Life Insurance question.........

[ICEQUEEN20]

Moving house soon, mortgage going to be £127,000. Little confused about how much cover Life Insurance to get? Its going to be a joint policy my husband and myself. What are the advantages of the decreasing policies?

[bednobs]

advantages of decreasing policy is that it is cheaper.
as to how much you need, if one of you were to die, would you want the whole amount paid off? If so, then both cover for 127 k

[ICEQUEEN20]

We have to have at least £127k life insurance cover to cover our mortgage, the Halifax insist on it.. just wondered about having more i.e. £150K cover. Yes not sure about decreasing cover as the payments get cheaper as the mortgage is paid off, but so does the amount of cover obviously.

[dotty.]

Do you not already have a life cover benefit wit your employer? I have a 3x my annual salary policy with my employer .

[Dris]

I would go for the higher cover whilst you're young and fit (assuming you are) as gettting any cover as you get older becomes more difficult.
If you can both get cover for £150k I would take it as even in 10yrs time the premium will seem like a drop in the ocean.

[ICEQUEEN20]

No Dotty, I work for a small charity !

[ICEQUEEN20]

Dris, we are both in our mid 40's. Already have life insurance for £120k (have a small mortgage at the moment) but our lenders said we must up it to cover our £127K mortgage. Yes I am probably going to go for £150K. Thanks

[boxtops]

DTA is less expensive, certainly, although you pay the same premium every month as the cost is rated across the term of the loan - they don't get cheaper as the sum assured reduces, sorry!
I also took out permanent health insurance (which does cost) as if I was out of work due to illness for more than six months, I couldn't afford to pay the mortgage otherwise.
I can't see the point of taking out more cover than you need - if the value of the mortgage should increase, you can always top up the policy, I did, it only cost an extra £5 a month for me.
By the way also, you don't have to take out the life policy with your mortgage vendor, you are free to shop around to get the best deal. You may have to note the name of the mortgagors on the policy but you can get the cover where you like.

[ICEQUEEN20]

OK thanks boxtops, we are not getting life cover with our lenders, they are way to expensive ! Thanks

[bednobs]

i have a feeling that with decreasing cover you can't extend it if you need to, wheras with a fixed 150k say, you can increase it if you increase the mortgage

[annie0000]

Really depends on the policy, you also can only get decreasing term cover if you have a repayment mortgage - if you have an interest only mortgage, you will need level cover. Terms assurance is relatively cheap, but it has an end date and no value at the end of that, please remember that. It is designed to pay a fixed sum on the death of the policy holder. If you get a joint policy, you can have it to pay on first or second death. Second death will be cheaper, but if either of you cant afford to pay the mortgage on your own then you will need a joint life first death policy - alternaitely you could take a policy each for the full amount.

Your need for extra cover will depend on what other insurance you have - e.g. through your employer or pension scheme, what other unsecured debts you have and whether you have any dependants that would require support if either or both of you were to die within the term of the insurance.

I have young children, so we have taken out a large amount of term cover so that there is money to raise them- the insurance cover terminates when they are adults.

Hope this helps

[ICEQUEEN20]

Thanks Annie. We have a repayment mortgage over 15 years. We are going for a 1st death payout. Surely if we were both to die jointly our 2 dependent children would get the equity from the sale of the house (about £150K to share)??

[annie0000]

Yes IceQueen, they would indeed get the equity though that would need the house to be sold first, so as long as you wouldn't require them to live in that if the worst came to the worst then that is absolutely fine. We have a large family but none of them close by and the children have only one grandparent. my 77 year old mother. We have also both suffered bereavements of our brothers leaving young families to struggle for the sake of a £6 a month policy. So, we tend to go a bit overboard and our kids stand to get well over half a million plus the house all paid into trust if the worst should happen - this is so that there is sufficient money to ensure that someone in the family can afford to take on the job of raising them if we aren't around - the chnaces of this ever happening are slim, so you could say that it is money down the drain, but the peace of mind for us is worth it.

[Dris]

Thats the point I was making when I answered you initially -take what you can get.I have -now at almost 52 - have to jump through hoops to get a policy (only because ive manged to live this long really and who gets to 52 without a hiccup -but thats all they need).I took a policy out 12yrs ago to cover my mortgage (a paltry 45k-mad isnt it) at a tenner a month.Accepted no bother -wish I had went the whole hog now -too late as im over 50.Mortgage is paltry now but least theres money in the pot :)

[ICEQUEEN20]

Thank you all