New mortgage- what insurance needed?

Chick

Hi all,

I've just bought a flat, am single (no children) and in my mid-twenties with a full time job.
The question is- how much insurance should I be getting in case of sickness/unemployment etc creating a situation where I couldn't work and pay my mortgage? I should get it sorted soon as I have already moved in and the mortgage payments have kicked in.

I don't think life insurance is something I need as I don't have dependents or a joint mortgage- CI insurance is something I've heard of but I've also heard that there are so many situations where they wouldn't pay it i.e. is it worth having in the first place?

I guess I'm not looking for definitive answers, just merely some solid advice and points of view,
Many thanks in advance, Chick

PS already have contents insurance sorted and the buildings bit is covered under guarantee as it is a new build

JasonG_2

Chick wrote:

Hi all,

I've just bought a flat, am single (no children) and in my mid-twenties with a full time job.
The question is- how much insurance should I be getting in case of sickness/unemployment etc creating a situation where I couldn't work and pay my mortgage? I should get it sorted soon as I have already moved in and the mortgage payments have kicked in.

I don't think life insurance is something I need as I don't have dependents or a joint mortgage- CI insurance is something I've heard of but I've also heard that there are so many situations where they wouldn't pay it i.e. is it worth having in the first place?

I guess I'm not looking for definitive answers, just merely some solid advice and points of view,
Many thanks in advance, Chick

PS already have contents insurance sorted and the buildings bit is covered under guarantee as it is a new build

Hi Chick,

You have some great questions and good grounds for having a conversation with a good advisor who should be able to explore these areas with you and help you define what is most important.

The bottom line with reagrds to life assurance is it is very cheap and choice has to be, on the event of my death would I wish my home to go to someone else, or the lender. No right or wrong answer just your choice.

Critical Illness cover is a different kettle of toads. Yes you are right the definitions should be understood. The questions becomes then twofold, do i want a lump sum of money for example to repay the mortgage, cover medical costs etc etc, and am i willing to pay the price and comfortable with the definitions. One of the reasons CI cover is more expensive and the definitions have got tuffer, is the claims are much more than was anticipated by the industry. If you think about it, with medical science improving, people dont die as much from what they used to, cancer or heart attack is no longer a definate death sentance. A heart attack is now defined for example by some as a certian portion of heart muscle being damaged. Apparently? If you have a heart attack (a proper one) this would happen. So I do not think the definitions are to stop people claiming successfully, more to stop the person who had a suspected indegestion/ heart attach claiming. This is a simplified view, but fundamentally if you stop paying your claims generally, I think your business wont last to long. Advisors aren't generally going to use companies if they find they dont pay.

(sorry i digress) So personal choice, cost vs benefit.

Now to protect your income you generally have two main types of cover, ASU and income protection. ASU covers for a shorter period, ie 1 year and covers for accident sickness and unemployment (redundency). It is usually calculated on a fixed formula, like £50 worth of benefit for £3.00pm. You can usually cover mortgage and realted payments. This will start paying after a shorter period like 1 month, and pay for example 12 months.

Inome protection is for long term accident and sickness (not redundency), and can be tailored to your needs, ie the benefit could be set to start after 6 months when your company sickness pay stops, and could pay you an amount based on your income until retirement. Lots of options with this.

It is not uncommon for people two have all three, two of the three etc. Hope this gives you some generic ideas, must make very boring reading! Good luck, and I would have a conversation about it with a real live person, or atleast an advisor.

Chick

Thanks a lot for your reply...yes, boring reading but pretty necessary I think!
I will get in touch with an advisor- I am presuming they can be found in the Yellow pages/on the internet?
also, would I have to pay them (hoping not!) or will the insurance/CI company pay the advisor a cut due to them referring me?

It does seem quite a mine filed, but it's something that I've let slip by and really should be getting sorted now I've bought a property. Thanks a lot!

dunstonh

will get in touch with an advisor- I am presuming they can be found in the Yellow pages/on the internet?

http://www.unbiased.co.uk/ or yellow pages.

would I have to pay them (hoping not!) or will the insurance/CI company pay the advisor a cut due to them referring me?

You still pay for it one way or another. If you go fee based, the recommended company will lower the premiums. If you want the insurance company to pay commission, the cost of the comission will be built into the premiums.

Your choice is paying a £250 fee for arranging a life assurance, with advice, on nil commission terms or saving £2 pm for 25 years, and therefore £600 over the term.

Small premiums will favour commission. Larger premiums will favour fee based (as with all financial advice).