Do I need life insurance to cover mortgage?

Srinivas65

Hello,
I am an NHS employee and I have life insurance to cover "death in service" and I was told that my dependents ( wife and kids) get paid in the event of my death. I bought a house on mortgage last year and I have a private life insurance to cover my mortgage. this life insurance which I bought from Aviva will pay lumpsumj to my dependent towards outstanding mortgage. However, I was told that if I have a death in service life insurance given by my employer, I do not need another private life insurance and in the event of my death, private insurance company will not pay my dependent as I already have insurance given by my employer. Is that correct? if it is correct, is it advisable to cancel my present private life insurance taken from Aviva. I contacted Aviva, but they were not helpful

worried_jim

Srinivas65 wrote: »

Hello,
I am an NHS employee and I have life insurance to cover "death in service" and I was told that my dependents ( wife and kids) get paid in the event of my death. I bought a house on mortgage last year and I have a private life insurance to cover my mortgage. this life insurance which I bought from Aviva will pay lumpsumj to my dependent towards outstanding mortgage. However, I was told that if I have a death in service life insurance given by my employer, I do not need another private life insurance and in the event of my death, private insurance company will not pay my dependent as I already have insurance given by my employer. Is that correct? if it is correct, is it advisable to cancel my present private life insurance taken from Aviva. I contacted Aviva, but they were not helpful

I cancelled mine, but I have no dependants so couldn't give a stuff if I snuff it.

Grumpygit

Never heard that one before and i think if that was the case, then a lot of people would be paying out for something that they won't ever receive (well, their dependents)


I have both DIS and a policy for my mortgage.


The way I see it, whilst you will have a payout to cover the mortgage (so that is one less bill to pay), would your family be able to have a quality of life given that they are now down 1 salary (or the only salary if your OH is a stay at home parent?)


If you can afford the life insurance, keep it as that money will come in pretty handy for your family.

SonOf

However, I was told that if I have a death in service life insurance given by my employer, I do not need another private life insurance and in the event of my death, private insurance company will not pay my dependent as I already have insurance given by my employer. Is that correct?

I suspect that is a load of rubbish for most people (as in do not need another one - the bit about refusing to pay out if you have DIS is complete BS)

DIS is usually between 1-4 times your pensionable salary. It's primary purpose is to provide a lump sum for an immediate loss of salary and go towards a lower pension entitlement (as the years wont be there).

Most people need upto 20 times their salary (as a crude guide) plus liabilties on top minus savings/investments. So, 1-4x DIS is nowhere near enough for anyone with a family.

if it is correct, is it advisable to cancel my present private life insurance taken from Aviva. I contacted Aviva, but they were not helpful

Aviva are not advisers and do not hold the regulatory permissions to give advice. So, asking them for advice is going to result in them not being helpful.

ceb1995

is the death in service amount enough to cover the whole mortgage and your funeral? i have both as my death in service is just a year salary which won't last that long with a funeral and bills for DH to cover, With our life insurance, the mortgage is paid and 40k left over which is plenty for my funeral and for DH to take time out of working if that's what he wanted to do for his mental health.

Zero_Sum

Srinivas65 wrote: »

Hello,
I am an NHS employee and I have life insurance to cover "death in service" and I was told that my dependents ( wife and kids) get paid in the event of my death. I bought a house on mortgage last year and I have a private life insurance to cover my mortgage. this life insurance which I bought from Aviva will pay lumpsumj to my dependent towards outstanding mortgage. However, I was told that if I have a death in service life insurance given by my employer, I do not need another private life insurance and in the event of my death, private insurance company will not pay my dependent as I already have insurance given by my employer. Is that correct? if it is correct, is it advisable to cancel my present private life insurance taken from Aviva. I contacted Aviva, but they were not helpful

Its not insurance you have, its a payout from your pension (assuming you havent opted out) which will be about 3 times your salary (thats what my LGPS one is anyway). Personally ive never bothered with life insurance for pretty much this reason and that the payout would be bigger than my mortgage (which ive always overpaid by a decent amount so its reducing at a good rate)

lisyloo

It depends.

Do you have kids? If you have small children then you need a lot of cover (I’ve heard 10 times salary) because your spouse cannot do childcare and work full time so they’ll need an income.

Death in service can be ok on its own if it’s enough, but do bear in mind that if your employment stops your cover stops.
This may be obvious but what is less obvious is that if you have a health condition by the time you need to take out a new policy it may be a lot more expensive.

For this reason Financial advisors usually suggest you get your own policy that you can keep long term rather than rely on you Employers policy.

Do so bear in mind your dependents May get a pension and/or lump sum from your pension fund. That may or may not be significant.

Whether you have kids and whether your spouse works and is dependent or not are significant factors.
A single person or someone with a high earning spouse doesn’t need to have life insurance at all although they can choose to.

I am forced to pay for it via my employer.
I’m actually a little annoyed about it as I don’t have a mortgage or kids and have a reasonable sized pension fund, although my employer does provide a “flex fund”, so it depends entirely on circumstances.

sal_III

Who told you that you won't get life insurance payout if you have DiS from your employer? A chap in the pub? It's perfectly legal and OK to have more than 1 life insurance policy.

BTW in the event of your death, the life insurance won't pay "towards your mortgage" it will pay the lump sum to your heirs, whether they will use it to pay the mortgage or not is their business. The life insurance is not linked to the mortgage.

Bear in mind that on top of paying out the mortgage you want to leave your family enough funds to live comfortably in the future without your income and assistance. So just insuring for the mortgage is shortsighted. Given the fact that extra £100-200k will cost you like £5-10/m

lisyloo

sal_III wrote: »

Bear in mind that on top of paying out the mortgage you want to leave your family enough funds to live comfortably in the future without your income and assistance.

Absolutely, but don’t forget other assets in particular pension fund.
It depends on age but some people have 6 figure pension pots which would pay out a pension and/or lump sum depending on the scheme rules.

Srinivas65

lisyloo wrote: »

It depends.

Do you have kids? If you have small children then you need a lot of cover (I’ve heard 10 times salary) because your spouse cannot do childcare and work full time so they’ll need an income.

Death in service can be ok on its own if it’s enough, but do bear in mind that if your employment stops your cover stops.
This may be obvious but what is less obvious is that if you have a health condition by the time you need to take out a new policy it may be a lot more expensive.

For this reason Financial advisors usually suggest you get your own policy that you can keep long term rather than rely on you Employers policy.

Do so bear in mind your dependents May get a pension and/or lump sum from your pension fund. That may or may not be significant.

Whether you have kids and whether your spouse works and is dependent or not are significant factors.
A single person or someone with a high earning spouse doesn’t need to have life insurance at all although they can choose to.

I am forced to pay for it via my employer.
I’m actually a little annoyed about it as I don’t have a mortgage or kids and have a reasonable sized pension fund, although my employer does provide a “flex fund”, so it depends entirely on circumstances.

Thank you, my wife and kids can afford to live on their own in the event of death. However, they wont be able to pay the remaining mortgage.. Kids are now finishing university, so I gues they wont be needing my money

SonOf

Srinivas65 wrote: »

Thank you, my wife and kids can afford to live on their own in the event of death. However, they wont be able to pay the remaining mortgage.. Kids are now finishing university, so I gues they wont be needing my money

Kids are still at uni and not capable of earning without compromising their education. So, there is a financial need there. Until that get a job, they are financially dependent.

Many spouses are reliant on the husband's pension in retirement. If you suffered an early death, would she have time and ability to make up the reduced pension that she would get?