new mortgage application - protection review appointment

victhesmith

Hi

We have just got our mortgage offer through and my mortgage advisor asked that we have a mortgage protection review meeting. I vaguely recall mortgage protection products being sold to me when i bought my first flat but i didnt take them up on it, instead opting to save the equvalent money.

So my question is, is mortgage protection worth getting? or is it best to get a savings plan in place?

Also, what are peoples thoughts on mortgage assurance plans (reducing term)? We have no dependants and I have minimal life insurance cover with work (£10k).

My mortgage is with Britannia (part of co-op)

Thanks!

_Andy_

What would you do if one of you died during the term of the mortgage?

kingstreet

Some protection can be sensible if it meets your needs and falls within your budget. Income protection can be useful, for instance, if you are unable to work due to disability. Imagine having to pay your mortgage for 25 years following an injury. Income protection can cover this for you.

Likewise, life cover and critical illness cover may be a good idea. All I'd argue with is your source of "advice."

Buying insurance products from a lender is a big mistake. The products are usually over-expensive (to pay their commission) and the terms and conditions are often not as good as the products via an independent intermediary.

Avoid.

victhesmith

yeh ive got a few quotes for mortgage assurance which is only around £7 a month so not too bad.

got nothing in place for illness etc....i just dont really know much about it so good to get some advice on here first before they try to sell me stuff!!

The appointments not for a couple of weeks so got time to shop around. So do you generally think mortgage payment protection and assurance is a good thing to get?

Thanks!

kingstreet

Mortgage payment protection is short-term. You have an illness longer than 12 months and the benefit stops, leaving you on your own. Permanent health insurance might be a better bet, as it covers the whole mortgage term, or even upto retirement.

The unemployment cover from MPPI could be useful if you have any job worries. Again, cover is likely to be limited to twelve months.

Life cover and critical illness cover pay off the whole mortgage debt if you die, or get one of the list of serious illnesses in your policy and survive.

I think you'd be better off talking to an Independent Financial Adviser. Not only will you be able to establish the cover you need, but you'll also get recommendations for the provider with the best cover, lowest cost etc.

MFSaver

I would definitely consider a life assurance term policy that covers the term of the mortgage (and covers critical illness if you think it is necessary). Should you move in future and require a new mortgage, or sell the house and repay the mortgage, the term policy is still there if you want to continue it.

kingstreet

You might like to have a look at the Defaqto rating system. This is one of the tools an adviser will use in comparing different products.

Here's income protection as an example. The best products receive a 5 star rating;-

http://www.defaqto.com/star-ratings/find-product/income-protection-insurance/5

The likes of Aviva, BUPA, Friends Provident, LV all have one or more of their contracts listed.

If you look at the other star ratings, the best rated Co-Op income protection plan is the Earnings Protection Plan with 3 stars.

http://www.defaqto.com/star-ratings/find-product/income-protection-insurance/3

The tied-adviser at the bank will tell you this is the best product for you because they can only recommend from their range. An independent will find you the best product from all the products in the market.

koexelek

Of course, it is all worth having.... but ultimately, it comes down to cost.

Whatever cover you decide you need, make sure you shop around for the best quote ( which is unlikely to come from the mortgage provider)

Conrad

Make sure of 3 things;

1) The cover is with a decent recognised provider such as AVIVA

2) That the broker gives a 35% or greater commission sacrifice which makes the premiums cheaper - I do this as a matter of course so others can too

3) That you check every health question is accurately answered - even down to minor health issues in childhood - some brokers deliberately encourage cleints to skimp over some questions as they dont want the policy to be turned down thus loosing thier commision. Alwasy check a hard copy of the submitted health questions.

victhesmith

Thanks all. We've had our appointment today and have asked for some time to think about it.

She is recommending life assurance (really mortgage protection to cover mortgage with decreasing term) and we are going to go with income protection i think. Potentially just for my bf as he has the higher salary so would be much harder hit if he was off sick. That would be £9/mth compared with £35 if it was both of us (i have more outgoings and my employer provides much less full time sick pay compared with my bf).

The life assurance is through co op and is FriendsLife underwritten by 50% axa and 50% friends provident. She says it goes through underwriting straight away so if you ever have to claim you dont have to worry about if they will cover you or not. We just need to decide if this is the best product for us and most cost effective etc.