Life Insurance question

misschicken

A mortgage was taken out in 1997 - repayment, 25 years - single person, no dependents, first time buyer. The bank made life insurance a condition of the mortgage with an insurer that had to be approved by them. The customer has no need for the cover but accepts it is a condition of the bank's mortgage products and agrees to let the bank's insurance arm provide cover to meet the conditions of the mortgage offer only, as cheaply as possible as there is no benefit to them.

From the various types of life cover what product would be appropriate?

dunstonh

From the various types of life cover what product would be appropriate?

Life assurance is life assurance. There are different types but typically you would expect level term assurance or decreasing term assurance.

If the lender makes it a condition of borrowing (which in 1997 to get a specific deal was not uncommon) then they are allowed to do that.

roonaldo

so this person took out a life insurance and you're asking what other sort of life cover would be appropriate for them, when you just said they have no need for life cover.

What are you asking? This makes no sense.

misschicken

No, I didn't ask what 'other sort of life cover would be appropriate' - I asked what would be appropriate in the first instance, when someone had to take out cover to fulfill the conditions of their mortgage offer even though they had no actual need for it themselves.

Dunstonh, thanks for that - which of the term assurances would be cheaper for the customer, cost being their only consideration under the circumstances?

magpiecottage

misschicken wrote: »

which of the term assurances would be cheaper for the customer, cost being their only consideration under the circumstances?

Generally, mortgage protection assurance, which decreases in line with the loan, would be cheapest. However, an educated guess is made about how fast the loan will be repaid at outset (the capital goes down less in the early years if the interest rate is higher) so the only way of being certain it will be enough in the event of a claim is to have level cover.

Consequently, that is suitable.

Some banks also only offered level cover at that time and, if so, its sale would not have been unsuitable.

misschicken

Thank you