New to life insurance

alyssa_liss

As above buying our first home . need life insurance where do we start.

24 yr old female,non smoker
25 yr old male , non smoker

with a child

i think we want level insurance payout

thank in advance

kingstreet

I slighty disagree with your opinion on level cover.

If you have a repayment mortgage choose decreasing term assurance to repay the outstanding balance if either of you die.

In addition, choose family income benefit which will pay an income to replace that of the deceased. Run this until your youngest child's 21st birthday, or perhaps until retirement for a non-working spouse. As this is also decreasing cover, it will be cheaper than level/lump sum options.

For example, £100k decreasing term for 25 years will cost £7 per month. £20k pa family income benefit over 20 years would cost £14. If one of you died in the first year, £400,000 would be paid out, with this reducing by £20k as each year passes while you still live.

That's a total of £21 per month. By comparison, a £500k level term assurance for 25 years would cost £27. Your call on paying 29% more for your cover.

Whatever you do, please ensure you obtain advice on writing the cover in trust so that the payout is made directly and quickly to those you want to receive it, outside your estate so no probate or Inheritance Tax implications and to keep it safe from creditors.

jonesMUFCforever

I am amazed if you have applied for a mortgage that the mortgage adviser has not at least discussed this with you.
I would suggest a visit to a decent IFA.

Emma_Drewberry

With mortgage insurance your options are to have:
Life insurance with a decreasing term. This suits repayment mortgages as the amount of the payout reduces in line with the outstanding mortgage balance. As explained by Kingstreet the premiums are also cheaper and it is important that it is written into trust.

You could also consider having an income protection plan in place to insure you in the event of being unable to work due to illness or injury. The policies to look for are those which cover you if you are unable to work in your own occupation.

Long policies are available which can pay out until retirement age (in case you are seriously ill and unable to work again) and short term policies are available which pay out for 12 or 24 months.

Income protection policies do not have a standard list of medical conditions so they can cover most conditions that leave you unable to do your job. However some other policies called mortgage payment protection policies do not cover conditions such as stress and back problems. It is always best to read the documentation. Income protection policies generally look at your medical history upfront and will state what is covered and what is not before you take it out.

Unemployment policies can also be taken out which can cover you for up to 12 months if you are made redundant or in some cases dismissed.

In addition, family income benefit is a monthly benefit which will pay out if the person covered passes away. It can be used to cover the essential expenses such as council tax, bills and education for a certain period of time such as until your child turns 21.

With so many options available your best option is to speak to an independent adviser who will be able to discuss the different types of insurance and can search for quotes across the whole of the market. They can also discuss your own circumstances to find out what is best for you.

I hope this helps.

marathonic

There are cases where a level-term policy is the better choice but, in general, the advice above holds true.

In my case, a level-term policy cost the same as a decreasing-term policy due to the low mortgage amount and my young(ish) age, i.e. the level-term policy was available at the minimum premiums charged by most of the insurers.