Some advice on Life Insurance/Assurance please

Jay-Producer

Hi,

Me and my partner where advised by a mortgage brocker/advisor (when taking out our mortgage) to take out Life Insurance. However, speaking to my partner's mother we are somewhat undecided. Reasons being:

- We are told insurance companies will try everything to get out of paying.

- It is not worth it at our age.

- The lengh of contracts are not suited to our age.


We are a couple (unmarried, boith in our early, early 30s) and have a child on the way. We are just about to buy our first property together. Could some of you advise on what would be the best policy to take out and why?

We are both healthy (although my partner less so with previous health concerns at a very, very young age - but all clear now). We don't smoke and rarely drink so no current major health risks which I assume will keep the premiums down?

Although I have done some reading it is rather a mindfield to us and it is very difficult to get a thorough understanding of the best options, as all the reading doesn't mention any advice for partners expecting a child.


To help give some advice, here are some questions pondering around my brain:

- If I take out "Level Term" Insurance for two people im assuimging regardless of who was killed from some nutter running one of us over, the insurance company would pay out the full amount to myself or my partner (i.e. the initial ammmount we seeked to be insured for would also remain the same for the duration of the term)? Would the insurance company pay out the full amount, and not part of it?

- Under "Level Term" insurance can you use that pay out money to pay for a funeral, mortgage, bills, holidays, anything really? or do you need to spend the money on certain things?

- The "Mortgage Protection" Insurance im assuming will only be payable to put towards the mortgage? Can it be spent on part of the funeral costs or to pay bills etc?

- Because the quotes given are based on gaurentees that they will never rise (the premiums I'm meaning), what happens if you become i'll or unhealthy do you have to declear this? can the insurance then change the premiums rate? even though they were initially guarenteed?


Thank you in advance for any advice given.

dunstonh

- We are told insurance companies will try everything to get out of paying.

Would your partner's mother like to explain how a life assurance company can get out of paying out on a life assurance policy when it only has one claimable event...death.

Is this person dead or are they pining.

- It is not worth it at our age.

So, when you are going to die?

- The lengh of contracts are not suited to our age.

So, why you are taking out a mortgage if length of that is not suited to your age.

We are a couple (unmarried, boith in our early, early 30s) and have a child on the way.

.

So, your partners mother would rather you risk not being covered for something that is dirt cheap all because she is clueless on the subject? How about when the lender repossess the property and you lose the income from the worker. No house, no income, no pension and a child to support.

I'm gob smacked to be honest at how daft a parent can be.

Jay-Producer

dunstonh wrote: »

Would your partner's mother like to explain how a life assurance company can get out of paying out on a life assurance policy when it only has one claimable event...death.

Is this person dead or are they pining.



So, when you are going to die?


So, why you are taking out a mortgage if length of that is not suited to your age.

.

So, your partners mother would rather you risk not being covered for something that is dirt cheap all because she is clueless on the subject? How about when the lender repossess the property and you lose the income from the worker. No house, no income, no pension and a child to support.

I'm gob smacked to be honest at how daft a parent can be.

Not to read bewteen the lines but she is a solicitor and a manager in an insurance firm I'd assume she knows all about how insurance companies try to get out of things.

I'd assume if someone was fishing and the hook caught me and killed me the insurance company could turn around and say it was my fault because I put msyelf in danger. Or if I made a stupid mistake on the road - they could claim I caused the accident and might not pay out - just speculating that's all. ???

I have no idea when I will die - good point.

What I meant by lengh of contract was the insurance cover. The maximum is 40 years I see, so that will cover it. However, If I'm still living after 65 Insurance for me would be sky-high then - but that is to be expected. Whereas if I took out insurance at the age of 45 and it covered me for 40 years I may well pay less over that period than taking out insurance again at the age of 65. Although the argument is how do I know how long I will live to. So we won't go there.

Insurance I got quoted for a couple was £19pm (Level Term) & £14pm (Mortgage Protection). That's expensive to us.

I have put up other questions I'm seeking to be answered.

Thanks for taking time in responding.

AskMeAnother

- If I take out "Level Term" Insurance for two people im assuimging regardless of who was killed from some nutter running one of us over, the insurance company would pay out the full amount to myself or my partner (i.e. the initial ammmount we seeked to be insured for would also remain the same for the duration of the term)? Would the insurance company pay out the full amount, and not part of it?

The insurer in this instsance pay on a "Joint life, first event" basis. So if either of you were to die the full amount would be paid and the policy would be cancelled.

- Under "Level Term" insurance can you use that pay out money to pay for a funeral, mortgage, bills, holidays, anything really? or do you need to spend the money on certain things?

Policies are no long "assigned" to mortgage companies, so you have the option to use the money for any purpose you wish. You do not even have to pay off the mortgage (although obviously it's recommended that you do)

- The "Mortgage Protection" Insurance im assuming will only be payable to put towards the mortgage? Can it be spent on part of the funeral costs or to pay bills etc?

If you have a decresing policy there is still a decent chance there will be a little left over after paying off the mortgage as they generally decrease based on mortgage rates of around 8%. So the gap between your insurance level and the mortgage maybe be enough to cover some cost. Be careful not to expect sanything substantial though if you choose this type of cover.
.........

With regard to your question an whether or not to have insurance - well this is up to you. You have to weigh up the costs with your desire to protect yourselves against the worst possible scenario.

For exmaple, I personally have Life and Critical illness on a decreasing basis for me and my wife - then a furhter "life only" policy on a level basis for both of us. The point of this is to make sure the mortgage is cleared, but also that there is a lump sum to help cover some of the living costs for a few years after the event. The small life only policies are less than a tenner month each, but the critical illness stuff is much more expensive.

Hope this helps!

