Financial education should be compulsory in schools - after all it is an essential survival skill suchs as reading and writing. I just feel sorry for those that are either not knowledgeable enough or too sceptical to insure themselves adequately. (oh, and conrads clients)

regularsaver1

To be a responsible lender, adviser, or broker surely a discussion around insurance needs to happen about existing insurance ect

I also have had a lady personally thank me for her claim on CI for breast cancer - she was 35

HelpWhereIcan

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.

Blah Blah Blah

I can also quote examples.

1. A lady I saw last year who used to live in a great 5 bed house in one of the most affluent villages round here. Married to a very high earner, she had 2 kids in private school and usual cars, 3 holidays a year etc etc.

Hubby dropped dead of a heart attack at 49. She then finds out he only has enough life cover to cover the mortgage. 2 years later she has sold up and moved into a smaler house in a less desirable area, car is now 5 years old rather han changed every year, one holiday a year if she is lucky and kids have had to leave the private school.

The house may have been paid off, but a lifestyle and a standard of living has an ongoing cost that has to be met from somewhere - in her case a huge amount of borrowing that became unsustainable, leading to an enforced sale of her family home.

2. A 27 year old fireman who claimed on the Critical Illness Policy I arranged for his mortgage after it had been in force for 19 months. He is back at work after 18 months on state benefits and sick pay from work and is mortgage free. Tell him your story about the guy on state benefits and see if he would agree that there is no way to improve upon the position your 'guy' is in.

It's not about it being the end of the world (although it can be for some), just about people being in the best position they can be at the worst time in their lives. If your guy had been properly protected, he would have been in an even better position now. Muppet.

dunstonh

My youngest claimant on CI was 26. Also breast cancer. Youngest male was 31 with a stroke.

You will find many financial advisers that have seen clients that didnt take these out and had a claimable event and are now suffering the consequences. One I know had to sell their house and she is still working into her 70s and they are currently living in a housing association property and have had to forfeit all the things that they had saved for.

HelpWhereIcan

Conrad wrote:

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.

A family friend of ours is a doctor who does medical assessments for both the DSS and the private insurance sector - he would find this comment laughable.

AndrewSmith

regularsaver1 wrote:

To be a responsible lender, adviser, or broker surely a discussion around insurance needs to happen about existing insurance ect

I also have had a lady personally thank me for her claim on CI for breast cancer - she was 35

My father is also very thankful for Critical Illness cover that covered the terminal cancer he was diagnosed with 2 years ago.

We were also very mindful of the benefits of Critical Illness cover when my other half had a breast cancer scare earlier this year.

How can anyone call themselves a professional by simply landing someone with the biggest debt they are ever likely to have without discussing all the surrounding issues? Completely irresponsible behaviour especially if the client is being charged for this.

regularsaver1

Surely its against the FSA guidelines to deal with lending and not discuss insurance or refer on to discuss?

AndrewSmith

regularsaver1 wrote:

Surely its against the FSA guidelines to deal with lending and not discuss insurance or refer on to discuss?

The defence would be that the individual concerned has a panel of IFA's to which he refers for life business however as a client I would question whether this is worth paying a broker fee for.

Why should a client pay a broker fee to simply be referred to an IFA for half the job? Would also be interesting to know whether the IFA charges a fee for 'the time consuming life business' (to quote the words of the individual) bearing in mind also that there will be some kind of remuneration involved for the referral.

Moneysaving? mm I wonder.

The FSA are indeed interested in the referral of business from Brokers to IFA's and look to ensure that the correct introducer agreements are in place along with transparency regarding the IFA fees and commission status (ie commission only, fees + Commission or fees with commission rebate) and the remuneration payable to the referror.

I had to demonstrate this in a recent audit. There are a couple of brokers to whom I pass business when quite frequently I do not have the time to deal with the enquiries personally, and an IFA to whom I currently pass any investment related enquiries. I had to show formal introducer and commission agreements between my firm and the other firms, all of which the client must be aware of.

Some openly criticise the fact that I offer a FULL service of Mortgage and associated Protection on a fees free basis however those that matter are the clients. Bearing in mind that approx 75-80% of the business I take on is via personal recommendation and have far more enquiries than I can cope with, along with the fact that I am about to be awarded the local Trading Standards 'Buy With Confidence' accreditation, guess I must be doing something right.