Mortgage Life Insurance amount

rjmachin

I started my mortgage 10 years ago, and took the life insurance from the bank (Halifax) at the time, which is with Scottish Widows.

At the time, the house was purchased for £165k and the mortgage was for just under £99k to get under the 60% LTV.

After 10 years, my mortgage balance is around £66k, the the latest life insurance premium increase letter shows the benefit amount as being for £83k.

It was a decreasing cover policy to cover the repayment mortgage in case I die, it would then pay off the mortgage.

This has led me to wonder, am I paying too much?   Should I ask them to reduce the benefit amount, which should lower the monthly premium?

Is there any advantage to keeping the higher amount?

I am 42, have no OH or children, have 2 siblings and my parents live with me.

CSI_Yorkshire

Your estate would have an extra £17k to give to your beneficiaries.

ACG

It would reduce the premium potentially but not by much, only maybe a couple of quid a month. 
I assume it is not an expensive policy anyway? 

rjmachin

I have a physical disability, so while an non-disabled person could get insurance for around £7-14, my monthly premium is £35, so maybe £5 reduction, rather than £2.

I will probably leave it as it is then, until it increases to something like £50 a month

strawb_shortcake

When our critical illness insurance paid out, I'm sure I read these policies assume an 8-10% interest rate on the associated loans. This results in a delta in the favour of the policy holder. This may explain in part the difference in your two figures. 

We claimed after 14 months and we got more than our mortgage was at that point, it was more in alignment to our balance when we took out the policy 

ACG

rjmachin said:

I have a physical disability, so while an non-disabled person could get insurance for around £7-14, my monthly premium is £35, so maybe £5 reduction, rather than £2.

I will probably leave it as it is then, until it increases to something like £50 a month

Oh, are you on a reviewable premium? 
It might be worth reviewing the policy as a whole. Thats not to say guaranteed premiums are better, but if you go to a whole or market broker, you may find you get a better policy and similar premiums but on a guaranteed basis so you are not worrying about 5-10 years down the line.