Life Insurance advice

piml79

I currently have joint mortgage life insurance cover on a decreasing term basis. With a child on the way I would like to increase the amount of cover that we have so that the new arrival can be provided for should the worst happen but I am unsure what the best option is.

Can I cancel the existing policy (as I think it is expensive) and take out a new decreasing term policy but for an amount that is greater than the outstanding mortgage so that there is a cash payout on top of the mortgage being paid off or would I be better off just adding a separate level term policy on top of the existing mortgage policy?

My thinking is that I would be better to take the first option as the amount required to cover living expenses would decrease as the child gets older but I'm not sure if you can take out a decreasing term policy that is greater than the value of the mortgage.

Any advice would be appreciated.

dunstonh

Can I cancel the existing policy (as I think it is expensive) and take out a new decreasing term policy but for an amount that is greater than the outstanding mortgag

That wouldnt be a good idea. You have two needs. One decreasing, one increasing. They will also almost certainly be over two time periods as well. Having one policy to cover two needs of different amounts and timescales will be inefficient and lead to extra expense or inadequate cover at some point in the term.

A second policy/segment would be most logical.

ACG

I agree with dunston but just to exapand:
Need 1) Sounds like mortgage cover, so presuming your on a repayment mortgage you would most likely be looking at decreasing term assurance over the period of the mortgage.
Need 2) This can get a little more tricky, you could have a level/increasing term assurance policy here, that will provide a lump sum until you feel your child would be independent (18, 21...maybe even older. I dont think i was financially secure until i was about 23). Alternatively you could have whats called Family Income benefit - which pays a monthly amount rather than a lump sum...this is usually a cheaper option.

Then you can also get into the options of looking at what would happen in the event of illness rather than death - so you then have income protection/PHI and/or critical illness cover.

Im not trying to make out job look more important than it is but it could be worth a chat with a mortgage or financial advisor. If price is an issue they can look at different options to keep the price low.