New house life insurance policy

911bill

Hello,
My wife and I have just had our mortgage offer approved and we are nearly in to our nee house. My mortgage broker talked to us about life insurance and took us through level, decreasing and adding critical illness cover. He explains about joint and individual policies and the pros and cons, all very good.

We are both in great health, early 30’s and a baby boy. 

The critical illness cover made it all very expensive, which isn’t too appealing when we have just forked out for the house and what it will need.

i just wanted to get some independent advice on what we should be considering. The level option sounded the best for us and doing it on an individual basis as apparently if we both get knocked off, our son would get twice the payout. 

Any advice much appreciated 

thank you 

dunstonh

The critical illness cover made it all very expensive, which isn’t too appealing when we have just forked out for the house and what it will need.

The reason it is more expensive is that you are more likely to claim on it than life assurance.

i just wanted to get some independent advice on what we should be considering. 

Is your mortgage broker an independent in all areas? (and I mean all areas - most mortgage brokers are whole of market on mortgages but many are tied to one or a small panel of insurers rather than whole of market there.

 The level option sounded the best for us and doing it on an individual basis as apparently if we both get knocked off, our son would get twice the payout. 

I think that is unlikely to be for the best.   The mortgage only needs to be repaid once.  So, a joint decreasing term assurance covers that.  Then a level term assurance for the family protection.  In that case, sole plans could be appropriate. Or joint up to a point and a sole once for the shortfall if one spouse earns more than the other.
 

Sandtree

You are more likely to get sick than die in the next 25 years hence the price difference however I would look at income protection before critical illness as it would replace your income if you are too ill to work in which case you still have the funds to pay the mortgage.

Two main differences are the IP pays no matter the cause (assuming no pre-existing conditions and excluding self harm in some cases) whereas CI only pays for set conditions however CI pays a lump sum and so whilst after a stroke and physio etc you may be fit to return to work after 2 years so IP stops paying as CI has cleared your mortgage you may decide its time to go part time or take less stressful work despite being fit to go back to the old job.

It may be worth speaking to a whole of market protection broker who can discuss your varying needs, as Dunstonh says, people fairly often need more than one life policy (or one policy with different sections) to cover their different needs.

Weighty1

Sounds like the broker isn't very good to me!  Recommending level cover instead of decreasing is no efficient way of protecting your family's standard of living.  Imagine you take out this level policy and die the next month.  There's enough to repay the mortgage but nothing else.  How is your wife going to raise your son without your income? (I'm guessing your income is larger than the mortgage payments so there would be an overall loss of income even once the mortgage is repaid).

A "proper" advisor would look at additional cover over and above the mortgage so you have the right policy for each job.  1) for mortgage protection 2) for family protection.

And what if the event you suffer isn't a critical illness but means you can't work long term?  A car crash which smashes you up but doesn't paralyse you.  A bout of severe depression.  Rheumatoid arthritis.  There's hundreds of conditions that often wouldn't be covered on critical illness plans which could prevent you from working.  For that reason long-term income protection is normally a far better option.

911bill

Thank you so much for these insights. This is invaluable as I am not knowledgeable in this area at all. 

My wife is a stay at home mum and I earn a decent amount so I would like to ensure she is supported should the worst happen. I don’t know if her not working makes a difference in all of this as she does not bring an income in? 

My broker is solely mortgages and I assume he gets some sort of deal for adding any policy cover on top from a partnered provider. The rates were comparable to those found on comparison sites but it was more the uncertainty around what is the best foot forward in all of this. 

Your advice has been great and giving me some direction for more research. 

Decreasing term and income protection sound like a good combo. 

csgohan4

I would get another opinion and get an separate independent broker

MSE has a good article on life assurance and suggest some brokers, but you can use your own as well. I've used the one on MSE and found them helpful

dunstonh

My broker is solely mortgages and I assume he gets some sort of deal for adding any policy cover on top from a partnered provider. The rates were comparable to those found on comparison sites but it was more the uncertainty around what is the best foot forward in all of this. 

It is a mandatory requirement for you to be told the status of the adviser.  Indepdendent/whole of market advisers will tell you as its the type you want to be seeing.   Restricted/tied advisers (with only one provider or a handful of providers) will usually try and avoid the issue as much as possible.   It is not unknown for some to use the fact they are whole of market on mortgages to pretend they are on insurances.  So, you should be clear if the adviser is being honest with you.  Although given the amount of info you take in during the process, it is inevitable that some things will be forgotten.

Decreasing term and income protection sound like a good combo. 

Based on the limited information posted, I would have thought DTA and Level Term assurance and permanent health insurance (The best type of income protection).