Life Insurance: To keep or to cancel?

fluffymuffin

I need some advice from peopple with generally slightly more knowledge about these things than me!

We bought out house about a year ago and were convinced to take out critical illness and life insurance mortgage protection plans. I have since cancelled the critical illness as I didn’t think we particularly need it as both me and my partner receive partial income replacement through our employers. We still have our life insurance and I am thinking if canceling it. It costs us £45 a month between us – we are currently paying off our own debts and doing up our house so every penny counts for us. I am only 24, my partner is 32 – neither of us smoke and as far as I know (touch wood – not wanting to tempt fate) have no major health concerns.

I am thinking if canceling the policy which is due to increase in cost because my partners job title has changed and he is no classed as “high risk” as he works in the construction industry. I am slightly unsure about canceling it though because of the fear factor out on me by the mortgage company when we took out the policy.

Any advise on what I should do much appreciated, should I cancel or any advise on how I could get some sort of lower level cover for a reduced rate.

payless

Surprised to hear that life cover will cost more due a job change- that is unusual for a policy that is already up and running.

Also did you buy direct from lender - if so chances are someone esle will be able to offer same life cover but cheaper.

DO YOU NEED IT ?

If either of you dies , would the other be able to continue and pay the mortgage or be willing to sell up ( assuming not in negatitive equity) ?

lisyloo

Firstly, there is always a risk a death (might be small) whatever your age, so just because you are young, doesn't mean you don't need it.

Have you thought about how your would manage without it, if one of you died? You might have to sell the house and live somewhere smaller.
Could you cope with that?
If you can cope without the payout and are happy with the consequences then it's OK to go without, however you should think through what the consequences would be first.

Do either of you have "death in service" benfefits via your employer (you don't have to die whilst wokring - just while emplyed).
The only caveat with this is that you need to review, if you lose or change your job.

Also I would suggest that if you look for on-line quotes then you can almost certainly get a cheaper quote than via your mortgage company.

Hope that helps

fluffymuffin

I think we could cope if anything happened to the other but it would be a struggle and as you say there is always a risk so I wouldn't like to be without any cover. We were indeed recommended the plan by our lender and think it is very expensive. I have seen some companies which offer mortgage cover instead of full life cover where the amount paid out ddepreciates over the life of the mortage and hence the premium is cheaper. This seems ideal as we have no children the house would be the main worry so I think I will have a look at these - seem to be getting quotes of around £10 a month which is much more reasonable.

Anyway - thanks again - nice to get some sound advice from people in the know. Cheers guys

grumbler

When people rent house they usually do not have life insurance. But almost everybody have this insuranse after buying house! Why? :mad: In my opinion nothing changes when you buy a house after renting accomodation before. Life insurance has nothing to do with having mortgage. You may have insurance or not - without any relation to your mortgage. *This is my opinion*

moneyuser

grumbler wrote:

When people rent house they usually do not have life insurance. But almost everybody have this insuranse after buying house! Why? :mad: In my opinion nothing changes when you buy a house after renting accomodation before. Life insurance has nothing to do with having mortgage. You may have insurance or not - without any relation to your mortgage. *This is my opinion*

If you were to die how would your relatives pay off the mortgage? Would you just let the bank take the property back and lose all the equity? Life insurance will cover the mortgage. With renting obviously you don't have a mortgage so nothing to pay back.

grumbler

moneyuser wrote:

If you were to die how would your relatives pay off the mortgage? Would you just let the bank take the property back and lose all the equity? Life insurance will cover the mortgage. With renting obviously you don't have a mortgage so nothing to pay back.

You (your relatives) do not lose the equity. Banks take only what you owe them.
If you rent a house and you die - what heppens in this case with your relatives? The same...

moneyuser

but where are your relatives going to get the money to pay the bank off? That's the whole point of the life insurance (at least that's what I've been told).

Debt_Free_Chick

grumbler wrote:

When people rent house they usually do not have life insurance. But almost everybody have this insuranse after buying house! Why? :mad: In my opinion nothing changes when you buy a house after renting accomodation before. Life insurance has nothing to do with having mortgage. You may have insurance or not - without any relation to your mortgage. *This is my opinion*

The difference is, when you rent and die, your estate will probably only owe a month's or so rent.

When you buy & die, your estate owes the entire mortgage (or at least your share of it) to the mortgage company. If you own the house & mortgage jointly, then the deceased's share of the debt automatically passes to the other joint owner. Life assurance, in this case, means that the debt is paid for at the time of death and the other joint owner does not become responsible for it.

A comparison between renting & buying is not appropriate.

grumbler

Usually you owe bank less than the full value of the hause (exclusion: negative equity). If you die relatives (or bank) can sell the house. This will be enough to pay off the mortgage. And relatives will get the rest of money. The same final as you were renting house and did not have life insurance.

I do not try to tell that nobody needs life insurance. My point is that generally this decision has nothing to do with having mortgage.

From the start I new that this sounds unusual and will cause controversy. However, I still do not see any real arguments against this point.

margaretclare

Hi

Can I just add a twopennyworth from bitter experience.

In my first marriage my husband 'didn't believe in' life assurance. Even when we had 2 daughters and when they were little. The point about life assurance is that it's cheaper if you start it when you're young and carry on paying it. If you wait until you're older or have a life-threatening illness then the premiums go up until they're unaffordable. So always start it when you're young, when you're in a relationship and when you might have children. Shop around - there are some really good deals out there.

What happened to my first husband? Oh, he developed heart disease at age 38 and by then he DID see the point of life assurance, but too late - no one would insure him. He died aged 58 after 20 years of declining health, and his death coincided with my redundancy. If he'd only insured himself when he was 38 just before his first heart attack...

You may think the premiums are a waste of money, you'd rather be paying your credit card bills or whatever. Insurance is always a waste of money - until you need it!!! Then you're very glad of it.

Aunty Margaret