What insurance do we NEED?

hopingforahouse

We are currently off to get our very first mortage (and flat too therefore hopefully!). Obviously buildings and contents. Probably life insurance. Do we really need the mortgage version of repayment insurance - so would insure us for a year or something for our repayments if one of us became unable to work? Unsure of what the mortgage people are trying to sell us as we need it, rather than they would like the comission?

HELP!!!

And thanks.

Xbigman

The only insurance you *must* have is buildings insurance. If you are buying a flat and there is a service charge, then buildings insurance may well be included.

Contents insurance is very sensible but not in any way essential. But it depends on your circumstances. I live in a low crime area and my doors and windows are modern multi point locking ones so theft is not an issue. My excess is high to save money, so I would not claim for any accidental damage. Therefore I have only basic buildings insurance with Barclays. £72.

Life insurance. If you have children then some sort of life insurance to cover the mortgage is important. Whether you want additional life insurance to leave a lump sum is another question. If you do leave a lump sum the surviving partner will not be able to claim any benefits, so you'd need to leave a pretty massive amount of money to support your partner and kids until they are old enough to support themselves. Couple of hundred grand at least. I'm single so I can't comment on the value of that.

MPPI (mortgage payment protection insurance). If you want it, don't take the lenders but get a stand alone policy. If you have two incomes and/or no kids to support I wouldn't bother, if you have one *and* kids to support I would get redundancy and sickness cover.

Mortgage insurance. If your lender insists on any insurance because your loan to value is a high percentage (IE 95% to 100%) then you should argue the toss and only pay if its conditional on the mortgage. If they just offer it to you, turn it down.
Regards



X

dunstonh

If you do leave a lump sum the surviving partner will not be able to claim any benefits, so you'd need to leave a pretty massive amount of money to support your partner and kids until they are old enough to support themselves. Couple of hundred grand at least. I'm single so I can't comment on the value of that.

What benefits? Widows pension wont go far and you would have to be below the breadline to get other benefits. Its not the ideal way to have your family remember you. Life cover is so cheap its not worth scrimping on and £200k of JLFD cover is going cost little to nothing for anyone under the age of 35.

Rick62

Buildings - required by lender

Contents - for extra £50 to £100/year you would be crazy not to have it, forget theft, suppose the building burnt down.

Life cover - very cheap, takes pressure off partner if something happened and definately recommended if you have kids. State gives hardly anything these days.

Critical Illness - bit more expensive, but being ill is a greater risk than dying, so worth considering. You don't have to take cover for the mortgage amount, you could take, say, £20k cover to provide cash to take time off or to pay for private treatment if something happened.

Income protection, Family income protection - gives an income if you can't work or for your family if you die. Cost can be reduced by having a long initial excess time, i.e. does not pay out for first 6 or 12 months.

MPPI - Very popular with government and lenders, however only pays out for 12 or 24 months max and often relatively expensive and many people are not elligible for the 'unemployment' bit. Worth while for some people, particularly on tight budget with no savings, but very often you can get a better package of other insurances for the same cost.

'Mortgage insurance' for loans over 95%. No such thing. Xbigman is talking about the lenders 'higher lending charge' which is a fee some lenders charge on high loans. It gives you no insurance or benefit of any kind, and usually you can find a better deal without this charge.

If anyone wants to sell you insurance ask about the different sorts in relation to your circumstances, if they don't discuss them all and in a way that you can understand then go to someone else. In particular lenders will just try and push their tied MPPI, this is usually an expensive way to get poor advice.

Xbigman

dunstonh wrote:

What benefits? Widows pension wont go far and you would have to be below the breadline to get other benefits. Its not the ideal way to have your family remember you. Life cover is so cheap its not worth scrimping on and £200k of JLFD cover is going cost little to nothing for anyone under the age of 35.

It depends where you are starting from. If you are a SAHM with a huge mortgage and no savings your first stop if you lose your partner will be the DHSS to make a claim. With as little as 10k in the bank you are blocked out of any sort of claim until the money is spent. Widows pension plus a smaller lump sum could work but the OP did not say they were married.
What the OP did ask was what insurance do you need, and you do not need life insurance. In some circumstances it is very very worthwhile but that is up to the OP to decide based on reviewing all the information. I certainly wouldn't rush out to get life insurance if I was buying my first home and had no kids (or more accurately that should be past tense as I didn't in reality).
Regards



X

Xbigman

Rick62 wrote:

Buildings - required by lender

'Mortgage insurance' for loans over 95%. No such thing. Xbigman is talking about the lenders 'higher lending charge' which is a fee some lenders charge on high loans. It gives you no insurance or benefit of any kind, and usually you can find a better deal without this charge.

Yes that was what I was talking about. It was called Mortgage indemnity guarantee (MIG) when I had it but I've not seen that term for a while so didn't want to use it.

As for contents insurance. Most people have it, I personally do not. I cancelled my contents insurance, MPPI, dropped car to third party, etc and banked the money instead. That account currently sits at a little over 2 grand and is rising. Could my house burn down? Well yes, but what percentage of houses burn down each year. I personally don't think its worth it.
Interestingly I just renewed my Norton internet security subscription so I obviously am not averse to taking some precautions. But then my computer is much more likely to get attacked than my house burn down.

I'm not advising people not to have contents insurance, you just need to realise that it is unlikely to ever do anything for you. £100 a year is a lot of money to some people.
Regards



X

dunstonh

I dont know if this is just me but the thought of relying on the state and living the lifestyle that goes with that is one that is not at all attractive.

Even more, the thought of my family having to live like that because I didnt spend a few pounds (and it really is just a small amount) is even worse.

You say you are single (and I assume no children). I can tell you that having children will change your viewpoint. Its amazing how you look at things differently then.

Rick62

If you are depedant on the state they generally only give assistance for up to £100,000 of mortgage and only that after 27 weeks.

Xbigman

dunstonh wrote:

I dont know if this is just me but the thought of relying on the state and living the lifestyle that goes with that is one that is not at all attractive.

Even more, the thought of my family having to live like that because I didnt spend a few pounds (and it really is just a small amount) is even worse.

You say you are single (and I assume no children). I can tell you that having children will change your viewpoint. Its amazing how you look at things differently then.

I have a grown up daughter. Whilst she was young I, like millions of others in this country now, simply could not afford life insurance. Blanket advice that it is nescesary and only a few pounds IMO is wrong. Everyone might want it but if money is tight then I believe the correct answer is that you do not need it.
As this is the mortgage board I do realise we are talking to people who have something financial to lose if a partner dies so they are more likely to want life insurance. But there are some for who leaving a limited lump sum would not be greatly beneficial. Leaving your family with a few quid in the bank and no credit card debts would be more usefull. It does come down to individual circumstances and individual choice though.

Or maybe I just view life differently.
Regards



X

Xbigman

Rick62 wrote:

If you are depedant on the state they generally only give assistance for up to £100,000 of mortgage and only that after 27 weeks.

I think its a year now.

And if you read my original post you'll see I said that insurance to pay the mortgage was important so I'm not actually talking about benefits for that.
Regards



X

hopingforahouse

Wow guys, a lot to think about. The way the broker described it, made it sound obligitory.

Think probably then going for buildings and contents, and will consider critical illness. We are married, and have a £35,000 deposit, and are prob going for a mortgate of about £105,000 on top of that.

Cheers :beer: