Life/Mortgage/illness cover? Please help totally confused

ssaz

Hi there,

Apologies if this has already been asked.

My husband and I are in the process of buying a house. In terms of any type of life insurance - Halifax have sent a quote of £13.53 from scottish widows, for critical illness with life cover. They will pay a decreasing lump sum of £55,245 (mortgage is 60k) for 25 years if my husband has an illness or dies within 25 years. Childrens criticall illness cover is also included.

I've looked at all the articles on here and I'm just very confused as to which to get,it said critical illness cover is not liked, and there is mortgage assurance, level term etc too.

The mortgage is on my husbands name solely, as is the house. He is 26 and the only source of income.

I am 25 and stay at home with our two daughters both under 2.

We have no diagnosed illnesses and are quite healthy atm.

We know what we WOULD like, if that helps:

In the event of the death of my husband, or if my husband needs to leave work due to illness assurance that mortgage will be paid off and house cashed. (Or if I am sick and he needs to leave work.)

So really all we want is for the mortgageto be paid off, can anyone recommend any type of cover?

Thanks a million
shamila

kingstreet

Joint decreasing life cover would pay off the mortgage if either of you died.

Joint decreasing critical illness cover would repay the mortgage if one of you contracted one of the covered illnesses and you met the criteria for the severity of the illness.

Income replacement cover, or permanent health insurance would replace your or your partner's income in the event of you being unable to work due to illness or disability following a set initial waiting period. This would enable you to continue to meet the mortgage payments and pay the other bills.

As you cannot guarantee being sick enough to claim on the critical illness cover, you should consider the income replacement cover and the life cover as the two highest priorities. If you can afford to take life and critical illness cover together, then add the income replacement cover as well, that would be the ideal solution.

Scottish Widows doesn't offer a particularly good/cost effective life or critical illness product as it is the Lloyds Group's tied-office. An independent financial adviser would find the best/cheapest way to effect this cover for you and to advise you on writing the life cover in trust, if sensible to do so.

dunstonh

I've looked at all the articles on here and I'm just very confused as to which to get,it said critical illness cover is not liked, and there is mortgage assurance, level term etc too.

Martin's article on CI is a disgrace to this site. When you consider that the insurers pay out in over 90% of CI claims and many people are so grateful for having it, his opinion seems very misplaced. Personally, we have seen more CI claims over the years than life assurance claims. I think a trend most financial firms would match. Also note that Martin's article doesnt even mention the most suitable form of income protection. That for many people is the better option.

I'm afraid the information on this site about regulated financial products is very weak nowadays (the pensions article is years out of date and the key product it mentions in the article has been replaced not only once but twice).

You should never buy your insurances from a bank. They are the most expensive distribution channel for advice. An IFA should be able to come in with better and cheaper.

kingstreet

Example.

Joint decreasing life & critical illness cover for £60,000 over 25 years would cost £14.02* per month with a leading IFA provider. Adding £500 per month income replacement cover would increase the cost to a total of £18.42* per month.

It's not a great deal more to cover all the needs you mention.

Worth noting, a serious illness would allow you to claim on both the income replacement cover and the critical illness cover if you meet the qualifying criteria for the latter. That means the potential for the mortgage to be paid off and the monthly income paid as well.

* M27NB N/S, F26NB N/S, £60,000 joint decreasing life and critical illness cover plus £500 per month disability income benefit following 13 week deferred period, benefit payable over 25 years. Assumed class 1 occupation and own occupation definition used. Guaranteed rates apply.

Please seek advice from an IFA as suggested in my last post.

ACG

I would agree with the above.

Why are the recommending you take out £5k less cover than your mortgage is actually for?

ssaz

ACG wrote: »

I would agree with the above.

Why are the recommending you take out £5k less cover than your mortgage is actually for?

I have no idea why its 5k less. The mortgage is with halifax and the mortgage advisor sent me quotes for building and contents from lloyds and life cover from scottish widows..she claimed they were the cheapest quotes but obviuosly I'll be doing my own research too.

Thank you all for your replies, I think I will see a IFA,Are they free btw?

ssaz

Also does decreasing life cover mean that if we were to claim, the amount paid to us would decrease over time...ie it would just pay off how much mortgage was left.

dunstonh

she claimed they were the cheapest quotes but obviuosly I'll be doing my own research too.

In the context of Lloyds/halifax, they will be the cheapest that they can offer. An IFA can be as much as 40% cheaper.

I think I will see a IFA,Are they free btw?

Nobody is free. The cost of retail is in the premiums you pay. Banks are expensive and that is reflected in their higher premiums.

lso does decreasing life cover mean that if we were to claim, the amount paid to us would decrease over time...ie it would just pay off how much mortgage was left

correct. You cover the need. No point paying for more than you need.

ACG

Scottish widows, lloyds, halifax - theyre all the same company when you drill down.
Scottish widows i would guess are probably not the cheapest - infact i would guess they are the only company Halifax have access to.

Just remember though cheapest isnt always best so dont just go off price. Just make sure you do your research if you dont go through an advisor.

savageHK

We have recently jumped through all these hoops ourselves!

You will likely need the life cover anyway for the mortgage, so it's the "accessories" that matter.

We went for term assurance which didn't decrease with the mortgage as the cost was rather similar for us, and while it's still term assurance (i.e. you need to die within the term of the policy to have a payout, so hopefully you'll never claim on it) if one of us did die it would be very handy to have some extra money about.

You should consider whether or not to get life assurance for you as well, as should you die your husband would need to pay for nursery or for someone else to look at the kids.

As for something that pays out if your husband was unable to work, this is where it gets a bit complicated. Critical illness only pays out on very specific illnesses, and usually very severe ones. What you are after is something else, income protection cover. And you may need to consider what happens should your husband become unemployed. Check what his work offers if he is unable to work due to illness. In our case I have cover through work, while my husband does not.

It's not likely that should he be unable to work for a short term problem that the entire mortgage would be paid off, but different providers will pay up to 65% of salary or similar for as long as you are off work.

ssaz

thankyou so much for your replies, they have been very helpful. My husband and I have agreed we need to think about this further and decide which is best after more research rather than jumping into the wrong cover. All your replies are appreciated.:T