Life Assurance tied with mortgage term - help?!?

FairyElephant_2

Hi,

This is a bit long, but please bear with me, I need some help advice please?

DH & I both have 'Decreasing Term assurance with Critical Illness cover' - without profits policies which we took out when we got our mortgage in 2002 (on the advice of a mortgage adviser at the time, who I now don't think gave us the best advice but that's another story....).

I pay £18.66 a month and he pays £38.19 (difference I guess due to age etc as he has 10 years on me - cradle snatcher - LOL!).

These policies are set to run for 15 years as per our original mortgage, to finish in 2017, BUT we have changed mortgages a couple of times, made various overpayments and reduced our mortgage amount, and it is currently due to finish in 2013.
I also have some savings which would pay off about half the oustanding mortgage amount at the moment (but despite being a MFW, due to other reasons I won't go into here, I don't want to pay them against the mortgage at the moment).

I need some advice.....

Should I cancel these policies? - we seem to paying out a lot between us and i'd rather pay extra against the mortgage each month to be honest!

Should I take out some similar policies but for lower amounts? - If so, do I take into account my savings when working out how much cover we need?

Would I be better off looking for a 'with profits' type of life insurance policy? -although realise that wouldn't take account of the critical illness/injury bit - and as my DH works as a tradesman his risk of injury is higher than mine as an office bod!

Grateful for any help or advice!

FE

dunstonh

Should I cancel these policies? - we seem to paying out a lot between us and i'd rather pay extra against the mortgage each month to be honest!

What if either of you die or suffer a critical illness? Can the other afford to keep the mortgage going?

Should I take out some similar policies but for lower amounts? - If so, do I take into account my savings when working out how much cover we need?

You could take out another if your needs have changed. As for you needs, we dont know enough about your circumstances. You should ascertain your financial need and take out your life assurance policies to match that.

Would I be better off looking for a 'with profits' type of life insurance policy?

No.

lisyloo

Should I cancel these policies? - we seem to paying out a lot between us and i'd rather pay extra against the mortgage each month to be honest!

If the remaining partner wants to stay in the house then the minimum you need is to clear a sufficient amount of the mortgage for them to be able to manage the remaining payments on their salary (assuming there are no kids and they can still work).
Anything above that is a matter of choice.
Some people might want the whole mortgage cleared so that their partner does not have to struggle but there is no logical reason why a single person can't continue to pay a mortgage.
Bear in ind that any death benefits your employer has will also be paid and also there may be lump sums from private pension funds and savings as well.
Bear in mind tough that one person living on their own will not have half the bills (for example council tax and TV licence).

It really is a trade-off between how much you think you need/want and the premiums.

Should I take out some similar policies but for lower amounts? - If so, do I take into account my savings when working out how much cover we need?

Well I'm not sure I'd want to leave my spouse totally devoid of savings, but do take into account any pension fund lump sums and "death in service" benefits from work.

Remeber there is no requirement to pay off the entire mortgage (unless you want to). Teh basic requirement is for your spouse to have a manageable mortgage.
Loads of single people have mortgages so being a widow/widower is no different to lots of single people.

Would I be better off looking for a 'with profits' type of life insurance policy?

No, I don't think so.
Best to keep savings and insurance seperate.

and as my DH works as a tradesman his risk of injury is higher than mine as an office bod!

Well firsly I don't think CI covers you for injuries or accidents.
It pays out a lump sum in the event of certain illnesses like cancer.
The downsides I see are that the lump sum could be inufficient to last if you are young and you might get an injury of illness that isn't covered.
In my view PHI is a much better product as it pays out an INCOME until retirement if you cannot work (pretty much all illnesses and accidents included except a few specific exceptions).
An income is much better than a lup sum when you are young as the policy may have to pay out for decades.
The lump sum from critical illness is more suitable for modifying your home or getting alternative treatment rather than providing a lifetimes income.
It really beats me why they promote CI so much (other than for their own gain).

I would look at your long term sickness provisions at work. Sick pay probably runs out after a few months and you are then on state benefits.
But check it out at work.
You might be lucky and have free PHI provided (my empployer provides it free).

FairyElephant_2

Thanks for the advice.

Forgot to mention that DH ALSO has 'Accident, Sickness & Unemployment' insurance which costs us £23.25 a month!

I hadn't thought of lump-sum payments from work - that would make quite a difference now.
When we took out the policies DH worked for a small firm and had no cover like that at all, but last year he joined a large company and there are now death-in-service benefits etc.
Also he now gets reasonable sickpay (he only got basic SSP from his last employer) so that will make a difference too.

Just done some quick calcs and if anything happened to either one of us, my savings would bring the mortgage to a level that the other one could afford to pay on their wages, assuming that the remaining partner was still OK to work (or in his case - if not he can claim on the other policy!).