Decreasing life insurance- insuring more than your mortgage is worth

w1lz

Hi there,

We have just got a new mortgage- £115,000 over 20 years. I'm not interested in level term insurance the cost is to much so I'm looking at decreasing term life insurance as a joint policy for me and my wife. I wonder can I insure more than the mortgage is? My thinking is if I insure for example £120,000 then if one of us does die the other will receive an extra amount to cover initial costs and lack of work for a few months. It also protects the children a little more. I wondered if this is possible or does decreasing cover only ever cover the mortgage?

Thank you!

HappyMJ

w1lz wrote: »

Hi there,

We have just got a new mortgage- £115,000 over 20 years. I'm not interested in level term insurance the cost is to much so I'm looking at decreasing term life insurance as a joint policy for me and my wife. I wonder can I insure more than the mortgage is? My thinking is if I insure for example £120,000 then if one of us does die the other will receive an extra amount to cover initial costs and lack of work for a few months. It also protects the children a little more. I wondered if this is possible or does decreasing cover only ever cover the mortgage?

Thank you!

A few months? How about a few years? The surviving partner will have to give up work to stay at home and look after the children or pay for child care.

£5,000 won't be enough at all. That't barely enough for the funeral. I would insure each other for at least enough to cover one year of your combined salary.

How about an extra £50,000? Or more.... £200,000 might be a better figure to insure for.

And...I would go for level term. The value of money will go down with time but your outstanding mortgage will be lower with time so the amount the surviving partner gets should be worth the same year after year. Netting £85,000 this year after the mortgage is repaid will be worth about the same as £200,000 in 20 years time. Children should have moved on by then so a 20 year level term policy would be ideal.

Look after the children.

My partner lost her husband a few years back without insurance...she gets a pension of £145 per month for life which is hardly anything.

w1lz

Thanks for your reply, I only really plucked a number out of my head as I just wanted to know if you can insure more than your mortgage amount.

When a claim is made is the amount paid in lump sum or directly to the mortgage provider?

HappyMJ

w1lz wrote: »

Thanks for your reply, I only really plucked a number out of my head as I just wanted to know if you can insure more than your mortgage amount.

When a claim is made is the amount paid in lump sum or directly to the mortgage provider?

It's paid as a lump sum to the surviving partner.

The recipient decides what to spend it on.

They could clear the mortgage or they could use it for living expenses.