Life Assurance - when is it not needed?

geekboy

Dear all,

I note in Martin's article on the subject that he says:

Plus often they try and sell it to you, regardless of circumstances, and for those with no dependants, where money is tight it isn’t a priority and can be avoided.

I'm a first-time buyer, in my late twenties, single, no dependents, and I will buy and live by myself. Am I right in thinking that mortgage life assurance will be completely superfluous?

Thanks for your wisdom!

cheers,
geekboy

Mr_helpful

yes and no Pure life assurance yes as you have no dependents but critical illness is another matter. If you become seriously ill with a critical illness you still need to pay your mortgage because you cant work but need to live in the house. Now its a peculiar quirk of critical illness that if you include Death on the policy it is often cheaper that critical illness alone.
Financially illness is far more dangerous to you than death.

geekboy

Thanks, Mr. Helpful.

I have both short-term illness cover and long-term/disability insurance from my employer. The former is adequate to cover the repayments, and the latter is enough to cover the mortgage itself.

cheers,
geekboy

apk1

Geekboy,

Mr Helpful's advice is spot on, illness would be a bigger problem for you, you should check carefully your employers long term cover, as most will only actually be for a limited period of maybe 5 years, and would only replace your basic income before any overtime or bonus's, would this be enough to cover your mortgage repayments and other possible enhanced living expenses due to an illness ?

geekboy

Thanks, apk1. Clearly, the details of the employer's cover are something I need to check, and if it's not adequate, I may have to get a supplementary insurance product.

But back to my original question: it seems clear from the opinions above that I don't need life assurance. Now, let's assume that I buy the house, and I die a few years later. In the absence of a partner, I'm considering willing my estate to another family member. My deposit is big so the mortgage will be around 50% of the value of the house by that time. Presumably, the mortgage company will want to repossess it to get its equity back: but will it be possible for the heir to take the initiative to sell the house and pay off the mortgage before it is repossessed, thus getting a maximal chunk of my equity?

(This is all waaaay below the IHT threshold, btw)

Thanks again for all the helpful advice - much appreciated!

geekboy

AndyWallace

The mortgage payments would not need to be made by your beneficiary until such times that probate/Letters of Administration etc are granted.

The mortgage costs will continually be added to the overall amount owed and when the property is 'transferred' to another person the mortgage balance will need to be repaid.

Andy.

AndyWallace

The mortgage payments would not need to be made by your beneficiary until such times that probate/Letters of Administration etc are granted.

The mortgage costs will continually be added to the overall amount owed and when the property is 'transferred' to another person the mortgage balance will need to be repaid.

Andy.

Fairdo_2

Best to get a will in place if you have not already done so, or to update the will when you are in possession of the property.

If you wanted to leave the home to the family member, they may wish to keep it and this would be worth discussing with that person. If they would want to keep the property, it may be suitable for them to pay for Life Cover for you and have it written in trust. I would suggest that you take advice on this as you have to be careful about "Insurable Interest" where it should not be permissable to take Life Cover out randomly for the "Life of Another" as in the dark ages this gave rise to unscrupulous people taking out life cover on a stranger and then bumping them orf!!

geekboy

Thanks, Andy. So the heir could solve the problem by just talking to the mortgage company, putting the property on the market, paying the mortgage company off once the property is sold, and pocketing the difference.

Thanks too, Fairdo.

I haven't done a will yet, because my net assets are approximately zero! This will change very shortly :-)

I'm pretty certain that the other family member would have no practical need for the house since it's in the wrong location by about 150 miles.