Critical illness and life cover on the mortgage

Daxx

Hi,

Just a quick question...we are due to exchange this week on a new build property bought taking advantage of the Help to Buy scheme. This means that 20% of the purchase is funded by the equity loan.

When looking at Critical illness and life cover our MA advised us that we would need a 'special' policy to take into account the mortgage and equity loan (mortgage risk decreasing over time, whilst equity loan risk increases over time).

Does anyone know if this is the case, or whether we can just purchase a normal critical illness/life policy without taking the equity loan into consideration?

Thanks

dunstonh

When looking at Critical illness and life cover our MA advised us that we would need a 'special' policy to take into account the mortgage and equity loan (mortgage risk decreasing over time, whilst equity loan risk increases over time).

Special isnt the word. Different to typical would be more like it.

Does anyone know if this is the case, or whether we can just purchase a normal critical illness/life policy without taking the equity loan into consideration?

What do you mean by normal? When buying the insurance you cover the need. That need could decrease in time, remain the same or increase. "normal" polices cater for those things although some providers will not offer increasing sum assured and that could limit the selection a little.

The policy should match the need. No more, no less.

kingstreet

It's difficult to write increasing cover for the equity loan with any degree of accuracy.

We use decreasing term for the mortgage, as the usual 9% rate is sufficient to ensure there will always be enough to repay the mortgage. However, we cover the equity loan using level cover, rather than increasing.

There is no option to have it increase by the growth in price of your particular home and TBH the value will probably be lower for the first few years, as the newbuild premium is lost.

We do reviews every couple of years either way...

Daxx

We have had a quote from our MA and I just wanted to know the best way to compare these prices and ultimately see if I could get cover which was necessary for the mortgage and equity loan elsewhere independent of the MA.

If this is not the case, or that I will struggle to get quotes then I will take their recommendation. I expected that looking at cover that just covered the purchase price of the current property would probably not be 100% appropriate but wondered the best way to get comparisons to include the equity loan.

Thank you

TrickyDicky101

As far as I'm aware, you don't *have* to take insurance to get on HTB.

Use Kingstreet's example of reducing term for the 75% you will owe to the mortgage company and flat term for the 20% on HTB (assumed %s) and look at a few quotes and consider your decision with these quotes in mind.

ACG

Just be careful doing this yourself, im not saying you cant do it yourself - but do not buy on price alone.

How many critical illness definionts are there?
How many are ABI+?
How many of the top 5 conditions people are likely to claim on ABI+?

Are there any extra included in the price? Sometimes its worth paying a pound or 2 extra to get the support of a trained professional when you most need it.

If you buy cheap, you may find its the biggest mistake of your life if you ever have to claim on it.

cevans65

The mortgage people will insist on buildings insurance only. Anything else i.e. critical illness is up to u. As for looking for a cheaper quote just use the usual comparison sites but make sure u use the info from the quote the MA gave u and when they come up check the key points against the policy the MA gave u to ensure like for like.




Chances are you will find the same one with the same provider but cheaper because that is exactly what we did. (why the MA price will include a commission to the them - our quote from MA even stated this)

Wh05apk

cevans65 wrote: »

Chances are you will find the same one with the same provider but cheaper because that is exactly what we did. (why the MA price will include a commission to the them - our quote from MA even stated this)

Normally the price will be identical, it just means the provider makes additional profit from you, and you are buying without advice, and the protection/comeback that offers. It may well be that you were quoted previously through a tied advisor in a bank or estate agents, in those case often the premiums are loaded to give them extra profit.

amnblog

The first thing you can do is ignore any advice about 'not having to buy insurance.'

You seem smart enough to know that is it a smart thing to invest in.

As Wh05 says it is worth sticking with the source of what sounds like pretty sensible advice. Don't try and sort it out yourself and make a mess of it - it is too important for that.