Death in Service and Life Insurance

BrianW2022

Hi all,
   Myself and my partner recently bought a house and I was looking into life insurance to cover the mortgage as I am 53 and my partner is 50 so want us to be covered. We both have death in service cover in our respective jobs os my question is do we need life insurance as well or would this death in service payment be sufficient? 

Were not very experienced in this area so not sure if it would be sensible or not to have both. I think we both have 3 times salary.

Thanks

Emmia

This is a bit of a risk question...

Do either/both of your death in service payments clear the outstanding mortgage? (For example if one of you died a month after moving in)

Can either/both of you pay the mortgage on a single income?

We've got life insurance, to ensure that the survivor doesn't need to worry about paying the mortgage, if the worst should happen.

HappyHarry

It is usually preferable to arrange your own cover and see the death in service as an additional benefit. 

Else, there is a risk that if you become ill and lose your job, you will lose your death in service benefit and may find it difficult to then get your own life insurance.

BrianW2022

Emmia said:

This is a bit of a risk question...

Do either/both of your death in service payments clear the outstanding mortgage? (For example if one of you died a month after moving in)

Can either/both of you pay the mortgage on a single income?

We've got life insurance, to ensure that the survivor doesn't need to worry about paying the mortgage, if the worst should happen.

The death in service would cover about 80-85% of the mortgage so either of us would be covered enough to pay what is left on the mortgage. 

BrianW2022

HappyHarry said:

It is usually preferable to arrange your own cover and see the death in service as an additional benefit. 

Else, there is a risk that if you become ill and lose your job, you will lose your death in service benefit and may find it difficult to then get your own life insurance.

This is a very good point, I hadn't thought of this. Not likely to get any insurance once your ill so it seems like it makes sense to get insurance to cover the mortgage as well. 

Emmia

BrianW2022 said:

Emmia said:

This is a bit of a risk question...

Do either/both of your death in service payments clear the outstanding mortgage? (For example if one of you died a month after moving in)

Can either/both of you pay the mortgage on a single income?

We've got life insurance, to ensure that the survivor doesn't need to worry about paying the mortgage, if the worst should happen.

The death in service would cover about 80-85% of the mortgage so either of us would be covered enough to pay what is left on the mortgage. 

For me, that wouldn't be enough, you have to keep working (in your current pattern) to pay the mortgage, no option to go part time, stop for a bit if you wanted.

Because we've made overpayments on the mortgage, the policy payout for us would clear the mortgage and have money left over - we reduced the payout amount once, but it made almost no difference to the premium, and was a complete faff to do, so we've not bothered since. 

I do recognise it's another expense though, and not a cheap one at that.

BrianW2022

We are spending a lot on fixing the place up at the moment but the plan is to do overpayments starting next year to pay it off sooner. 

My partner wants to wait for a year possibly two to sort this out as we do have reasonably high outgoings at the moment with the renovations and as you said it is an extra expense. 

Appreaciate the advice, this has helped a lot.

powerspowers

I have death in service and life insurance that covers about 80% of the mortgage. We had a similar rationale that I couldn’t guarantee that I’d keep my job if I were to get sick. 

We took out life insurance for a previous property and I tried to increase the cover when we moved. My current provider could only increase it so much and then the cost of a new policy was higher so we decided that the risk of the whole mortgage not being covered was one we’d take- our mortgage is fairly small so we’re talking £20k rather than 100s. 

Emmia

BrianW2022 said:

We are spending a lot on fixing the place up at the moment but the plan is to do overpayments starting next year to pay it off sooner. 

My partner wants to wait for a year possibly two to sort this out as we do have reasonably high outgoings at the moment with the renovations and as you said it is an extra expense. 

Appreaciate the advice, this has helped a lot.

In a property needing lots of work, which presumably both incomes are paying for, I'd definitely have insurance - one income without a mortgage could pay for the work, but trying to continue the repairs whilst also paying a mortgage (even a smaller one) might be too much.

dunstonh

   Myself and my partner recently bought a house and I was looking into life insurance to cover the mortgage as I am 53 and my partner is 50 so want us to be covered. We both have death in service cover in our respective jobs os my question is do we need life insurance as well or would this death in service payment be sufficient? 

Nobody can answer that question without knowing what your financial needs are.

However, historically, death in service was a small amount to make up for immediate loss of income (not long-term loss as it's typically only 2-4 times salary) and some reduced pension entitlement (whilst the spouse gets 50%, the reduced service means a lower pension on which that 50% is based - and sometimes, spouse pensions stop on remarriage).

For most married couples, it is not sufficient.

p00hsticks

Emmia said:

We've got life insurance, to ensure that the survivor doesn't need to worry about paying the mortgage, if the worst should happen.

In reality, the 'worst' may not necessarily be the death of one partner, especially if there is a death in service payout, but rather one falling ill enough to be unable to work (and then possibly the other having to reduce hours or also give up work themselves in order to care for them).

The OP should also be considering income protection and/or critical illness cover in the mix.