Isa linked insurance.

Zork

Hello.
Having just checked with a number of online insurance brokers to find that I can get vastly cheaper mortgage (life) insurance than I currently have, I decided to change it.

I have an interest only mortgage with ISA's as the investment. These are managed, by Synergy. They also pay the insurance premiums to the insurers on our behalf.

I phoned them and asked if it was a problem to cancel my insurance policies and take out my own. Reply. " No, just write to us".

My wife also phoned to find out the cost of her policies and asked the same question. The reply was something similar to, " The insurance is linked to the ISA's, so the ISA's would also be cancelled. However you can take out the minimum insurance (£10,000) to reduce the premiums"

I would still have to buy insurance for the remaining amount of £110000 owing and this method of two lots of insurance probably wouldn't be cost effective.

This just doesn't sound right to me. Has anyone else come across this?

( I will write to them to get a definitive answer).

Zork.

dunstonh

Some low quality ISA products are linked like this. Much easier to have the decreasing term assurance and ISA treated as two different things and not linked. The life cover is is irrelevant compared to the benefits of having a decent ISA.

Zork

Thanks for that. It is now dawning on me.

I was going to take out term insurance without the critical illness cover, which is significantly cheaper and does suit my circumstances.

So, I suppose my next question is, ( and I appreciate that the answer won't be advice), would I stand to lose anything, much, by moving the Isa?

I have to admit I feel like cashing it in and going down the repayment road!

Rob.

dunstonh

So, I suppose my next question is, ( and I appreciate that the answer won't be advice), would I stand to lose anything, much, by moving the Isa?

"probably" not. Most ISAs have no penalties built into them but a small number do.

I have to admit I feel like cashing it in and going down the repayment road!

May be the right thing to do. That said, if done correctly and kept under review the benefits of ISA mortgages can be stunning. I have about a dozen on my books and I do it myself. At this time, all of them are running significantly higher than they need to be. Indeed, one is almost at the point where he can stop making contributions if he wished and the exisitng capital value would be enough to see it through at a sensible growth rate for the next 13 years.

If you use the decent experienced investor options it can be really good. If you are only ending up in a FTSE tracker or bank/insurance company default fund then its not worth the risk and you may as well stick with repayment.

Zork

Thanks. That's been very useful.