Wrong mortgage protection, advise needed please.

niftythrifty33

I'm currently doing an overhaul of our finances. We have been paying mortgage protection which was sold to us in 2001 by a local Ins. broker firm. The Policy is with Norwich Union, although the direct debit states Aviva Life.

We've been paying £13 per month. We have changed mortgages a few times since this was taken out and each time I stated we didn't need mortgage protection as we already have it.

The policy states that the 'Life Cover benefit' is for £40,000. Maximum £80,000 if we both died. States 'Decreasing Term-Without Profits Sum Assured'.???
It states that my husband is a smoker which he is not (he stopped 10 years ago so was correct at time).
It says we have 'Terminal Illness Benefit' for about 5 or 6 different illnesses.
It also states that each year the 'benefit' reduces and now its 2013 is currently worth £26,000.

Our current mortgage is for about £60,000. I know I've been stupid for not looking at this earlier (a lot earlier) but what should I do now?

Thanks for your advise and please don't be mean about me not doing something sooner.

kingstreet

Such plans decrease as the original mortgage they were designed to cover decreases. They are pretty inflexible and don't adapt to changes in lifestyle and mortgage.

The cover should have beer reviewed before and should definitely be done now. If he is now a non-smoker he could have been benefiting from non-smoker rates for years, although if it's only £13 a month, the saving would not have been that great.

However, he could now get more cover for the same premium, so he should do something about it, probably be reviewing the plan with an IFA and deciding on possible replacement cover. Please do not cancel the existing plan until the new one is underwritten, accepted and in force.

dunstonh

The Policy is with Norwich Union, although the direct debit states Aviva Life.

Aviva is Norwich Union. They rebranded some years back.

The policy states that the 'Life Cover benefit' is for £40,000. Maximum £80,000 if we both died. States 'Decreasing Term-Without Profits Sum Assured'.???

Standard decreasing term assurance for a repayment mortgage (or where there is a repayment vehicle, like an ISA).

Our current mortgage is for about £60,000. I know I've been stupid for not looking at this earlier (a lot earlier) but what should I do now?

Look at reviewing it now and replacing it with something that meets the financial need.

niftythrifty33

Do I need to use an IFA? I've just done a quote using a comparison site which came up with 'Beagle stree' part of scottish friendly for £5.83 p/m covering £60K decreasing over 15 years (current time left on mortgage) also covering lots more critical illnesses than existing policy, although I had unchecked the critical illness box as advise on here states it's not worth having?

My husband doesn't get paid sick pay from his employer, he would get standard gvmt sickpay which is no-where near his current wage. Is there a policy that will pay the mortgage if he is off sick or breaks his leg for example?

Many thanks

kingstreet

Beagle Street is part of the BISL "Compare The Market" empire. Its contract is nowhere near as comprehensive as the cover IFAs have open to them.

Are you talking about critical illness, or the more common terminal illness cover? An IFA-style critical illness plan will pay out on the diagnosis of around 40 conditions.

If you want to do this in front of a computer screen, there are firms who will be able to get you the best cover at the lowest price. These do not include "general insurance" aggregators and you really, really need the correct advice on writing life cover in trust.

On your other question, you seem to need advice on income protection.

dunstonh

Do I need to use an IFA? I've just done a quote using a comparison site which came up with 'Beagle stree' part of scottish friendly for £5.83 p/m covering £60K decreasing over 15 years (current time left on mortgage) also covering lots more critical illnesses than existing policy, although I had unchecked the critical illness box as advise on here states it's not worth having?

If budget plans are what you want then you dont need an IFA. IFAs tend to cater better for those wanting quality option (middle to upper market. Not bottom end - don't mean class but worth). However, you need to be very careful with the budget route. If you pay peanuts for basic cover with lots of things lopped off or with greater clauses to prevent claims paying out then it can be false economy. You need to find the balance between quality and cost.

niftythrifty33

kingstreet wrote: »

These do not include "general insurance" aggregators and you really, really need the correct advice on writing life cover in trust.

Thanks for your advice. I don't really understand what the above means. I know when working in the field you are used to these terms but I don't know what they mean?

The insurance I found when searching seems to have more than the policy we currently have. It states Critical illness? There are lots more illnesses than on our current policy.

I think you're right about the wages protection insurance, is it worth having or should we just concentrate on saving up 3-4 months worth of savings just in-case?

It's all such a minefield. I would love to use a IFA but I'm so worried that they will only be selling us products that make them a good profit, not necessarily products that we need or are best on the market.

kingstreet

Aggregators - comparison sites like Compare The Market. Don't mistake their service for advice on the best product. It isn't.

A trust ensures the benefit is paid outside your estate for tax purposes and is paid quickly without the need for probate. There are firms who will sell you cover, you'll have no idea if it's any good and it may leave you paying tax when you shouldn't.

Then there are IFAs.

Around 1% of the complaints made to the Financial Ombudsman Service are against IFAs. Only half of them are upheld. This is by far the best route to the best cover at the best price.

Tied salesmen and bank and estate agency "advisers" are not IFAs. Ensure you get real independent advice.

dunstonh

I would love to use a IFA but I'm so worried that they will only be selling us products that make them a good profit, not necessarily products that we need or are best on the market.

IFAs are under 1% of complaints at the FOS now despite still being the major distribution channel. FAs have been the main problem historically.

Most providers pay similar amounts if you choose the commission option. If you prefer fee based, they can do that as well and use the commission to offset the fee.

jeffnail

You need to be very careful that you do not have an old critical illness that covers illness that are n/a now - Aviva had a plan in 2001 that had some illness covered apart from terminal illness. You MUST get the plan checked out first that is does not contain any types of critical illness as these plans should not be cancelled as these definations are no longer available.