Life Insurance for Repayment Mortgage

Jaxxie

Hi

I didn't know whether to post this in the mortgage forum or this forum so apologies if I got the wrong one........my query is more about the insurance than the mortgage.

Due to personal circumstances, the life part of my endowment policy recently paid off the majority of my mortgage. I'm left with a small mortgage on a repayment basis & I need to get life cover on this.

From what I understand, part of what the premium is based on is what's outstanding on my mortgage but as it is on a repayment basis, this amount will reduce over time..........surely then my premiums should reduce over time but from the quotes I've had, this does not seem to be the case.

However, although I will be paying the premium based on the current amount, should I ever need it to pay out, it will cover the outstanding amount of my mortgage only meaning I'm paying a premium to cover more than I'm going to need........is this right?

robnye

its called decreasing term life insurance, and yes i am afraid the monthly payment will stay the same, yet the amount of cover will reduce as time goes by

Dick_here

But it is a very cheap form of insurance, the cost takes account of the fact that the death payout is decreasing of course.

lisyloo

From what I understand, part of what the premium is based on is what's outstanding on my mortgage but as it is on a repayment basis, this amount will reduce over time.

If you buy decreasing cover, then yes.
You can also choose to buy "level" cover.
This would give you some cash in hand but it would be more expensive.

surely then my premiums should reduce over time but from the quotes I've had, this does not seem to be the case.

It doesn't reduce over time but it IS cheaper than level cover, so it is priced in.
Actually the risk gets higher as you get older so cover ought to increase, but it's all priced in at the start.

However, although I will be paying the premium based on the current amount, should I ever need it to pay out, it will cover the outstanding amount of my mortgage only meaning I'm paying a premium to cover more than I'm going to need........is this right?

No, it's priced in.
It's cheaper than a policy that pays out a level amount.

Choose whichever suits your needs best.
I don't know what your age is but bear in mind that your pensions may pay out a lump sum on death before retirement (and/or a pension for dependents).
If you are a mature person or you've provided well then this may turn out to be a six figure sum, so it's worth bearing in mind.

Jaxxie

thanks very much, at least now I know I'm not being ripped off