life insurance and death!

minimike2

1. Death in service benefit should NOT EVER be relied upon as a substitue for life cover for a mortgage. I get this ALL THE TIME off clients. Death in service is not for paying mortgages off its to allow a subsitute for the income. Its not even guaranteed, payout is at the discresion of the trustees.

2. You need to consider who would benefit from what. If you take out life policies on an individual basis, they need to be set in trust. There have been cases in the past where people have been in your situation and the life policies have not been in trust, the proceeds paid to the NOK who then refused to pay off the mortgage.....

Either get policies and get them in trust, or take out a policy of your own on your partners life. That way you know you will be in the position to buy out his half from whoever inherits it if he dies.


That all aside, I guess the cynic in me says if you are having to go to these lengths then really you shouldnt be buying together at all and should just rent. Just my opinion tho.

LillyJ

We have been together 7 years and renting for 3 so it is hardly like we are rushing in to things, but thanks for your concern.

I am sorry I am naive to these things, but it is very confusing, and having never done this before we don't really understand it.

Like I said before the death in service would not go to me as I am not named on it, it would go to his parents.

I suppose I was looking at in in a simplistic way, and so didn't really understand, it wasn't that we don't want each other to be unsecure on the even of the other's death, it is just both our parents want to protect us from a split. I am not forseeing a split, but as you all know people break up even after 30+ years of marriage and so nothing is garaunteed.

Things would be simpler if we were married, however we cannot face wasting money on a wedding when we have things to buy for the new house, and used a lot of our savings on deposit, stamp duty, solicitors fees etc. We do plan to marry in the next couple of years though.

I looked at joint policies last night, and decided that would be the simplest option. It would only cost £7.02 a month joint, which I hadn't realised, I thought it would be more like £30 each for some reason.

Can someone please explain to me what "in trust" means, if we have a joint policy do we still need to do this? And if one of us dies, does the whole mortgage get paid off there and then, or half of it, or what?

Thanks for the help

allan673

i have a death in service benefit from work of 4 x my salary, and it doesnt have go to your n.o.k, i just filled out a transfer form and put my fiancees name on it and left her 100% of the benefits if i die.

you can do what you want with it, you can even split the death benefit up to different people with different percentages.its just a case of asking for a form to fill in.

i have life insurance too, only around £7 per month for £70k cover.

Dan_Collins_2

Mortgage protection in joint names may not need to go in trust. But in your case you may want one each.

The sum paid out goes in to the trust rather than your estate, so it is dealt with by who ever you make the trustee. They have control over the sum, and you can leave instruction in a will etc.

I dont think you need to be dealing with this on a forum. I know you think your broker is only after your commission, but I would raise your conserns, he may or should know more than you think.

If you not happy go get your self an IFA. Remember that IFA's are not the same as mortgage brokers, they earn money in a different way and you couldpay a fee. Life insurance is cheap, get it sorted now before you get older!

LillyJ

i have a death in service benefit from work of 4 x my salary, and it doesnt have go to your n.o.k, i just filled out a transfer form and put my fiancees name on it and left her 100% of the benefits if i die.

you can do what you want with it, you can even split the death benefit up to different people with different percentages.its just a case of asking for a form to fill in.

i have life insurance too, only around £7 per month for £70k cover.

Yeah that is what we were thinking about doing. When he started work we were only 19 and had only been together a couple of years, so it went to his parents. But he can (and would) change it if that was the best way around it. But like everyone said it might be best to get life insurance, but still need to understand this "in trust" thing.

Or I might go and convince him we should get married and make things simpler!

LillyJ

I have also just come off the phone to a lawyer friend who said joint cover would be adequate, and that the money would go to each of us as it is a joint policy. Therefore this seems like the perfect solution, as our parents wouldn't give us the money for deposit if we were buying as joint tennants.

thanks

HelpWhereIcan

Personally I do not see the problem with using DIS to cover the mortgage.... as long as there are no children and both people know that there is a risk that life cover could be difficult or expensive to get if his health or lifestyle change in between now and the time he needs to take it out in the future.

If you don't think that's likely I'll introduce you to a client of mine who declined cover because he had death in service.

3 years later he had changed jobs, sprouted a rug rat and realised that not only did he no longer have death in service with his new employer, but he also had a kid and a wife now working part-time to consider.

We looked at some costs for him and his was mildly irked at the increase in cost over and above what I had quoted before due to his age. This was not a problem though.

What was an issue was the fact that his change in job was stress related and that he was on medication and under treatment for depression related to the job and the death of a close relative. We got him cover, but on a fairly heavily rated premium (50% IIRC) and only after a much more detailed under-writing process than he would have had to go through 3 years before.

