Mortgage decreasing life assurance moving home

scotgirl

I took out a policy of mortgage decreasing life assurance 8 years ago following Martins guide.

We are now moving home and have increased our mortgage but not a great deal, (original life assurance was for £162k, reduced by payments to about £135k, increasing our mortgage back up to £145k).

I've had another quote done by our mortgage advisor and it more than doubled what we are paying now, I pressume this is due to our increased age and other medical
Things that have come since last policy.

How does my current policy work? Is there a way to work out how much cover I currently have (since it decreases)?

Is there a better way to increase my policy without drastically increasing my premiums? Thanks

Aretnap

The policy documents which came with your old policy should explain somewhere how much the cover decreases by each year. If you can't find them, you could phone the insurer and ask.

There's a good chance that the old policy will b better value than a new one, especially if you've had health issues come p in the meantime, so it's likely to be worth keeping. If there's a significant shortfall between its cover and the new mortgage you could always get a new policy for a smaller amount to cover the difference. Also if the term date of the new mortgage is later than that of the old mortgage that's something you might want to make allowance for.

david78

scotgirl wrote: »

How does my current policy work? Is there a way to work out how much cover I currently have (since it decreases)?

On your policy there will be an assumed, usually fixed, interest rate. If you put your initial policy value, the time you have had it, and the interest rate into a mortgage calculator on line, the current balance of the "mortgage" will be the current value of your insurance.

As rates are currently low, you may find you are a little over insured, and don't need to increase your cover for the new home. Or you may just use savings to cover any shortfall (if your lender agrees to this).

Of course, you can always ring your insurer and ask what you current policy value is.

pinkteapot

david78 wrote: »

Of course, you can always ring your insurer and ask what you current policy value is.

This.

The policy isn't in any way "linked" to your mortgage. It's just an insurance policy where the payout happens to decrease in value at about the same rate as the mortgage.

If you took your mortgage out for £162k and have just made standard repayments (no overpayments) and it's down to £135k, the current payout on your life assurance should be in the region of £135k, but phone your insurer and check.

Your new mortgage is £145k, so the policy payout is only about £10k short. You could decide to just live with that - if one of you passes away then the policy almost clears the mortgage, except for £10k. Do you have any savings that could clear that part?

Or, as someone else said, you could just get a very small top-up life assurance policy for that shortfall.

In short though - ditching the old mortgage doesn't mean you have to ditch the old assurance policy as they're separate things.