Interest Only Mortgage Protection

mpreed

Hi!

I'm about to take out a £166,500 25 year interest only mortgage.

My IFA has been keen to sell me a Scottish Provident Self Assurance Insurance policy to cover critical illness and death.

The premium for this is £192 per month, which I feel is a large figure on top of the c. £800 a month mortgage.

Is £192 a typical monthly premium for such a mortgage (interest only)?

It may be reduced slightly, as the quote mistakenly listed me as a smoker.

One other thing is that when I asked for Death cover to be removed (I have no dependents and my job includes Death In Service provision) I was told this would increase the premium by £10 per month, which was standard practice!

Please advise ...

martinhp

The cost of critical illness has 'gone through the roof 'over the last 2 years. So premiums are pricey!!. Scottish Provident is not the cheapest around (that's usually Legal & General and Norwich Union.) but they do have one of the best policies available on the market. Being a NON-smoker should not a fair chunk off the monthly cost. And the funny thing is.. life cover and Critical illness is cheaper than Critical Illness only ??? It seems to have always been that way ::)

mpreed

If £192 is a standard monthly premium, then the question would be - do i really need it?!

Am I required to have the cover?

One of the perks of my job is to be able to pay £25 a month for £150,000 critical illness cover. Unfortunately, I won't be able to take this out until next Summer.

Would this do instead of paying £192 per month to Scottish Provident?

What would I do for the six months until I can take out the work critical illness policy?

Am I required to take out a policy such as the Scottish Provident one?

mpreed

Oh, one of the reasons why I was surprised at the £192 per month figure, was that getting online quotes from the web for critical life insurance on £166,500 over 25 years came in at between £60 and £100 per month.

However, I realise this is for a repayment mortgage.

I couldn't seem to find any online quotes for interest only insurance policies.

martinhp

It is not mandatory to have Critical Illness Cover.

If you apply for the Scot Prov plan then cancel it next year the adviser would have their commission taken back. So they would probably prefer that you did not do it at all.

As for 'should you wait or not' that is totally up to you. No one should advise you to wait or not. The company policy may be a very basic plan, only covering the most basic illness's. Where as the likes of Scottish Prov's plan has a comprehensive cover of illness's (it is very nearly, you get what you pay for ::).)

If you are looking on the net, it's a 'Level Term Assurance' plan that you need.

Plus check if the premium is reviewable (life company could change the cost every 5 years) or guaranteed.

mpreed

Thanks for the advice, but I'm still confused!

I went on the Legal and General web site and filled in the form for a quote for Level Term Assurance, based on my figures and was given a quote of £21 a month!!

I don't understand the huge discrepency in premiums.

What does the Scottish Provident policy offer that the Legal and General doesn't?!?

martinhp

That is probably Life cover only.

mpreed

Ah, knew I must be doing something daft!! :-[

Anyway, went on the Halifax web site, and level term assurance (including criticall illness!) came to £86.

Less than half the price of the Scottish Provident one.

I'm still confused why SP is so expensive - can't see the non-smoker amendment knocking £100 off the monthly payment.

Guess I'll wait and see, and go for something cheaper if the price still remains high.

martinhp

The Halifax plan is quite a poor cover compared to the main life companies. The art of a good critical illness plan is finding one with Good to Excellent cover for a reasonable cost.

Mpreed - You have a pmessage

dunstonh

Are you sure it was an IFA that you saw?

Scot prov rarely come up in the cheapest list for me and I cannot see a life assurance quote being done under regulated advice offering a premium like that. I wonder if it was non-regulated process that was being used and in those cases, the cheapest doesnt need to be offered.

If you give us your age(s) and smoker status, i can pop those into the comparison list and post the top 5 premiums for you based on that.