Life Insurance for First Time Buyer

KazzyTI

Hi all, I'm just about to get myself on the property ladder and I'm finding all about the wonderfully confusing world of life insurances. Basically, I'm looking for some assistance as I'm hopelessly lost and seem to be getting dragged in different directions by the various "helpful" souls who get my details when I try to find policies on price comparison sites.

I'm a non-smoker who turns 30 in November with a clean bill of health, although heart issues tend to run in my mother's side of the family in later life.
My mortgage will be to the tune of £130k over 30 years, paid solely by myself (no partner or dependents). I work as a quality professional in the manufacturing/oil and gas industry. I've been made redundant once in the past two years and the state of the market makes this a constant threat, one that I'd like to guard against.
My current employer doesn't offer any enhanced sick pay so any leave of absence would be SSP. My current financial state would not allow me to cover mortgage payments should I be off sick.

I have read lots of different pieces of information about the various types of cover (Income Protection, Critical Illness Cover etc) but really, I'd like to hear the actual stories of people who've navigated this labyrinth before me. Ultimately, I would look to be covered in the event of a redundancy or period of sickness until I can get back to work and for the mortgage to get paid off should the worst happen.

Anything that can help me see through the mist would be greatly appreciated! Thanks in advance.

SonOf

Why do you think you need life assurance if you have no partner/spouse or dependents?

Permanent health insurance and critical illness cover seem order of the day here

KazzyTI

Thanks for the reply. My thinking is that I will leave the house to siblings or nieces and nephews when I eventually snuff it. If that happens prior to the mortgage being paid off, I don't want to leave them with the financial burden of having to pay it off or the logistical burden of having to sell it on.

I guess that's a very separate issue from requiring cover should I not be well enough to work but still need to maintain bill payments.

nick74

If you left your house to your nieces etc or siblings wouldn't they be quite likely to want to sell it anyway and split the money, rather than all live together?

When I was single with no dependents I always considered that the money I could have spent on life assurance premiums was better spent on making overpayments on the mortgage to clear it quicker.

KazzyTI

Actually yeah, that's a very good point. When my gran passed away a few years ago, we had a similar situation regarding keeping the house in the family and we all opted to sell it. I hadn't thought of it that way. I'm just not sure what that means realistically in the types of insurance that it'd be better to have versus the ones I can do without.

sal_III

The main reason behind life insurance is to provide for your dependants, not extended family that are not financial dependant on you. If you want to be generous by leaving them both a lump sum and equity it's entirely up to you.

What is more important is to protect yourself while still alive with a suitable selection of Permanent health insurance / Income protection / Critical illness, especially with such a shaky work prospects.

I would suggest speaking to a broker (most mortgage brokers offer this for free) and arrange the most appropriate solution for your circumstances.

Personally I would be inclined towards PHI in your scenario, just make sure to read the small print when it comes to how long it keeps paying etc. Don't just grab the cheapest on offer.

Weighty1

As above, I'd be inclined to look at Permanent Health Insurance (this is basically long-term income protection) in the first instance. Whilst you see value in Unemployment cover it's worth considering how long you were actually unemployed for when made redundant and how difficult it would be for you to obtain employment, even if it's something short term until you are back in your ideal role? Sometimes, considering it like this can de-value unemployment cover, especially since the premiums can be relatively high for the benefit provided. Ill-health is a different matter. If you are ill, you are ill, and there's not a lot you can do about it so without having long term income protection you'd be at the mercy of the benefits system and these are generally meagre at best.

I would also consider critical illness as well. Ideally, you could cover your full mortgage amount but in reality, if someone placed £25,000, £50,000, £75,000 (whatever) in your hands following a diagnosis of MS or cancer then that money is going to be extremely worthwhile.

I'd also recommend speaking to a broker. Make sure they offer an advisory service, are whole of market and specialise in protection and you should go far wrong.

