should i still be paying decreasing life insurance

bargainHunter

Hi I'm new to this but I don't seem to be getting answers anywhere else .
I took on my mortgage in 1999 & at the same time I took out a decreasing life insurance policy to run along side my mortgage . in 2009/2010 we moved homes & ported our mortgage to the new home at this time we asked about our life insurance & what would happen with it as we were looking at paying our mortgage off early ( before the end of term date ) we were told the payments would stop as we would have no loan left on the mortgage . In 2014 we paid our mortgage of early approximately 11 years early before its end, during this time we had miss- placed our policy documents . In 2016 we had a phone call from the company we had the life insurance with our 5 year review or something at this point we asked about the policy again stating we had paid off our mortgage in 2014 & should we be paying it still we were advised to keep paying he policy . I have now recovered my policy papers & it says that it is a decreasing life insurance cover & will pay out on death the remaining amount of to cover the loan , but it says nothing about paying the policy off early . So what I would like to know is should I really still be paying this policy as it cost £30 a month or should it have been stopped like I was told on completion of my loan even if it was paid of early .
I would be gratefull for any help .
Thanks

ValiantSon

No, you shouldn't be. They will pay out if you die, but the purpose of that pay out has gone. If you want life assurance to provide money for your partner in the event of your death then, in your current situation, it is level term assurance that you are after. Cancel this policy now.

You may also find that when you moved home the policy became useless as well, as it was based on paying the mortgage on your previous home not the new one, so the payout may not have been sufficient. Unfortunately that is irrelevant for any complaint because it is your responsibility to ensure that the sum insured is sufficient.

I suggest making a complaint to the insurance company for advising you to keep the policy in 2014 because it did not meet your needs any more.

bargainHunter

Thanks for the response I thought that would be the case I am going to look into this & try & find the best way to complain about this as I feel I have been mislead about this policy from many years back & definitely on 2 occasions. I have paid around £1500 for a policy that would not have paid out anything in the event of death .
Thanks once again .
P.S any further help on the best ways to complain about this would be great .
Thanks.

ValiantSon

bargainHunter wrote: »

Thanks for the response I thought that would be the case I am going to look into this & try & find the best way to complain about this as I feel I have been mislead about this policy from many years back & definitely on 2 occasions. I have paid around £1500 for a policy that would not have paid out anything in the event of death .
Thanks once again .
P.S any further help on the best ways to complain about this would be great .
Thanks.

The policy would have paid out, but the sum may not have been enough to clear the mortgage on your second property. Indeed, it will still pay out, but every year that pay out reduces in value and you no longer have a mortgage, so it isn't the right kind of insurance for you anymore. You need level term life assurance, if you want any kind.

The company should have a clear complaints procedure that is explained in your policy documents. Follow this procedure.

Which company is it?

BooJewels

Are there any other benefits to the policy (i.e. which might be the reason they told you to keep paying it), such as repayment protection for sickness, unemployment etc.?

On our mortgage plan, it isn't necessarily linked to still having a mortgage with repayments, we can still keep the repayment protection aspect going after the mortgage is paid off and would receive a monthly payout (which was initially set to cover mortgage repayments) in the case of a successful sickness or unemployment claim. In our case, this payment is fixed to the repayment amount at the time we took out the policy, not what it might have gone to subsequently if we made changes.

Did the premium payments reduce when you paid off the mortgage? Because 30 quid doesn't sound like it will cover life insurance as well as repayment cover.

dunstonh

I am going to look into this & try & find the best way to complain about this as I feel I have been mislead about this policy from many years back & definitely on 2 occasions. I have paid around £1500 for a policy that would not have paid out anything in the event of death .

That is not correct. It would have paid out in the event of death.

BooJewels

dunstonh wrote: »

That is not correct. It would have paid out in the event of death.

Does this happen even if the sum assured has disappeared to zero by the borrowing being paid off - and if so, to what value? Just curious, as I had the idea that a decreasing term gradually spiralled to nothing and vanished in a puff of smoke at the point where there was nothing left owing?

TrickyDicky101

BooJewels wrote: »

Does this happen even if the sum assured has disappeared to zero by the borrowing being paid off - and if so, to what value? Just curious, as I had the idea that a decreasing term gradually spiralled to nothing and vanished in a puff of smoke at the point where there was nothing left owing?

Outstanding loan amount and the sum assured are separate - the sum assured amortises over the [original] term of the mortgage and is not dependent on how much is outstanding on the loan.

BooJewels

TrickyDicky101 wrote: »

Outstanding loan amount and the sum assured are separate - the sum assured amortises over the [original] term of the mortgage and is not dependent on how much is outstanding on the loan.

Ah, I see, thanks - I knew there must be something I wasn't getting and thought it might help the OP and other readers.

It would presumably then pay out what you should have owed at this point in time, not what you actually do owe (i.e. nothing now). So if the OPs mortgage still had 11 years to run (ie. at the point he paid it off), for those 11 years he'd still get life cover on the same terms as if he'd continued paying the standard repayment each month?

So, for his £30 per month, he still has life cover until 2025?

dunstonh

Does this happen even if the sum assured has disappeared to zero by the borrowing being paid off

If the sum assured had fallen to zero, the policy would be over. Regardless of the debt, the decreasing term assurance follows the same decline as it would have from day one.

Also, there is no requirement to use these for mortgages. They are used for other financial needs as well despite the wording more often than not mentioning mortgage.

TrickyDicky101

BooJewels wrote: »

Ah, I see, thanks - I knew there must be something I wasn't getting and thought it might help the OP and other readers.

It would presumably then pay out what you should have owed at this point in time, not what you actually do owe (i.e. nothing now). So if the OPs mortgage still had 11 years to run (ie. at the point he paid it off), for those 11 years he'd still get life cover on the same terms as if he'd continued paying the standard repayment each month?

So, for his £30 per month, he still has life cover until 2025?

Yes - typically the monthly payment for the insurance would be fixed at the start and would not change. This is generally good news as life insurance costs would normally be expected to increase the older one gets (if one were to take out a new policy after 11 years for instance). However, the amount paid out on an insurable event (like death) under the decreasing term does naturally decrease over time - so this needs to be balanced against the cost.