Matt

dunstonh

Not to read bewteen the lines but she is a solicitor and a manager in an insurance firm I'd assume she knows all about how insurance companies try to get out of things.

That just makes her opinion so much worse. However, it is not uncommon for those close to a trade but not actually doing it to actually have misconceptions. I work with accountants and some of the things they tell me about financial products are often old fashioned and long out of date or little better than the man down the pub (as no doubt my attempts at their roles would be if I was to try and tell them their job).

I'd assume if someone was fishing and the hook caught me and killed me the insurance company could turn around and say it was my fault because I put msyelf in danger.

Wrong. It would pay out without a query.

Or if I made a stupid mistake on the road - they could claim I caused the accident and might not pay out - just speculating that's all. ???

Again, it would pay out.

Even suicide is covered in most plans (typically after 12 months to prevent someone planning it on a whim).

What I meant by lengh of contract was the insurance cover. The maximum is 40 years I see, so that will cover it. However, If I'm still living after 65 Insurance for me would be sky-high then - but that is to be expected. Whereas if I took out insurance at the age of 45 and it covered me for 40 years I may well pay less over that period than taking out insurance again at the age of 65. Although the argument is how do I know how long I will live to. So we won't go there.

If you took out cover at age 45 it would be more expensive than taking them out in your 30s. Are you going to have a financial need for life assurance beyond age 65? Most do not.

Insurance I got quoted for a couple was £19pm (Level Term) & £14pm (Mortgage Protection). That's expensive to us.

Small premiums. If you think £14 is expensive then try living as a single parent with no house (so rented) and no income coming in.

Jay-Producer

Thanks Matt,

Can you take out more cover than your actual mortgage for morgage protection insurance,a nd use whats left over to cover the funeral costs?

For example, if my mortgage is 120,00 and I take out 150,000 for mortgage protection insurance. And say towards the end of the policy one of us sadly died, and the remaining mortgage was £5000 would the insurance company pay out the full £15000 (if that was what was left in the policy)?

Jay-Producer

dunstonh wrote: »

That just makes her opinion so much worse. However, it is not uncommon for those close to a trade but not actually doing it to actually have misconceptions. I work with accountants and some of the things they tell me about financial products are often old fashioned and long out of date or little better than the man down the pub (as no doubt my attempts at their roles would be if I was to try and tell them their job).



Wrong. It would pay out without a query.


Again, it would pay out.

Even suicide is covered in most plans (typically after 12 months to prevent someone planning it on a whim).



If you took out cover at age 45 it would be more expensive than taking them out in your 30s. Are you going to have a financial need for life assurance beyond age 65? Most do not.



Small premiums. If you think £14 is expensive then try living as a single parent with no house (so rented) and no income coming in.

Thanks for the input. Some good points raised.

AskMeAnother

Jay-Producer wrote: »

Thanks Matt,

Can you take out more cover than your actual mortgage for morgage protection insurance,a nd use whats left over to cover the funeral costs?

For example, if my mortgage is 120,00 and I take out 150,000 for mortgage protection insurance. And say towards the end of the policy one of us sadly died, and the remaining mortgage was £5000 would the insurance company pay out the full £15000 (if that was what was left in the policy)?

Basically yes - as life insurance is not directly linked to the mortgage you can choose to protect any number you like. You could take half each to keep it cheaper, or double the amount each for extra protection.

Thanks

Matt

ACG

Lol dunston has made me laugh - however what he is saying is spot on.

Life Insurance pays out if you die - its pretty hard for them to argue that one.
Even Critical Illness cover pays out in over 90% of claims!

To be honest with you, the fact that you have a mortgage a partner and a child on the way is pretty much screaming that you need life insurance. I would also be inclined to look at atleast Income Protection OR Critical Illness cover (If not both)!

Think about it...
You or your partner dies - can the surviving partner still afford your mortgage, bills, funeral, bringing up your child. (Life Cover)
If one or both of you are unable to work - can you both still afford the above? (Income Protection or at the very least Critical Illness cover should be considered).

As for "Mortgage Protection" life insurance - If/When this pays out it is paid out in a lump sum to the surviving partner or whoever you decided at outset. The money is paid to that person - therefore you can use it to clear your mortgage, go on a cruise, your local pub or your local drug dealer - there is nothing in either your mortgage contract or insurance contract that stipulates it has to be used on your mortgage.

I dont want to sound rude but i would honestly ignore your partners mother. Its hard to ignore mother in laws (Ive tried) but if one of you cant afford the mortgage is she going to pay it for you?

You will always here the bad stories in the press, but having worked for a life insurance company and now myself as an advisor - i can honestly say i truelly believe in my job as i know im doing the best for people.
I have seen people go into arrears on their bills - putting off bailiffs and debt collectors (the last thing you need after your partner has passed away) and then receive a cheque for £90,000.

Jay-Producer

Thanks everyone for their input. Will have a chat about this with my partner.

kingstreet

AskMeAnother wrote: »

For exmaple, I personally have Life and Critical illness on a decreasing basis for me and my wife - then a furhter "life only" policy on a level basis for both of us. The point of this is to make sure the mortgage is cleared, but also that there is a lump sum to help cover some of the living costs for a few years after the event.

Excellent recommendation for all. Make sure once the mortgage is repaid there's enough to replace the deceased's income.

Can I suggest those on a limited budget consider family income benefit. This would pay the money every year like an income and you can choose to have it run as long as you need, perhaps upto your youngest child's 21st birthday.

As the number of years and the total amount paid drops every year, the cost is lower than for an equivalent level term assurance.

And finally...!

Don't forget your trusts folks! Write your cover in trust and;-

- no need to wait for probate
- no inheritance tax problems now or later
- make sure the money goes to who you want it to go to

and for us brokers, less chance of cancellation.

I thank you.