what is this insurance payment with my mortgage

happyhero

Hi, out of all the money sorting I have ever done there is one payment I have somehow overlooked, probably a bit stupidly.

I have a 25 year offset mortgage with First Direct but as well as this payment there is another payment I make which I have paid ever since I had this mortgage. The amount is £22.30/month, not a lot I know but obviously it mounts up over the years.

I vaguely remember that when ever I took out a mortgage I was sort of pushed into taking out an insurance policy along side the mortgage, possibly I had no choice. I had mortgages previous to this and had a policies running a long side them too which I think was some sort of insurance.

I never seem to get any paperwork related to this payment, no yearly statements etc, as if they are hoping I don't notice this which has been the case in a way.

On my bank statement online, the company used to be called Royal Life INC plc but now displays as PHOENIX.

Do I have to have this insurance?

What is it supposed to be for exactly (I have vague memories of it being protection in case something happens to me)?

Can I cancel it, and if so what is the risk to me?

How do I get hold of them?

Any info/help appreciated.

TrickyDicky101

Phoenix and Royal Life are both Life Insurance companies so it looks like this is some form of life insurance policy you have in place which is presumably there to repay the mortgage in the event of your death (a term assurance).

It may have other things as well.

You must have this detailed in your paperwork from when you took out the mortgage?

lucie_1985

Sounds like it was required under the terms of the mortgage, I have a term insurance policy with Aviva which was a requirement of my Nationwide mortgage...they didn't require Aviva, I just worked there at the time so it was discounted! The level of cover reduces in line with the term of the mortgage so that in the event of death the full amount is paid off. Depending on the size of your mortgage £22/month may not be such a bad deal, I pay £12.34/month on £270k of mortgage which includes the discount (I get to keep it for a while as I was made redundant!)

dunstonh

Most people have insurances with their mortgage. Most common is life assurance (so your spourse/partner/children dont get thrown out when the mortgage isnt paid). There are other types that some will take out as well such as income protection (so the mortgage is paid when your income stops due to illness)

Do you need them? In the sense that they are not compulsory, no you dont. However, in the sense of whether they cover part of your financial planning, maybe you do.

Can I cancel it, and if so what is the risk to me?

if you suffer a claimable event, you wont get a payout and that could lead to repossession.

happyhero

Thanks everyone for the help but one further question if thats ok, my mortgage is £73,000 by the way, my mortgage is due to end in 2020 but I am hoping to pay it off soon, hopefully next year when I have some saving policy maturing, will this insurance policy that runs along side the mortgage end automatically if I pay the mortgage off early or do I need to do something, ie does the mortgage people inform the insurance people or something similar?

Incidentally what you guys say all makes sense now, about it being there to pay off the mortgage if anything happens to me, as I read what you said I slowly recalled that something like this was said to me at the time of taking out the mortgage, nice to know its still in there somewhere in my grey matter.

kingstreet

It is separate.

You would need to take action to cancel it, unless it is set to expire at the same time as the mortgage ends.

happyhero

Wow that was the quickest answer ever.... 1 min later, many thanks

TrickyDicky101

If you stop paying the premiums the cover will cease. The insurance is separate from the mortgage payments though, so you would need to direct your bank to cease the payments.

Only you can decide if that is a good idea (ie if you don't want the cover to continue because you have suitable life insurance in place from other sources should the worst happen).

happyhero

TrickyDicky101 wrote: »

If you stop paying the premiums the cover will cease. The insurance is separate from the mortgage payments though, so you would need to direct your bank to cease the payments.

Only you can decide if that is a good idea (ie if you don't want the cover to continue because you have suitable life insurance in place from other sources should the worst happen).

Cheers for your answer TrickyDicky101 but is this insurance not only to pay off the mortgage if something happened to me, ie wouldn't it be worthless once I have paid off the mortgage in full?

Thats when I am thinking of cancelling it, once the mortgage is paid off, hopefully next year.

TrickyDicky101

Well, if you maintained the premiums your estate would still get whatever the sum assured is should the worst happen.

It would be a good idea to dig out the original paperwork and find out if you have decreasing or level term assurance - with decreasing the sum assured reduces over time to more or less match the outstanding capital on a repayment mortgage of the same term. Level term the sum assured remains the same. At the start, decreasing term would have smaller premiums than level term as the any payout is likely to be smaller.

If it is decreasing term, you may well decide the benefits simply aren't worth the premium once the mortgage has been fully repaid.

jamesd

It's very likely that you can today get term life insurance cover at a lower cost than what you already have. That's in part just because you seem to have been overpaying on the mortgage so the decreasing amount of cover won't have been decreasing at the appropriate rate for what you've done.