Life assurance term type - Please assist

pardal51

hi all,

Need a bit of advice from the experts here.

Me and OH are purchasing our first property on an offset mortgage. We will be getting quotes for life assurance to cover for death and critical illness or death only.

Although we will be on an offset mortgage; the amount related to the capital part will be collected monthly by the bank and transferred to an offset savings pot, which we will not touch (we are quite disciplined). Furthermore we will also try to save monthly in to this offset savings pot in order to repay the mortgage in full quicker. This means that in essence we are in fact on a "repayment plan".

My question is:

Should I go for Level Term or Decreasing Term life assurance?

Hope someone could share some thoughts and point us to the right direction.

cheers,

dunstonh

Should I go for Level Term or Decreasing Term life assurance?

Although it is an offset mortgage, is it still being set up on repayment basis or interest only basis?

interest only = level term assurance
repayment basis = decreasing term assurance

pardal51

dunstonh wrote: »

Although it is an offset mortgage, is it still being set up on repayment basis or interest only basis?

interest only = level term assurance
repayment basis = decreasing term assurance

On my FD application I have selected:
"How do you wish to repay your Offset Mortgage:"
(a) Interest & full capital repayments;

This means that the payment is being taken from my current account to cover not only interest but to repay mortgage capital over selected term.

I understand the "capital" part will be taken from my current account and transferred to the offset savings which we can have access anytime to redraw should we wish (although it is not our intention to touch this pot).

Having said that I believe I can treat this as "repayment basis". Am I correct?

Thanks once again

JDC14

I know nothing off mortgages - but that sounds about right, that it'll be a repayment mortgage.

However, I think you should consider getting quotes also for Level term cover.

This means, if in extreme circumstances, you were to 'touch the savings' in the offset pot, you're still covered. As decreasing won't go down as your mortgage does precisely, it goes down at a similar rate as it should, they're not tied.

Also - You'll get more cover from a level policy.

If you were to claim early on into your mortgage term, it'll cover your mortgage as well as leave a bit extra, and if you were to claim on late into your mortgage term, it'll leave a lump sum for your relatives to cover your funeral expenses etc. And help maintain your partner/children in their current lifestyle.

It's something worth considering, maybe see an IFA or speak to an Insurance broker who can lay out all the facts with Level/Decreasing, Joint/Single.

I find more often than not these days more people would rather have 1 larger level policy, than a decreasing policy to cover their mortgage then two single policies to cover each partner on the side. But that depends on your situation, finances etc. Best to a see a professional to discuss your individual circumstances in my opinion.

dunstonh

I find more often than not these days more people would rather have 1 larger level policy, than a decreasing policy to cover their mortgage then two single policies to cover each partner on the side. But that depends on your situation, finances etc. Best to a see a professional to discuss your individual circumstances in my opinion.

Whilst the DIY market seems to follow that route nowadays the advice market does not. Indeed, the FOS are more likely to consider it is mis-sale as it is rarely the most cost efficient option or the most suitable.

Having said that I believe I can treat this as "repayment basis". Am I correct?

yes