Decreasing Term Insurance

penguin10

Hi
A relative has recently bought a house that I live in rent free.
I decided to take out decreasing life cover so that her mortgage would be paid off in the event of my death.
Got all my paperwork and now wondering if I have bought the right thing since the mortgage is not actually mine?
It does mention how it would work out a payment if the mortgage was now paid off but I am now concerned that the whole thing would be null and void because at the time I took it out, I did not have a mortgage at all.
I bought it on line and have no financial advisor.
The company tell me they can't/won't give advise.

Any ideas?
Thanks

biscan25

You don't have to have a mortgage for a decreasing term assurance. They are typically used for other things too.

Sandtree

You can insurer yourself for more or less whatever you want to... insurers are only concerned about potential fraud (ie trying to hide pre-existing conditions etc) which are potentially spotted by buying policies much larger than your incomes etc would suggest is necessary.

Its when you buy insurance on someone elses' life that you must show an insurable interest (eg they owe you money) but interestingly (to some at least) with Life insurance the interest only need to exist at the time you buy the policy whereas for non-life (eg Home insurance) you must have an insurable interest at the point of claim (you cannot sell your home, keep the insurance, and then claim when theres a big fire)

penguin10

Great thanks

So even though it says this - do think I am covered for full amount? I took it out to cover the full mortgage amount for the full term of the mortgage. (but its not MY mortgage) 
This type of insurance is intended to cover the amount owed on a mortgage where repayments are based on the amount you borrowed from your mortgage lender, plus interest (known as a capital and interest or repayment mortgage).
This means that your amount of cover will go down each month throughout the term of your policy, but the amount you pay (your premium) stays the same. When a claim is made we will normally pay the remaining amount left on your mortgage from the date the person we’re insuring died or was diagnosed with a terminal illness (we’ll also pay any interest that has built up since that date) as long as:
 ● There’s still a mortgage being repaid in equal monthly instalments.
 ● The mortgage was taken out no later than three months after the start date of your policy.
● The mortgage is a capital and interest repayment mortgage which is on track to be fully repaid at the end of the term of the mortgage.
 ● The length of the mortgage is the same as the length of time on your policy.
 ● The amount remaining to pay for your mortgage is not more than it would have been if you borrowed the same amount on the start date of your policy for the same amount of time that your policy was taken out for, and interest rates had been 12% compounded annually.
If there is no longer a mortgage in place, or the other criteria above are not met when a claim is made, we’ll pay an amount that is equal to what would have been outstanding if you borrowed the same amount on the start date of your policy for the same amount of time that your policy was taken out for, and interest rates had been 6% compounded annually.