Being ripped off? Life Assurance & Income protection

Money_Saving_Matt_K

I am a single 1st time buyer with no dependants. My mortgage broker advised that I need life assurance & income protection cover. The property is valued at £260k. I already have life assurance at work for £132k.

1) Is it necessary to top up the life assurance to the value of the property? My only concern is that if the worst happened then my parents would have to pick up the mortgage payments short term. Don't know if life cover helps here anyway so there is probably no need for me to top it up.

2) Not sure what to make of income protection cover. By all accounts it is notoriously difficult to make a claim if you can't work anyhow.

3) Will also have lodgers so do I need any additionally cover here?

Can anyone offer any advise please?

dunstonh

single with no dependents sees no requirement for life cover. Income protection makes sense.

By all accounts it is notoriously difficult to make a claim if you can't work anyhow.

That doesnt make any sense.

3) Will also have lodgers so do I need any additionally cover here?

You will need to declare this on the home insurance and may find many insurers reject you or impose special terms.

The life cover being sold is a mis-sale. If it was me, I would point out that selling a regulated financial services product when there is no need is a breach of rules and would be upheld if you were to make a complaint.

KittyVentura

Money_Saving_Matt_K wrote: »

1) Is it necessary to top up the life assurance to the value of the property? My only concern is that if the worst happened then my parents would have to pick up the mortgage payments short term. Don't know if life cover helps here anyway so there is probably no need for me to top it up.

It is more than likely you will need to get additional life cover so you are covered for the full amount. It may be written into your mortgage contract to have full life cover and even if it is not if you are to pass away before the mortgage is paid off and do not have life cover to cover the outstanding costs they can and will repossess the house and sell on, letting any residual fund fall into your estate. Also what happens if you leave work and forget to take new life assurance - you could be in breach of contract.

Money_Saving_Matt_K wrote: »

2) Not sure what to make of income protection cover. By all accounts it is notoriously difficult to make a claim if you can't work anyhow.

IPPs are NOT hard to claim on. It will vary plan to plan but as a general rule you simply need to be medically unable to work to be able to claim. They nromally exclude things like redundancy or pregnany and some exclude war and aids. You can set a "deferred period" which is the number of months you would need to be off work before you could start to claim. They smaller deferred period the higher the cost as the chances of claiming increase. An IPP is to be viewed basically as a replacement income. So however long you are unable to work the plan will provided you with a set % of you income prior to claim.

Money_Saving_Matt_K wrote: »

3) Will also have lodgers so do I need any additionally cover here?

Not as far as the mortgage is concerned but I don't know if legally there are insurances you must have if you have a lodger.

You can get from life assurance companies what is commonly called "decreasing term assurance". These are a lower cost than set lever term as the cover you have goes down every year so you are only ever paying for the amount you have left on your mortgage. The cost is built in upfront on the understanding the cover reduces so your premiums will simply start off low and stay low rather than decreasing. You can often build into these a form of payment protection also (like an IPP element) which offers protection if you are medically unable to work to cover your mortgage payments. Most life assurance companies have these taylored plans to suit todays mortgage.

I'd suggest taking financial advice, independant from the mortgage provider and see what you do and dont need to set up and let them search the markets. Just bear in mind that if you don't take up a plan you may have to pay them fees as they wont gain commission

Hope this helps