Decreasing benefits from Mortgage Insurance Policies

[Deleted User]

Hi,

I'm looking at my current D&CI policies which cover my mortgage and would like to know how the payable amount is calculated - or is it as simple as it looks?

I've got decreasing benefits which '...decrease at a rate of 10%pa...' and would like to know if this means the benefit in year 2 is 90% of year 1, year 3 90% of year 2, year 4 90% of year 3, etc?

I've used Excel to calculate this, but at the end of the term - and when the mortgage finishes - there's still quite a large 'benefit' - which I appreciate isn't an endowment.

For example, a 20 year policy worth £100,000 in the first year, is still worth (almost) £11,000 in the last year.

I would be interested in a more accurate calculation if I have got it wrong!

Thanks

OshayAway

it decreases in line with a repayment (capital & interest) mortgage balance. Normally the policy docs will show the balance yearly or monthly. Otherwise ring the insurer and they will tell you the current sum assured balance.

[Deleted User]

Thank you, OshayAwway

OshayAway

It's worth oting that some policies have higher policy interest rates than others. In this regard, the higher the rate, the more the payout (outside of the first month of the plan). The range is typically 6% - 12%. Some have a feature called 'mortgage guarantee' or similar but the potential down side to this feature is that there will not be any over in the event of claim and if there are any flexibility options exercised on your mortgage, the rate normally defaults to a low value e.g. 6%.