Life Assurance

Frogmena

I am 33, I have a long term partner. I have a daughter who is two and another on its way. We have got joint decreasing term life assurance at the moment. However, we have just moved house and have an interest only mortgate which we will be switching to a repayment in a couple of years. I am assuming that my decreasing term life assurance no longer applies to my current mortgage as it is interest only and therefore isn't really decreasing? Therefore should I switch to a level term life assurance policy Or do I need both? I am a little confused. Also I'm not sure how much I should go for either. Can anyone offer me any pointers? I see Martin suggests contacting Cavendish the brokers. Will they take me through it all impartially?


Thanks

dunstonh

However, we have just moved house and have an interest only mortgate which we will be switching to a repayment in a couple of years.

Make sure you do. Increasing numbers started with that intention and forget or keep putting it off or find they cant afford to switch as the cost of repaying over a shorter term than it would have been at the start is too high.

I am assuming that my decreasing term life assurance no longer applies to my current mortgage as it is interest only and therefore isn't really decreasing?

Yes. The sum assured and possibly the term no longer match the liability/debt.

Therefore should I switch to a level term life assurance policy Or do I need both?

A level term assurance does match the requirements of an interest only mortgage.

Also I'm not sure how much I should go for either.

One level term assurance to match the mortgage (sum assured - debt and length matches term of mortgage) and another level term assurance or family income benefit to match your needs for family protection.

I see Martin suggests contacting Cavendish the brokers. Will they take me through it all impartially?

No. Well, not at the cost in Martins article. Advice costs money and that typically means paying a fee or the adviser being paid a commission. That increases the premium (or in case fee, an up front charge). If you ask for advice, it ceases to be "execution only" and becomes "advice". Cavendish (like most IFAs) have different rates for execution only and advice cases.

So, the advice will be independent but the cost will not be as cheap.

As you are unmarried and have a child (and another on they way) then the life cover is likely to be best written in trust to avoid inheritance tax. Failure to do do could see as much as 40% of the life cover payout going to Govt in tax just because one trust form wasnt completed.

lostilly

Hi do you know what sort of trust life assurance policies should be written in? I have heard of discretionary and absolute trusts but don't know which is suitable.

Thanks