Life insurance..to keep or not?

zenshi

I have a life insurance policy which I thought I had to have due to having mortgage but it appears not. I'm now in two minds wether to cancel it or not

It's a lot of money £63 a month and covers life and terminal illnesses. My children are grown and sort of left home. I do have a fair amount of collateral in the house so the mortgage would be paid in the event of my death if the house was sold but obviously the kids would have nowhere to live

I know it's a personal choice but wanting thoughts? Just to help me see it clearly

michael1983l

Maybe there is an alternative, maybe you should drop the terminal illness cover and just have standard life insurance with no frills. Then shop around for a better deal too. Maybe you could get that payment down to £20 a month (guess as insurance is so variable) and that might represent value for money for you?

FireWyrm

Um...sorry, but life insurance on a mortgage is as you say, necessary to safeguard your children - critical illness cover is not. You can get very much cheaper insurance by a) shopping around and b) getting a decreasing or fixed amount cover over the life of the mortgage. In any case, most critical illness cover isnt worth the paper its printed on due to the prohibitive clauses.

de_g.

What are you insuring?

When you have dependants who rely on you, then I'd say that life insurance is essential. For instance, Mrs de g,. and I both have insurance which pays off the mortgage on one of our two houses in the event of the demise of one or both of us. This will ensure that our son (<2 years old) would be provided for and be able to be supported.

However, if you've no longer got any dependant children or spouse, then I'd say it is an optional extra. It isn't essential, and there may be things you can do with the £63 which you value more.

Other things to consider are, what other cover do you have? I get a fairly hefty death-in-service benefit (2x salary) from my pension plus pensions for adult and child dependants, and my Union covers all members for £10k in the event of their accidental death.

zenshi

I have no other cover whatsoever and yes the money would be useful elsewhere.

foxgloves

Hi Zenshi,
I had the same dilemma as you when we were debt-busting. I had been sold a policy at the time of my first mortgage & it was back when mortgage lenders obviously got commission for selling certain products they were obviously linked in with. I was told it was a legal requirement of a mortgage to have life insurance. It isn't. Buildings insurance is the only one they can insist on. My life insurance policy had a small investment element as well as the life cover & they put it up every year, then when it was at about £40 a month, they wrote to say it'd need to go up to £113 a month to get anywhere near the amount of cover/lump sum they originally said. I cashed it in, cancelled it & took out some life cover for the remaining term of the mortgage from UIB (via trade union). If anything happens to me, it doesn't cover the whole mortgage, but it pays out £30k & that more than covers my half of it if I were to go under the proverbial bus tomorrow. It has made the monthly payments very much more affordable. It may be worth you shopping around to look at other options, but don't cancel until you're sure, to be on the safe side. I don't have children, which maybe does make things simpler.