insurance?? assurance??

chopper

we have just stepped on to the property ladder!!

does anyone know what the deal is with life insurance/ assurance?

i always thought that you had to take out life insurance in order to get a morgage and yet no one seems to have asked us to do that yet and we move in next week!?

we don't have any children although we do plan to somtime in the future. if something happened to either one of us as it stands, the other one would be just about able to pay the morgage independantly.

what is the difference between the insurace/ assurance?
is there any point getting either of them?

many thanks for any help.

roswell

it depends on the lenders, there isnt any deffinative Need for the insurance the insurance only protects the buyer after all, the house has a mortgage on it if the mortgage cant be paid the lender gets a property.

I would seek professional advice if you are concerned to make sure you get the right product for the cover you want / need.

gazza007

Assurance = You are assured of something happening which is Death.
This is not a requirement for a mortgage but if you are a couple with a joint mortgage & in the unfortunate event of a death of one person you can receive a cash lump sum, which you could use to reduce your mortgage. On the other hand you may have a good death benefit from your pension which would be adequate.
These days because of mis-selling in the past and bad advice, BS & Banks will try to advise on every issue & sell you a product for a bit of selling comission.

One thing that any lender will need to be satisfied of is that you have buildings insurance as being the lender they are protecting their investment too.

At the end of the day it is up to you, plenty of advice on these forums.
If you don't need it why bother....

Debt_Free_Chick

It always used to be the case that to insure one's life, you bought life assurance - and everything else was insurance (car, buildings, contents etc).

However, that distinction is no longer strictly observed - so you will find references to life insurance and life assurance. They mean the same thing.

courtjester

If your mortgage lender does not require life cover to protect the mortgage (which is unusual but not unheardof), it's a question of your exposure and attitude to risk.

If you or your partner dies, would continuing to pay the mortgage be difficult for the survivor? As this would pose a problem to most couples, it makes sense to insure the lives of you and your partner so that the mortgage debt is paid off in that event, leaving the partner with one less (major) headache once they are left alone.

Of course, once children come along, it becomes more vital to protect the family home and ensure that surviving dependents are not left in the lurch - you must get a will at that point if you have not got one already to also protect the child(ren) interests in the event that both parents die. All very morbid, but you should think about this objectively.

Your needs are likely to change, so there is no harm in getting life insurance for a particular level now and changing it later. It is easy enough to cancel and set up new policies.

You probably want to consider a joint cover with a single sum insured to start with - a figure equating to the mortgage amount borrowed which is paid out once in the event that either partner dies, but not on the second death. The surviving partner becomes uninsured and would need to take out further insurance if required if the worst should happen.

Life only cover like this is relatively cheap particularly for the young and healthy - you don't need any savings element (like an endowment policy) which bumps up the cost significantly.

Even cheaper is to go for a diminishing term insurance - where the sum paid out drops in line with the fall in the mortgage outstanding over time - this is OK if you have a repayment mortgage, but no good for interest only.

You can insure just for the value of the mortgage or go for a higher figure to give the surviving partner funds in hand once the mortgage is paid off - or this can be adjusted anytime later if you need to start with the cheapest form of cover.

The difference between insurance and assurance is not important, it is only grammatical correctness.

*Insurance* is for property (which has a value which can be expressed in monetary terms and may or may not be lost /destroyed).

*Assurance* is cover for the person or a life, which cannot be valued expressly in monetary terms and as far as life cover is concerned, the policy will pay out eventually for a 'definite' event.