Mortgage protection - worthwhile or not?

The_Walker

Our mortgage broker is suggesting mortgage protection is advisable. My wife can't work, and if I was flattened by a bus she'd have a major problem paying off the mortgage. On the other hand, it's a small mortgage which I hope to get paid off within 5 years maybe. I do have a serious pre-existing condition and I'm told this would most likely be excluded from protection, which makes me wonder whether it's really worth it!

Any opinions on mortgage protection? Is it worthwhile or not worth the paper it's written on? I don't know how reliable these policies are for paying out?

thanks in advance

dunstonh

My wife can't work, and if I was flattened by a bus she'd have a major problem paying off the mortgage. 

So, you have a clear financial need.

Any opinions on mortgage protection?

People that claim on them will think they are the best thing they did.  People that dont claim may think they are a waste of money.

 Is it worthwhile or not worth the paper it's written on? 

It is clearly worth exactly what it says it is.

I don't know how reliable these policies are for paying out?

99%.

Nailer99

I’m old enough to remember banks having to pay billions of pounds in compensation for misselling these policies. 

By all means take independent financial advice, but my understanding is that independent life insurance or income protection insurance is much better value than any mortgage protection policy cooked up by your bank, which is why most banks don’t do this any more. 

ACG

Aviva
In 2020 Aviva paid 99.3% of all life insurance claims. 
In 2021 Aviva paid 99.4% of all life insurance claims. 

LV
In 20201 LV paid ouf 96% of all protection claims (this includes Life, CI, PHI), but typically life insurance has higher percentage. 

Zurich
In 2020 Zurich paid out 98% of all life insurance claims. 

I have just chosen 3 at random, but you can see it is consistently above 95%. 


Why would it not pay out? 
- If there is an exclusion and that was the cause of death. 
- Applicant lies on the application form to the point where the insurer would never have offered cover in the first place. 
- You are not dead (bear with me here)...

I used to work for a life office (one that no longer exists), we once had a claim on critical illness (critical illness covers things like heart attacks, strokes, cancer) from someone who broke their arm. That had to go down as a declined claim and obviously affects the statistics. 

Life insurance is like any other insurance, its only useful if you actually need it otherwise it is a waste of money. It does generally pay out though in excess of 9 times out of 10. 

Typhoon2000

Nailer99 said:

I’m old enough to remember banks having to pay billions of pounds in compensation for misselling these policies. 

By all means take independent financial advice, but my understanding is that independent life insurance or income protection insurance is much better value than any mortgage protection policy cooked up by your bank, which is why most banks don’t do this any more. 

I think you are thinking of Mortgage Indemnity Guarantee. These were for the benefit of the lender rather than the borrow and previously sometimes insisted upon as a condition of lending. These covered the lender if the borrower did not pay the mortgage for any reason.

dunstonh

Typhoon2000 said:

Nailer99 said:

I’m old enough to remember banks having to pay billions of pounds in compensation for misselling these policies. 

By all means take independent financial advice, but my understanding is that independent life insurance or income protection insurance is much better value than any mortgage protection policy cooked up by your bank, which is why most banks don’t do this any more. 

I think you are thinking of Mortgage Indemnity Guarantee. These were for the benefit of the lender rather than the borrow and previously sometimes insisted upon as a condition of lending. These covered the lender if the borrower did not pay the mortgage for any reason.

MIG was never missold and didn't result in any redress being paid.  I suspect he is referring to PPI.  Which also isn't comparable with life assurance.

Nailer99

I was referring to PPI which is what I thought “mortgage protection insurance” in the OP was referring to. 

Life insurance and / or income protection insurance is sensible if you have dependents. 

MFWannabe

The_Walker said:

Our mortgage broker is suggesting mortgage protection is advisable. My wife can't work, and if I was flattened by a bus she'd have a major problem paying off the mortgage. On the other hand, it's a small mortgage which I hope to get paid off within 5 years maybe. I do have a serious pre-existing condition and I'm told this would most likely be excluded from protection, which makes me wonder whether it's really worth it!

Any opinions on mortgage protection? Is it worthwhile or not worth the paper it's written on? I don't know how reliable these policies are for paying out?

thanks in advance

Do you have life insurance? 

Would mortgage be paid off by this in the unfortunate event of death?