Help! Life insurance

Lisa1978

Hi all,
I have dug out my life insurance policy as i am in the midst of changing my mortgage from IO to Repayment. I have a few problems, for which i hope you can give me good advice

I have 2 properties :

1) House - I let this out. Value £95k. I have life insurance for this in my name only but it says on the policy amount of critical illness benefit £60479, amount of death benefit £60479. Does this mean if i die, the mortgage wldn't be paid off? Do i need to increase the policy? I am currently paying £19/month.

2) apartment, which i share with my husband. We do not have any life insurance at all (shock!). The mortgage is worth £113k IO but we are in the midst of changing it to Repayment. Would i need a policy to cover the full £113 and buy a joint policy? The quotes seem to be £77 level or £48 decreasing per month - woo!!!

Also, for both properties should i go for level or decreasing mortgage?

Thanks a mill, appreciate it :)

lisyloo

1) Is £95K the value of the property or the mortgage. Is the policy level or decreasing?
If it's a level policy and pays a fixed sun of £60479 and the the mortgage is £95K then no it won't cover the mortgage. That's simple maths.
You will have a shortfall of £35K (although of course the property will still be in your estate so there is equity).

2) Why shock??
You don't need to have any insurance if either your husband can continue the mortgage alone or he is willing to sell the apartment.
You only need insurance if he wishes to remain in the apart but can't afford it on his salary.
If the quotes are high, then does he really need to have zero mortgage? Could he not afford any mortgage on his own??
So for example if you each could afford half then you could get a joint policy for half the amount.
It's not really necessary for a healthy working adult to require the entire mortgage paying off (assuming no kids).

Do either of you have death-in-service benefits via employers?
Do either of you have pensions schemes that would pay out a pension and/or lump sum on death?
You should definitely investigate these issues before working out what life insurance you need.

Also, for both properties should i go for level or decreasing mortgage?

Generally that depends on whether you are I/O (without any repayment vehicle) or whether your mortgage is repayment.

Lisa1978

lisyloo wrote: »

1) is £95k the value of the property or the mortgage. Is the policy level or decreasing?
If it's a level policy and pays a fixed sun of £60479 and the the mortgage is £95k then no it won't cover the mortgage. That's simple maths.
You will have a shortfall of £35k (although of course the property will still be in your estate so there is equity).

Basically both, the mortgage is £95k, the value wld be approx £90-£100k;

2) why shock??
You don't need to have any insurance if either your husband can continue the mortgage alone or he is willing to sell the apartment.
You only need insurance if he wishes to remain in the apart but can't afford it on his salary.
If the quotes are high, then does he really need to have zero mortgage? Could he not afford any mortgage on his own??
So for example if you each could afford half then you could get a joint policy for half the amount.
It's not really necessary for a healthy working adult to require the entire mortgage paying off (assuming no kids).

Shock, because i assumed people on here might have a go with me not having life insurance!! The apartment is in negative equity currently so selling would not be an option, i'd say we're £12-15k negative. He could keep the apartment on as could afford the monthly payments himself. We don't have kids at present.

Do either of you have death-in-service benefits via employers?
Do either of you have pensions schemes that would pay out a pension and/or lump sum on death?
You should definitely investigate these issues before working out what life insurance you need.

No, none of us have death in service with our employers. I have a pension through work, they pay 5% of my salary. Husband doesn't have one.

Generally that depends on whether you are i/o (without any repayment vehicle) or whether your mortgage is repayment.

as of today, my 2 mortgages are io (only £22k out of £95k is repayment), but i am changing both, i have received quotes and changing both to repayment.

Thank you very much for your kind advice :)

Lisa1978

Sorry, i wrote in caps above the answers to your qus, but the forum has changed back into non-caps, i hope you can find my replies to your qus, thanks

Lisa1978

Pardon magicstam???

lisyloo

A level term would mean the amount paid out is fixed but as the mortgae is decreasing this means there would be a lump sum left over.
This would be nice but of course the premium may be higher.

A decreasing term is mean to decrease in sync with your mortgage, so there would be no lump sum.
Generally the advantage is to minimse the costs of the premium.

So really it comes down to whether you want to pay the extra for an additional lump sum.

There is no right answer but if you were looking to minimise the premium then a decreasing term will probably be cheaper.

BTW - Are you sure you want to switch the mortgage on the rental property to repayment?
Normally the advice is to keep the mortgage high as the interest can be offset against your profits for income tax purposes. So if you have spare cash you'd pay less tax if you maximise the BTL mortgage and minimise the home mortgage.