Life insurance for first time buyer

sammyj84

Hello all.

I have just been accepted for a mortgage to buy my first property, i know i need life insurance but find it a little confusing. 
Its just me on the mortgage so do i need a sole insurance to cover the home/mortgage only or can you get them that cover that plus extra for family? 
Also do i just select the amount that the property cost or can i select more? 
And how many years do I have it over? Mortgage is 25years but it will be paid off well before then. 

Sorry if these sound daft. 

Thanks in advance 

Sandtree

Best thing is to speak to an independent advisor (broker or IFA) who can talk you through it all. Just make sure they are whole of market as tied agents firstly only promote what their principle offers and secondly tend not to have the best rates. 

In many people's lives they need multiple policies for different purposes, though some allow a single policy with different sections, so one to pay off the mortgage that goes down in time with the mortgage and another to provide for partner/kids that may be static or indexed linked etc.

mgfvvc

I'm assuming that having life cover is a condition of the mortgage, so the lender knows it will be paid off in the event of your death. You can get additional cover if you like, as long as it covers the mortgage.
You can buy a single policy for more than the mortgage, so that some is left over for your family.
You can buy separate policies, one to cover the mortgage and one to provide for the family. This is a more flexible approach allowing the cover for the family and the mortgage cover to run for different terms. If you pay the mortgage off early you can cancel the mortgage cover and retain the cover for your family. You could have reducing cover for the mortgage and level cover for your family, if that is cost effective. It may be advantageous to have the policies written in trust, but you should definitely take advice on that.

user1977

mgfvvc said:

I'm assuming that having life cover is a condition of the mortgage, so the lender knows it will be paid off in the event of your death

Pretty unlikely - long gone are the days when lenders made that a condition. They rely on being able to repossess the property. Hopefully the OP isn't under the mistaken impression (given by some brokers) that it is actually mandatory, and they just mean they are choosing to have protection for their dependants.

csgohan4

Bare in mind, the younger you are, the cheaper it is for life and income protection insurance. There's another thread on here, where the 49 year OP cannot find income protection due to medical issues. 

You can always write your insurance into a trust or put instruction in your will where it goes once you have a family or simply go to charity e.t.c. 

User4search

Sandtree said:

Best thing is to speak to an independent advisor (broker or IFA) who can talk you through it all. Just make sure they are whole of market as tied agents firstly only promote what their principle offers and secondly tend not to have the best rates. 

In many people's lives they need multiple policies for different purposes, though some allow a single policy with different sections, so one to pay off the mortgage that goes down in time with the mortgage and another to provide for partner/kids that may be static or indexed linked etc.

I know good protection advisor . I got my cover from her for my property mortgage. Let me know.

sammyj84

Thanks all, there no condition by the lender as such they just mentioned it and id like to have it just incase, 

I'm thinking a single decreasing policy then for the mortgage amount?
But it will be paid off early so what term do i have? the term that the mortgage is for or for the 5 year fixed? 

What happens when i remortgage? (Which i will do in 5 years at the end of the fixed term) Do i cancel this one and get a new one? 

User4search

I have also taken decreasing policy for mortgage term 35 years. Even if I do early payments of some amount,  my beneficiary would get set amount irrespective of what is due on mortgage. 

dunstonh

But it will be paid off early so what term do i have? the term that the mortgage is for or for the 5 year fixed? 

It doesn't matter if its 5 year fixed as you will either do a product switch or a remortgage.  Unless you change the amount borrowed or the term of the mortgage, the original DTA will remain suitable.   

If you pay it off early, then you can stop the cover or retain it.

sammyj84

When i remortgage i will be having it over a shorter term. 

So if i keep it place will my beneficiary get whats left over after the mortgage is paid or does it HAVE to go on the mortgage? 

user1977

sammyj84 said:

So if i keep it place will my beneficiary get whats left over after the mortgage is paid or does it HAVE to go on the mortgage? 

The insurance proceeds will (normally) just form part of your estate. Your executors will repay the mortgage (and any other debts) from the assets in your estate. What's left goes to the beneficiaries.