Mortgage Insurance (Death / Permanantly not able work)

ggpeg

Hi,

I am planning on buying a property asap. I will need to finance 50% by mortgage and the rest by my savings (plan is to pay off within 15years & before i turn 60). I will have living at the property with me my Brother & Mother (There are no other people involved [I am Not married (single) & I do not have any children].

I want to make sure that an insurance will cover me for "in the event of death" (or permanently unable to work) that the mortgage would be paid for completely so that any remainder of family are not in a position to have to move out oe be forced into a big debt situation.

Can anyone give me some guidance if this is possible and is it a standard item on Mortgages insurances or are there policies that exclude this and only extend to "Wives & Children".

Thanks.
Gary

opinions4u

Commonly sold cover would be life assurance (usually decreasing with the debt) with a critical illness element.

The problem with critical illness cover is that it only pays out for specified conditions.

I'd suggest researching PHI for illness cover.

ACG

Im with O4u - PHI might not pay out a lump sum, but it will pay a regular monthly amount so either way your not having to worry about the payments.

ggpeg

Can i purchase the insurance (for death/permanent non work)anywhere or do i have to buy with same mortgage company?

Thanks for the answers so far....

holly_hobby

If this is a repayment mortgage - Decreasing Term Assurance (DTA) policy (cheapest form of life cover, which will be adequate to settle the debt).

Some term pols also include terminal illness (TI) ( paid where there is a prognosis of 12 mths or less survival of the individual) - lump sum paid on diagnosis of terminal illness, which means you can settle your affairs before you are no longer able to.

Permanent Health Insurance (PHI) - only pays out a % proportion of lost income (taking account of income from other sources such as sick pay or DWP benefits) after your chosen waiting period (min 4 weeks), and it's important to note that under the plan you will not be recompensed a full 100% of your lost salary whilst in your claim period, with payment ceasing upon return to work, retirement or death (which ever occurs sooner). So you will want to verify that the policy Normal Retirement Age (NRA) is suitable for your own schedueld retirement date (just in case you don't manage to repay the debt, and will suffer on loss of income, before that time).

Critical Illness (CI)- (as on the tin) pays out a lump sum on diagnosis of a CI - meaning again you can arrange and settle your affairs yourself whilst able. This cover is beneficial for all, but especially if there is a history of serious illnesses within your family (although of course not having any history of such, does not mean that you won't suffer a blip of your own !).

With any single life term assurance, and if covering a debt, you may want to consider writing any term assurance under trust (which will be a split trust if there is any CI included in the plan) and may not be suitable at all if there is TI element, which means that payment is speeded up (ie avoids probate), which will enable the beneficary to settle the mge debt without having to wait for probate to complete.

A will is also essential - given that you have no spouse or issue - and will ensure that your estate goes to whom you wish it to, not whom intestacy law dictate (which prevails if there is no valid will at time of death).

You can purchase your requirements from any source you wish, but I would advise engaging a Financial Adviser, whom will assess and verify where your protection needs lie and the sums involved, and prioritise according to budget and requirements (with periodic reviews if thats part of the client agreement you effect). You may also wish to engage the services of a solicitor/notary to have your will drawn up (again reviewed periodically).

If your net estate is likely to exceed IHT nil rate band (currently 325k), and you remain single, you need some estate planning - your financial adviser should be able to guide.

Hope this helps

Holly

dunstonh

Can i purchase the insurance (for death/permanent non work)anywhere or do i have to buy with same mortgage company?

You shoudlnt buy it from the lender. Lenders are tied to one provider in most cases or a tiny panel. Their pricing tends to be up there with the most expensive on the market.

It is available through any local IFA. PHI (the income product) is very much an IFA distributed product. Some banks offered their version but you tended to see expensive and low quality options made available via them.

Dave_the_Ginger_Cat

Very sensible to be thinking about this now.

It's your choice, you're the consumer, but do remember that a number of employers do provide life assurance to a multiple of income whilst you are employed, and some have provisions into the pension payout too

You are not tied, and you should find the policy which suits you and your family the best. As Holly says, a good financial adviser will help with this

amnblog

Don't buy from the mortgage company.

Get independent advice on the insurance.

Write it in trust so that in the event of your death your family can get the funds quickly and easily to repay the mortgage without any taxation issues.

(you can make the beneficiaries who you want - not just wives and children)

holly_hobby

Not sure what taxation you are referring to Amnblog ?

If referring to IHT, although proceeds are ringfenced from the decds estate, the premiums paid are not, and are assessed, if not deemed to be from normal expenditure, as gifts under IHT regs. Unfortunately this will affect their available nil rate band to a lesser or greater degree depending upon the value of any the non-exempt gifts (prems).

Also, as discussed earlier, he'll need to be careful to effect a split trust for pols with supplementary benefits such as TI or CI.

Hope this helps

Holly

amnblog

I do mean iht