About to pay off morgage with life assurance policy

_ASH_

Hi All, I've been over paying my mortgage, to the point I have 1 payment left (Will be mortgage free next month).

Now, I have a phoenix life, decreasing assurance policy, which apparently is still valid until 12/1/26

What are my options/peoples advice? Do I keep this going? can I change this to a different policy?

I'm 47 & my wife is 46 and we are both in good health.

We have 3 children together.

What are my options or peoples thoughts?

Many thanks in advance for any information

DullGreyGuy

What are your financial needs if one of you were to die tomorrow? Could you maintain the current lifestyle, child care etc with just a single person's income?

What other life insurances do you have?

On a decreasing term policy its payout is going to be relatively small with only a couple of years left to run and so may not really move the needle in terms of replacing a salary for 20 years. 

You won't be able to change the existing policy but you way want to run through the different scenarios to work out if you need to be buying additional insurance unless you've already got someone in the wings that you'd marry the day after the funeral to replace the income etc. 

_ASH_

I dont have any other insurances that I currently pay for

Brie

Judgement call....how much will you pay between now and the end of the policy?  how much will it pay if the worst happened?

With mine I reached a tipping point where the monthly payments didn't make any sense given the small value payout so I cancelled it a bit early. 

Also check the T&Cs - will it pay out at all if there is no mortgage left?  I would think yes it should be always better to be sure than to pay towards something that is not going to do anyone any good other than the assurance company.

Brie

_ASH_ said:

I dont have any other insurances that I currently pay for

What will the kids live on if both you and your wife die?  Possibly you're insured through your work pension scheme in which case that's fine.  

DullGreyGuy

_ASH_ said:

I dont have any other insurances that I currently pay for

So if you or your partner died tomorrow you'd be able to continue living the same lifestyle without their income until retirement? Or you happy having to change your lifestyle/ dont care if your partner has to change their lifestyle if you/they die tomorrow?

It's an honest question, an associate refuses to buy life insurance on themselves for the benefit of their wife as doesn't see it as his problem if he's dead. He has substantial assets (inc liquid) that will go into trust for his only child with the wife being able to make modest withdrawals for cost of living until the son is 18. 

_ASH_

I'm currently paying £12. a month, and they have told me currently there is £13000 in the pot, but im thinking that if I carry on paying, that 12x19 months = £228 and assuming that the pot will decreese and end on January 2026

DullGreyGuy

_ASH_ said:

I'm currently paying £12. a month, and they have told me currently there is £13000 in the pot, but im thinking that if I carry on paying, that 12x19 months = £228 and assuming that the pot will decreese and end on January 2026

I'd avoid the term "pot" as it has other connotations... your current sum insured is £13,000 and it will decrease every month to £0 at the term of the policy or you cancel it now and save the £228 in future premiums. 

Rodders53

You'd need to read the T&Cs of the policy...  but the decreasing life policies we took out were to pay off the outstanding Mortgage, so I assumed worthless when we did that, and cancelled the policies.

DullGreyGuy

Rodders53 said:

You'd need to read the T&Cs of the policy...  but the decreasing life policies we took out were to pay off the outstanding Mortgage, so I assumed worthless when we did that, and cancelled the policies.

It doesn't matter what the original purpose was, ultimate the money is paid to your estate/trust and it's up to the beneficiary what they do with the money. They could pay off the mortgage or put it all on Black in Vegas if they preferred. 

The pattern of decrease is designed to roughly mirror how a mortgage or other form of lending would decrease but in principle could be used to cover anything which you feel decreases overtime rather than simply goes off a cliff at the end of the term.