Life Insurance - First TIme

robgoode

Me and my partner are purchasing a new build house and have a moving in date of May. Today we have just been approved for our mortgage.


I've done a lot of research into different types of insurance but feel like I've read too much and need some advice. We are both in our early 30's, good health, never smoked and have no health issues.


I'm unsure if level or decreasing life insurance is best. We are unlikely to have children due to reasons I won't go into on here so the insurance would be used to pay off the mortgage and maybe leave a little to the side for whoever lives the longest.


Mortgage is £115,000 and I have £40,000 death in service cover with my pension.


Due to the circumstances mentioned would it be best for us to go for joint cover due to no dependents or single cover each if the prices are pretty much the same?


Also if I take out level cover is it alright to take the cover out for longer than the mortgage. eg. mortgage is 30 years but cover for 40 years? Reason is to cover us as we get older in life against any issues that might occur or should I look into a different policy for this.


We'll be taking critical illness cover out as well to safeguard against any unforeseen health issues. On my searches I've found level cover is often cheaper than decreasing life cover, should that be right?


I've spoken to an insurance broker but feel like I was being pushed into the 'premium' package in order to boost their commission.

BooJewels

Purely as a customer and repeat claimant of such policies, my very personal recommendation would be to buy the greatest level of cover (with the most options covered and longest term) that you can comfortably afford, then hopefully you'll spend the next 30 years or so thinking that you've wasted your money. In the nicest possible way.

As I understand it, a level term assured would usually be more expensive than a decreasing term - if it's associated with your mortgage borrowing, a decreasing term would pay out the remaining balance of your mortgage account on the date of a life or critical illness claim, where a level term would pay the amount you originally borrowed - potentially leaving you with a lump sum of the difference. You'd have to weigh up if the additional premium would be worth it.

We're just awaiting a decision on a critical illness claim and only found out recently that we could have assured up to 125% of the mortgage borrowing, which as of today, would be worth many thousands of pounds - I'm now sorry that I somehow missed that option.

If you're both in good health now and if you can take a long term policy, your health is locked in to the policy as it starts, so that gives you additional peace of mind if small health niggles crop up (like having to go on blood pressure meds) during the life of your policy and/or mortgage, which may prevent you getting new cover. Our policy runs out before our mortgage is paid off because we couldn't extend the policy when we added a couple of years to the mortgage.

Our mortgage based policy states that you had to be between 18 and 55 when it started and under 70 by the end of the term, but there are others here who know much more about the different policies available who could give you better advice on the options available.

But the summary of my post is to not skimp on it - there may unfortunately come a day when you would seriously regret it.

Weighty1

A decreasing plan should never really be cheaper than a level plan as it's a far greater risk to the insurer.

If you are interested in critical illness then it would probably be worthwhile looking at long term income protection. Arranged properly it would ensure you had an ongoing income right the way through to retirement if you were unable to work due to health reasons. Often, for younger clients it can be cheaper than critical illness cover as well.

robgoode

Weighty1 wrote: »

A decreasing plan should never really be cheaper than a level plan as it's a far greater risk to the insurer.

If you are interested in critical illness then it would probably be worthwhile looking at long term income protection. Arranged properly it would ensure you had an ongoing income right the way through to retirement if you were unable to work due to health reasons. Often, for younger clients it can be cheaper than critical illness cover as well.

I'm going to take a look at the long term income protection. Would it be best to get this instead of the critical illness cover or is it best to look at both alongside the life insurance cover?

Weighty1

If you can afford both options then it would be good to have both, but if not, then I'd almost always place income protection as being a bigger priority than critical illness. Long term income protection typically has very few exclusions which prevent it paying out and a claim is based on your ability to work (normally doing your Own Occupation, which is the best option). Whilst critical illness is great cover to have the fact that it only cover a certain list of conditions means there will always be situations were people may be unable to work yet can't claim on a critical illness plan.