Level Term Life Assurance vs Decreasing Term Life Assurance

danadanny

Hi,
my wife and I are considering taking out a joint mortgage life assurance policy.

How do we go about deciding if we should go for level or decreasing term?

We received a quote from our mortgage broker:

Level Term Life Assurance - Joint Life
Premium: £20.50
Insurance company: Friends Provident

Is this considered expensive? Would the premium be cheaper if I go to Friends Provident directly?


To be honest, I prefer a level term assurance but have read somewhere that it is not advisable to put it in a trust. Is this a fact?


Any advice will be deeply appreciated.

Thank you,
Danny.

dunstonh

Is this considered expensive? Would the premium be cheaper if I go to Friends Provident directly?

If the broker is whole of market/independent chances are it is cheaper with them than going direct to FP. However, pricing is not static. You could go to 20 different independents and get 20 different prices with the same company. Life assurance is a retail product and advisers get it "priced" to them depending on their turnover and negotiation skills.

We cannot tell if your quote is good or not because we dont know you age, medical history, term, sum assured, occupations or smoking status.

To be honest, I prefer a level term assurance but have read somewhere that it is not advisable to put it in a trust. Is this a fact?

It can be very advisable to put it in trust if you fall under the right circumstances. It can be wrong to put it in trust if you dont meet the requirements. So, the answer on that is "depends".

Why are you considering level term assurance when the need is for a decreasing term assurance?

danadanny

dunstonh wrote: »

We cannot tell if your quote is good or not because we dont know you age, medical history, term, sum assured, occupations or smoking status.

It can be very advisable to put it in trust if you fall under the right circumstances. It can be wrong to put it in trust if you dont meet the requirements. So, the answer on that is "depends".

Hi dunstonh,
thank you for your reply.

Could you kindly elaborate "right circumstances"?

dunstonh wrote: »

Why are you considering level term assurance when the need is for a decreasing term assurance?

Just to clarify, for level term assurance, the premium will be fixed, the sum covered will be fix, whereas for decreasing term, both premium and sum covered will decrease.

Reason for choosing Level Term is, as well as paying the house off, there may be extra money for dependents.

dunstonh

Could you kindly elaborate "right circumstances"?

reduction of IHT, speed of payment (not held up by probate), ensuring funds go where intended are all examples.

Just to clarify, for level term assurance, the premium will be fixed, the sum covered will be fix, whereas for decreasing term, both premium and sum covered will decrease.

With guaranteed premiums yes. With reviewable premiums they can be changed at various points in the policy if insurer requires.

Reason for choosing Level Term is, as well as paying the house off, there may be extra money for dependents.

You should be doing another policy for family protection in that case. In the long run, it isnt cost efficient to do it the way you have it.

danadanny

dunstonh,
thanks for your reply and advise.

we are both 30, no medical history, sum insured is £151000 for 35 years. Both non smokers. She's a staff nurse and I am a software engineer.

Just wondering, do mortgage brokers have the knowledge to provide advice for insurance?

dunstonh

most mortgage advisers are able to provide insurance. However, a large number will be tied to one or two providers even if they are whole of market on mortgages. As long as they are whole of market on life assurance then they should be fine (you can verify that on the general insurance initial disclosure document they give you called key facts)