Advice on 'mismatch' between mortgage and life/critical illness policy

tacpot12

An insurance broker should be a source of independent advice (you are paying them for the advice after all), but some of them get wrapped up in trying to sell you stuff so you have to use a bit of due diligence with their recommendations.

Income Protection is a very useful insurance to have, especially if you are the sole wage earner. It can seem quite expensive when you start to look into it, but there are things you can do to reduce the costs, so ask the broker how to get the cost down to a level that you can afford. One option is to defer the date at which the insurance will start to pay out, and use a combination of sick pay and your own savings to make this deferred period as long as possible. You will need to have some savings to tide you over to the point where the payments start.

Make sure you understand the policy that you are buying, especally how they will assess whther you are fit to work and what work you are fit to do. 

littleteapot

I read this thread with curiosity, as I've  seen a few thread along the lines of this. However I have never been asked for evidence of any life or critical illness cover when applying for a mortgage or any other type of loan.

Back when I took out my first mortage in 2007 the provider did 'offer' me life and critical illness cover, but it was not mandatory to take it. I declined it in any case as after reading the terms it offered no benefit over my then employers contract which gave 6 months full pay follwed by 6 months half pay in the event of illness.

Since then I've had two other mortage applications and neither have asked about life or illness insurance. Is my experience unusual? There's nothing 'special' about me - just a mid 40's bloke employed on a salary towards the top end of the basic tax rate range.

ACG

littleteapot said:

I read this thread with curiosity, as I've  seen a few thread along the lines of this. However I have never been asked for evidence of any life or critical illness cover when applying for a mortgage or any other type of loan.

Back when I took out my first mortage in 2007 the provider did 'offer' me life and critical illness cover, but it was not mandatory to take it. I declined it in any case as after reading the terms it offered no benefit over my then employers contract which gave 6 months full pay follwed by 6 months half pay in the event of illness.

Since then I've had two other mortage applications and neither have asked about life or illness insurance. Is my experience unusual? There's nothing 'special' about me - just a mid 40's bloke employed on a salary towards the top end of the basic tax rate range.

No. The only insurance that is compulsory is Buildings insurance. Everything else is purely optional. 

On a side note however, you have 6 months sick pay. 
The average claim on an income protection policy is around 7 years I think from memory. 

kingstreet

tacpot12 said:

An insurance broker should be a source of independent advice (you are paying them for the advice after all), but some of them get wrapped up in trying to sell you stuff so you have to use a bit of due diligence with their recommendations.

Make sure you understand the policy that you are buying, especally how they will assess whther you are fit to work and what work you are fit to do. 

An independent financial adviser would be more appropriate for IP.

Couldn't agree more on the latter. You MUST get "own occupation" cover as the work tasks definition can lose you a payout because, for example, you can hold pen or use a keyboard.

Hazelnutty

@littleteapot It's not compulsory but I came under heavy pressure in my 1st remortgage about 5 years ago to take *some* kind of CI/life cover even if not through the nominated broker. I was a little surprised that taking on £6k of additional debt @ 0% got the same treatment though! A bit heavy to 'warn' that this minor shortfall would leave me unprotected I've decided not to go ahead for other reasons but I will take on board the advice to consult an IFA. Now just to find the right one...

Hazelnutty

Thanks @tacpot12 @kingstreet I'll look into this in the new year including income protection. A bit worried about handling potential hard sell but will do my research, and, of course, pop back to the forums if needed

ACG

I am like Kingstreet, I really believe in income protection (I do not have critical illness cover but I do have Income protection). I always think there is a fine line with insurance, on the one hand people generally do need it and on the other you do not want to sound like a dodgy insurance salesman. 

If you are not comfortable with whoever you speak to, there are plenty more out there.

Hazelnutty

Thanks @acg it's finding the right adviser that's the challenge. Was thinking of starting with Unbiased to find an IFA as they offer a free 30 minute session. Will be interesting to see what they suggest re: critical illness and/or income protection as I agree I probably need the latter more than the former...

ACG

Unbiased...Except they display the advisers who pay at the top. Completely unbiased. Not that that makes the adviser good or bad, it just the unbiased name that makes me laugh. 

Any IFA or Mortgage Broker should be able to help. Just check if they have "loaded premiums", that basically means they are getting more commission and in turn you are paying more for no extra benefit.