first time buyer - life insurance or mortgage insurance?

earthlover

Life-term assurance or mortgage life insurance - Which is the best insurance for a 26 year old, single at present, first-time buyer with a £170,000 mortgage over 17 years? He has his dad as guarantor for the mortgage so he needs to protect dad against having to pay in the event of son not being able to, also.

Also if dad died, would dad's estate have the responsibility of guaranteeing the son's mortgage and /orwould mum have to take on any guarantor responsibility? Mum and dad own their own house jointly.

Been reading threads on the Life term asssurance thread, but not much clearer.

ACG

Both the same thing.
Life Insurance, Term assurance, mortgage protection life insurance = all the same. Just like if you said beans or baked beans you would probably be talking about the same thing.

Sounds like the life insurance policy should be placed in trust for the dad (this is free if done through the life office rather than a solicitor).

If hes a guarantor and he were to pass away there is no guarantor, as far as im aware it doesnt fall on the estate, the lender wouldnt do anything unless the person your talking about started to miss payments.

Might be worth a chat with a broker as you seem to have a fair few questions and some are a bit more technical than the general run of the mill we get.

earthlover

Would an insurance broker be the best person to talk to?

ACG

Probably not, i think they only really do home/car etc.

A mortgage or financial advisor would probably be a better option.

earthlover

Perhaps income protection would be useful in these circumstances?

ACG

i personally think income protection is the most important policy for the majority of people. Its the one policy i took out myself, i will get round to life insurance when/if i have kids myself but at the minute if i dienobody will be worse off.

Andy7856

I may be missing a trick but check the son's pension - many cover salary x 4. Also if the son died, then would the dad simply not be able to sell the property? From what I see paying life cover is a total waste of money here... unless (like I say) I am misssing a trick and miss read it.

ACG

Selling the property is an option - however if the son were to get married and/or have kids then you could find that the house or equity in it does not pass to the father.
You also cant be sure that the property will hold its value, so as well as grieving the hassle of selling the property there could be a shortfall in the money (may be the least of his problems but may not be).

As for the pension, again it could pass to the persons wife/kids instead.

rs65

Andy7856 wrote: »

I may be missing a trick but check the son's pension - many cover salary x 4. Also if the son died, then would the dad simply not be able to sell the property? From what I see paying life cover is a total waste of money here... unless (like I say) I am misssing a trick and miss read it.

Makes sense to me. If he gets married or has kids then review but I wouldn't worry about that now.

I would be more concerned about being alive and unable to pay. Sickness, redundancy etc.. The guarantor could be called upon in circumstances where life assurance would make no difference.

ACG

i agree there is also a need for income protection.

If anything were to happen to the son now - heart attack for instance then he may not get cover at a later date, it could be more expensive and it probably wouldnt cover for further heart attacks.

To be honest i can see the argument both ways. I as a guarantor would want the cover in place, however if i wasnt the guarantor and was in good health the property was unlikely to lose value and had some sort of cover through work or a pension then i would be reluctant to incur any extra costs...if i needed a guarantor then i imagine money must be a little on the tight side.

kingstreet

Is it 15 posts before you can start spamming, Andrew?