KazzyTI

sal_III wrote: »

The main reason behind life insurance is to provide for your dependants, not extended family that are not financial dependant on you. If you want to be generous by leaving them both a lump sum and equity it's entirely up to you.

What is more important is to protect yourself while still alive with a suitable selection of Permanent health insurance / Income protection / Critical illness, especially with such a shaky work prospects.

I would suggest speaking to a broker (most mortgage brokers offer this for free) and arrange the most appropriate solution for your circumstances.

Personally I would be inclined towards PHI in your scenario, just make sure to read the small print when it comes to how long it keeps paying etc. Don't just grab the cheapest on offer.

Weighty1 wrote: »

As above, I'd be inclined to look at Permanent Health Insurance (this is basically long-term income protection) in the first instance. Whilst you see value in Unemployment cover it's worth considering how long you were actually unemployed for when made redundant and how difficult it would be for you to obtain employment, even if it's something short term until you are back in your ideal role? Sometimes, considering it like this can de-value unemployment cover, especially since the premiums can be relatively high for the benefit provided. Ill-health is a different matter. If you are ill, you are ill, and there's not a lot you can do about it so without having long term income protection you'd be at the mercy of the benefits system and these are generally meagre at best.

I would also consider critical illness as well. Ideally, you could cover your full mortgage amount but in reality, if someone placed £25,000, £50,000, £75,000 (whatever) in your hands following a diagnosis of MS or cancer then that money is going to be extremely worthwhile.

I'd also recommend speaking to a broker. Make sure they offer an advisory service, are whole of market and specialise in protection and you should go far wrong.

Thank you both kindly for your input and responses. I think I'll look into PHI to cover illness and injury, critical illness for anything big that may come up and unemployment cover. Would it be best to seek out a mortgage broker specifically or possibly approach an independent financial adviser?

With regards to my redundancy, it took me 6 months to get another job in my current industry. I took a part-time job while I searched but the income wouldn't be enough to cover my costs if a similar situation occurred again. I'll get some quotes for it and see the outgoings versus the potential benefits but I do think it'd be more worthwhile in my personal circumstances than for most.

Again, a huge thanks to everyone who has chipped in. The help is hugely appreciated. :beer:

Weighty1

Either a mortgage broker OR an IFA, you just need to make sure the mortgage broker is independent as some are independent for mortgages whilst tied to one provider or a small panel of providers for insurance products.

KazzyTI

Weighty1 wrote: »

Either a mortgage broker OR an IFA, you just need to make sure the mortgage broker is independent as some are independent for mortgages whilst tied to one provider or a small panel of providers for insurance products.

My mortgage will be provided by Nationwide but was set up through L&C. They've forwarded my details onto one of their other departments who deal with insurance but I'm not sure how impartial they are or how competitive the quotes are, based on what I've seen on price comparison sites (although I know cost isn't the be all and end all with these policies).

Weighty1

KazzyTI wrote: »

My mortgage will be provided by Nationwide but was set up through L&C. They've forwarded my details onto one of their other departments who deal with insurance but I'm not sure how impartial they are or how competitive the quotes are, based on what I've seen on price comparison sites (although I know cost isn't the be all and end all with these policies).

Personally, I'd be more inclined to try and deal with a self employed adviser rather than someone employed within L&C. For example, when I worked in a similar environment we were expected to have 10 "conversations" a day and were always expected to be making outbound calls if we weren't on the phone. For a £50/month premium it would earn me between £60-£100, depending on the provider, type and length of plan.

Now, as a self employed adviser I receive about 8x that amount so it means I can spend far longer providing the client the absolute best advise. I sometimes have conversations with clients lasting 1.5hrs to narrow down the range of options to those best suiting the client. It shouldn't have to be rushed and be done in 20-mins. If it can, great, but if more time is needed then so be it.

As soon as larger companies become involved, needing more advanced IT systems, larger offices, managers salaries to cover etc etc, the sales process generally becomes more time constrained.