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  • FIRST POST
    • juraj.kecso
    • By juraj.kecso 16th Sep 19, 3:02 PM
    • 35Posts
    • 2Thanks
    juraj.kecso
    Life insurance for Dummies question
    • #1
    • 16th Sep 19, 3:02 PM
    Life insurance for Dummies question 16th Sep 19 at 3:02 PM
    Hi,

    Me and my partner bought a house last year and stupidly just got to arranging life insurance (it was not mandated by the mortgage provider).

    I am not sure about the amount I should insure for.

    We borrowed 315,00 over 35 years. Over the term, this may be around 700k to repay. It is with Accord Mortgages.

    Do I take out decreasing insurance just for the amount borrowed or for the total amount due to be repaid over the mortgage term?

    Which amount will the mortgage company expect to repay should any of us die? I assume this would fall under early repayment charges?

    Could someone give an idiot's guide for life insurance?
    Last edited by juraj.kecso; 16-09-2019 at 3:09 PM.
Page 1
    • Cscott139
    • By Cscott139 16th Sep 19, 3:12 PM
    • 22 Posts
    • 13 Thanks
    Cscott139
    • #2
    • 16th Sep 19, 3:12 PM
    • #2
    • 16th Sep 19, 3:12 PM
    You just need to take out the decreasing amount for the amount borrowed if you want to cover the mortgage only. Its worth considering your situation over and above this too i.e do you need any additional family cover etc.


    It would also be worth considering cover for ill health too such as critical illness cover or income protection (for me if you have no or limited sick pay income protection is something you really should look into) but I would recommend speaking to a broker to get some guidance.
    • sal_III
    • By sal_III 17th Sep 19, 9:19 AM
    • 1,385 Posts
    • 1,333 Thanks
    sal_III
    • #3
    • 17th Sep 19, 9:19 AM
    • #3
    • 17th Sep 19, 9:19 AM
    Your life insurance is not linked to your mortgage and has nothing to do with mortgage ERC. Once the insurance event (death or terminal illness etc.) occurs the beneficiary can make a claim and receive a lump sum you are insured for. You don't have to use it to repay the mortgage.

    People that are only concerned about the mortgage take out decreasing cover which will reduce the payout in line with the remaining balance NOT the remaining payable for the lifetime of the mortgage, the assumption is that you will payout the mortgage here and then, not continue incurring interests for the next 10-20 years etc.

    The above is a bit shortsighted in most cases, especially if there are kids involved. You need to sit down and do the math, what your family will need to keep their living standards in the event of your death. Only you know the financial position of your family and how much you want as a payout.

    Also personally I dislike joint policies, they are only about 20% cheaper than 2 separate policies, but only pay out at first death then they are cancelled.
    • tacpot12
    • By tacpot12 17th Sep 19, 9:57 AM
    • 2,899 Posts
    • 2,623 Thanks
    tacpot12
    • #4
    • 17th Sep 19, 9:57 AM
    • #4
    • 17th Sep 19, 9:57 AM
    Your should definitely compare the cost of decreasing insurance to level term insurance. I found there was so little different that it made more sense for me to take out level term insurance in excess of what I needed to cover the capital owing on the mortgage.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always check official information sources before relying on my posts.
    • juraj.kecso
    • By juraj.kecso 17th Sep 19, 4:27 PM
    • 35 Posts
    • 2 Thanks
    juraj.kecso
    • #5
    • 17th Sep 19, 4:27 PM
    • #5
    • 17th Sep 19, 4:27 PM
    Hi, I suppose I was also concerned about whether the mortgage provider would also slap some early repayment charges in addition to repayment. Shouldn't this be factored into the amount insured?
    • annabanana82
    • By annabanana82 17th Sep 19, 6:26 PM
    • 127 Posts
    • 56 Thanks
    annabanana82
    • #6
    • 17th Sep 19, 6:26 PM
    • #6
    • 17th Sep 19, 6:26 PM
    When we claimed our critical illness it was a year after we took out the policy, we actually got a slightly bit less than what we started the mortgage term with. Had we have chosen to pay the mortgage off it would have covered the ERC.
    I believe on a decreasing policy it assumes an interest rate of between 8 and 10% so it will be a bit above your mortgage balance. We also got 4 months of premiums returned and interest on the sum from the date the claim was upheld and when it was paid.
    • Cscott139
    • By Cscott139 19th Sep 19, 12:43 PM
    • 22 Posts
    • 13 Thanks
    Cscott139
    • #7
    • 19th Sep 19, 12:43 PM
    • #7
    • 19th Sep 19, 12:43 PM
    The penalties aren't something you could add into a decreasing plan with a certainty it would be the right amount. Maybe add on a small additionallevel plan of 10k to cover for funeral and any adhoc costs that crop up.
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