Life insurance - what amount should I cover?

AbsensCarens

Hello everyone,

We’ve only just bought a house together with my partner and looking for a life insurance or mortgage protection insurance covering both of us in case of our death. We’re interested in decreasing term life insurance. Should we cover the amount we borrowed or the amount we owe to the bank at present? Is it better to apply for life insurance separately or do you think a joint application works better financially?

dunstonh

Should we cover the amount we borrowed or the amount we owe to the bank at present?

If you have only just bought it, does it make a lot of difference?   

At the end of the day, it is to clear the debt.  So, go by that figure.

Is it better to apply for life insurance separately or do you think a joint application works better financially?

You only need to clear the mortgage once if one of you dies.  Not twice.   So, joint life is suitable.

AbsensCarens

If you have only just bought it, does it make a lot of difference?

Not really. I just wanted to point out that we're fresh when it comes to buying a house.

dunstonh said:

At the end of the day, it is to clear the debt.  So, go by that figure.

That's what I thought. I know some people around me, who bought life insurances covering the amount they borrowed, but not what they actually owe. It seems ridiculous.

Thanks for your reply.

theoretica

AbsensCarens said:

That's what I thought. I know some people around me, who bought life insurances covering the amount they borrowed, but not what they actually owe. It seems ridiculous.

Not really - depends how much it costs as some extra money can be very appreciated when bereaved. 

dunstonh

theoretica said:

AbsensCarens said:

That's what I thought. I know some people around me, who bought life insurances covering the amount they borrowed, but not what they actually owe. It seems ridiculous.

Not really - depends how much it costs as some extra money can be very appreciated when bereaved. 

If people want an additional amount for family protection or salary replacement, then they should do it as an additional segment or separate plan and likely to be best on level term assurance for that chunk.  Mainly as the other financial needs that exist are unlikely to have the same timescale as the mortgage.