Level Term Assurance Discussion

payless

No probs-
help a few people out - and what comes around goes around

clarebear

My husband and I have life insurance & critical illness cover that decreases with the term of our mortgage; he works, but I am at home looking after our 2 daughters - should we change this to fixed term?

MSE_Martin

By the sounds of it you have 'mortgage decreasing term assurance' This is a policy designed to cover your mortgage payments. It is not designed to protect your families income - just your mortgage.

It is worth considering level term assurance. It is worth getting a quote that also includes covering your mortgage - as it is likely it'll be cheaper to cover both in one policy. (it depends how long ago you got the original cover though - if it's a long time you may be better off keeping them seperatre)

Martin

payless

Level term would of course give more cover- but is a lot more expensive. Rates are increasing (L&G next to announce rate rises 14/9/03) Also watch out for giving up guarnateed rates , as some companies switching to reviewable

Of course using a discount house / getting lowest rate might be competitive against your existing plan if this was taken from a tied adviser (bank / tied sales force)

Some people would say level CIC is a bit of a luxury- also easy to sell-
Protecting income can be a better route than more CIC

(Advising on, Inc protection / PHI needs more expertise hence less online brokers)

MSE_Martin

Payless not sure I agree. While level term can be expensive - for under 40s especially non-smokers - if people buy via my recommendationsi n the article the difference can be very small indeed.

I always think for anyone getting quotes for mortgage decreasing term, should also take a look at level term and if the difference isnt too big should go for that as well

martin

Galstonian

(I wrote this before the last few posts were made but I think it is still relevant)

Possibly.  If you want the relative level of cover to grow  i.e. not only will you be able to pay off the mortgage if one of you dies but you will have an additional sum on top of that too.  You may want to consider just how much you might need in that event, would paying off the mortgage be enough?  Would you need to pay off other debts?  How would you provide for the children?

I believe most people are underinsured but thankfully the vast majority of us do not find this out.

Even if you are well covered I would suggest that you go through Martin's suggestions for life insurance and get quotes on level and decreasing insurance policies because it is quite possible that you will save a lot of money just by taking out a new policy with exactly the same cover as you already have.

payless

Martin

Example (NU  IFA standard rates- before any discounting which will be pro-rota )
Jt life £100K 20 yrs   n/s
Dec TA 16   or £68 with CIC
Lev TA £21 or £105 with CIC

as you will the differences with CIC quite high

Whilst I agree that some insurance is better than none, and that many are under insured - ( and many other paying over the odds)  I think that CIC is sold heavily into a mass market often via tied-sales (or now via websites) to people you have little understanding of the actual product - they are full of clauses and conditions that need to be met to validate a claim.

Many people have long periods of time away from work due to back problems and stress - neither are covered by CIC. (nor is RSI  ;D )  

Whereas others have had windfalls ( not the reason behind insurance) of having a CIC claim then returning back to back with little financial loss.

After covering the mortgage - it is now generally considered better to protect one's income rather than
a higher CIC amount.

Of course if one can afford both Income prot (PHI) , a good amount of life cover and level CIC all the better


Of course as stated this is a more complex product to sell, and produces less commission , so is over looked by some brokers.

MSE_Martin

The point about CIC is agreed. However the difference between straight mortgage term and level term is still small in many cases. Often less than £1 a month. It is always advisable to get quotes for both and see the difference. Often much better value getting the level term early on when risks are lower anyway. Im not such a great fan of CIC anyway - i prefer income protection. However i am a fan of level term

martin

ddeaves

Another tip for Term cover, whether Decreasing, Increasing or Level it usually pays to have two seperate policies rather than a joint one.

It usually costs only around 10% more.
If one dies the other still has cover.
If you both die together - two payouts
If you split up you can take the policy with you.
Twice the cover for 10% more premium.
If you cant afford the 10% increase reduce your cover slightly but still insist on seperate cover.
Easier to put in trust (essential if you are not married and recommended even if you arn't- also make a will)
You can have different amounts of cover.

If its for personal protection not mortgage get the policy indexed, this increases the sum assured without further underwiriting and keeps the payout in line with inflation. Some companies charge extra for this option and some do not (check) .

One other bit of advice especially for Critical Illness cover. If you are going to claim have a look at the increase options before you put the claim in. These can sometimes enable you to increase the cover, for instance if you have increased your mortgage, moved house, had another child, adopting, increase in salary etc.

Don't forget a lot of Criticall Illness policies provide free childrens cover. If your child has a CI you will be able to claim without it affecting your own policy.

Do you want some free accident cover for a month or so, if you apply online to L&G they give you free cover up to £300,000 while they process your application. you don't have to take up the insurance offered. If you are going to do this please do it yourself not through a broker etc as it wastes their time and money.

DD

LongDongDave

Thanks, great tips I've had my policy for nearly ten years and it runs out soon. I took it out without any knowledge last time, this time i know what to look for