Make sure you know what saving what may be as little as £6 pm (for a non smoker in their 20s) actually involves.

chappers

LillyJ wrote: »

We have been together 7 years and renting for 3 so it is hardly like we are rushing in to things, but thanks for your concern.

I am sorry I am naive to these things, but it is very confusing, and having never done this before we don't really understand it.

Like I said before the death in service would not go to me as I am not named on it, it would go to his parents.

I suppose I was looking at in in a simplistic way, and so didn't really understand, it wasn't that we don't want each other to be unsecure on the even of the other's death, it is just both our parents want to protect us from a split. I am not forseeing a split, but as you all know people break up even after 30+ years of marriage and so nothing is garaunteed.

Things would be simpler if we were married, however we cannot face wasting money on a wedding when we have things to buy for the new house, and used a lot of our savings on deposit, stamp duty, solicitors fees etc. We do plan to marry in the next couple of years though.

I looked at joint policies last night, and decided that would be the simplest option. It would only cost £7.02 a month joint, which I hadn't realised, I thought it would be more like £30 each for some reason.

Can someone please explain to me what "in trust" means, if we have a joint policy do we still need to do this? And if one of us dies, does the whole mortgage get paid off there and then, or half of it, or what?

Thanks for the help

Now it all depends what policies you take out for how much cover and to whom the beneficieries will be.
The common link through your thread is to keep your assets seperate, so in the event of your death your NOK inherits your half of the house rather than your partner.
So as I see it you both probably need to be covered for enough to do two things.

In the event of the death of one of you you would probably want to pay off the mortgage completely so that needs to be covered, also you probably want to consider how each of you might buy out each others next of kin and cover for that, with an increasing term policy(also as well as the right to reside you may want to put in a right to buy clause as well).
The other alternative is you just cover your own liabilities as you suggested at the start and then leave each other to their own devices, in the event of one of you dieing
If you want to leave to your next of kin then a will is strictly not needed but would clarify things in the event of either of your deaths.

LillyJ

HelpWhereIcan wrote: »

Personally I do not see the problem with using DIS to cover the mortgage.... as long as there are no children and both people know that there is a risk that life cover could be difficult or expensive to get if his health or lifestyle change in between now and the time he needs to take it out in the future.

If you don't think that's likely I'll introduce you to a client of mine who declined cover because he had death in service.

3 years later he had changed jobs, sprouted a rug rat and realised that not only did he no longer have death in service with his new employer, but he also had a kid and a wife now working part-time to consider.

We looked at some costs for him and his was mildly irked at the increase in cost over and above what I had quoted before due to his age. This was not a problem though.

What was an issue was the fact that his change in job was stress related and that he was on medication and under treatment for depression related to the job and the death of a close relative. We got him cover, but on a fairly heavily rated premium (50% IIRC) and only after a much more detailed under-writing process than he would have had to go through 3 years before.

Make sure you know what saving what may be as little as £6 pm or a non smoker in their 20s) actually involves.

I have just spoken to him, as he has just woke up, and his policy is actually life insurance! He got it as it an insurance policy all in one that covers critical illness, life insurance, travel insurance etc.

I can't currently be added to it as we have been living together too long. It would cover all but £10k of the loan.

Death is service is a different payout and he would get that as well, which I will get him to change to my name. He is unlikely to change employers as he is a policeman.

HelpWhereIcan

Whether you rely on the OH's death in service or not I think the way your life cover is set up is very important.

The issue that the others are alluding to is who will own the share of the property and who the life cover needs to be made payable to.

If you own it as tenants in common the share of the property does not pass over to the remaining partner, but to whoever is named in the will or NOK if there is no will.

This means that the surviving partner owns half of the house they live in with an unrelated party owning the other half. This puts them in the position of potentially being forced out of the house against their will as the other party could sell their share and because no-one will buy part of a house, the whole house will need to be put on the market.

As for paying a rent on a share to an deceased partner's family... how many pitfalls? What if a new partner moves in? What if the relationship was on the way out before the death?

Having the proceeds of the DIS or policy pay out to the surviving partner means that they either have the money to pay off part of the mortgage and buy the NOK out or sell up and move on without losing out.

The NOK have the funds to get their contribution back etc etc

Using wills, nomination of beneficiary forms on DIS, trusts or a policy set up as life of another are ways to achieve this (I would choose life of another over a policy in trust).

The point is that you should look to take the advice your broker is giving you on board. Not everyone is trying to rip you off!!! By all means check the advice with an IFA to get a second opinion but it will remain the same.