Life assurance and Mortgage protection

S

Shinny

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Hi and thanks in advance for any help given

We bought our house 6 years ago and got the mortgage protection as required.

Now we are finally getting our heads around getting life assurance.

We were thinking of getting around 300k per person at 60 euro per month between us. (30 euro for 300k each over 20 years inflation linked).
Then someone suggested getting rid of the mortgage protection instead of one of the policies.

Its a real minefield what have others done?

Thanks
 
I would want a sizeable, say 20+ year, non-indexed convertible dual life term policy.
 
Shinny said:
Its a real minefield what have others done?
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What you 'should' do depends on your circumstances.

Firstly, mortgage protection is a life assurance policy. If one of you dies, or in a small number of policies is diagnosed with a terminal illness, the policy should repay the mortgage.

Surviving spouse has a mortgage free property.

How much insurance you need beyond that depends on your circumstances.

For example:
Do either of you have 'death in service' benefits as part of a pension?
Do you have well funded pensions, and what happens to it if you die?
Do you have children? What ages?
Do you both work? Could surviving spouse work if one died?
What if you didn't die, but were unable to work? Could you survive on one salary, with a mortgage? What if you needed care while unable to work? How much sick pay will your employer cover? Would income protection insurance be more important than death benefit?
What ages are you, how many years will children be financially dependent on you, how long until pensions can be accessed, etc?
 
At the end of the policy you have an option to extend it at prevailing rates without any medical questions. The conversion option adds very little to the cost.
 
Shinny said:
We were thinking of getting around 300k per person at 60 euro per month between us. (30 euro for 300k each over 20 years inflation linked).
Then someone suggested getting rid of the mortgage protection instead of one of the policies.
Click to expand...


Make sure to check quotes on www.labrokers.ie.

I have no connection to them, just a satisfied customer.
 
michaelm said:
At the end of the policy you have an option to extend it at prevailing rates without any medical questions. The conversion option adds very little to the cost.
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So it's an extension option, not a conversion option.
 
No, its a conversion option not an extension option. The existing policy converts to a new policy for a further term without medical evidence. Premiums for the new policy will depend on your age and life expectancy at the time of conversion. The life cover under the new policy can equal to or be below the sum assured on the original policy. Its real benefit is if you develop a non-insurable medical condition before the conversion date.
 
I would keep life assurance very simple.

The Mortgage Protection policy in its simplest form is a decreasing term assurance over the term of your mortgage loan. As said before, its purpose is to pay off your mortgage if, in a joint life case, either of you die before the end of your loan term. The policy is normally assigned to the Bank so the death benefit is paid directly to the bank to clear the outstanding loan. The house is now the property of the remaining spouse. A huge relief to most.

For life assurance purposes, I would take out simple Level Term Assurance. The younger you take it out, the lower the rates. You pick the amount of cover your want (sum assured) and the term you want it over, get a quote, fill out a form, have it accepted, pay your premium monthly or yearly.

With regard to term, as it is hard to cover all eventualities, I would go to age 65. By the time you reach that age, most major costs are probably out of the way, children are grown up and you probably won't need the cover. You can choose any term the life company allows.

With regard to sum assured, maybe 200,000 or 300,000 might suit most folk. You can always go higher or lower.

If you are taking out a joint life policy, it is usually paid in the event of the first life dying and the sum assured goes to the surviving life, thereby, giving them at least some breathing space financially, during what can be a difficult period.

Joint life policies are cheaper than each person taking out their own policy. Had a quick look, Level term for M 30 next birthday and F 30 next birthday, 300,000 sum assured to age 65 was working out at approx 40 euro per month.

Death in service is a great benefit but no use to you if you leave the Company. By the time you leave, you may have developed a medical condition that could restrict your ability to take out life assurance at that stage.

Keep it simple..Mortgage Protection for your mortgage. Level term assurance for simplicity and for peace of mind.

By no means an expert. Just saying what I would do/ have done. Others will have differing opinions.
 
Thanks everyone for all the advice.
We are both 43 next birthday. Baby No. 1 on the way!! The broker had recommended doing a 20 year policy... this was before they knew about the pregnancy... maybe makes most sense to go for a 25 or 30 year policy that can be changed at that age with no medical questions? Theres prob some sort of sge limit on those.
Would ye suggest keeping mortgage protection and then also doing life assurance As Well!?

Also Im a primary teacher and he is in IT , i dont know where we are on critical illness cover etc, are there specific advises in this area.?
 
Shinny said:
critical illness cover etc
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Note, 'critical illness' and 'income protection' are different things.

Critical illness pays out if you are diagnosed with an illness from a specified list. The lists are getting more & more specific with each new policy.
In my personal unprofessional opinion, they are poor value for money.

I would be more inclined to out for income protection, which pays an income for as long as you are unable to work due to illness.

In general, I find that people who have insurance are probably over-insured for death, but under insured for an illness / event that leaves them alive but unable to work.

Be wary of a broker who wants to sell you a 'product' rather than taking a holistic view of your circumstances. They should be asking most of what I did in my original reply, and explain why they are suggesting critical illness vs income protection.
 
RedOnion said:
income protection, which pays an income for as long as you are unable to work due to illness.
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Many income protection policies also only pay out in very limited circumstances and for limited periods rather than indefinitely. Many such policies are also very poor value for money.
 
RedOnion said:
If that's the type of policy you've bought. Just buy a better policy.
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I've never had such cover but a lot of critical illness/income protection policies are very restrictive in terms of when and for how long they pay out.
 
ClubMan said:
I've never had such cover but a lot of critical illness/income protection policies are very restrictive in terms of when and for how long they pay out.
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I'd love to see some references from your research on income protection to back up such a blanket statement.

Bundling together "critical illness/income protection" into one statement is disingenuous as they are completely different things.

When you take out income protection, the policy has an end date. You'd be naive to expect it to pay out after that.
There are 2 levels; cover if you can't do your current job, or cover if you can't do any job. The former is more expensive.

Critical illness only pays out a lump sum once.
 
Congratulations on baby No. 1. Given both your ages, if it was me, I would go to 65 min and possibly 70 with Level Term and forget Convertible which would be more expensive initally and also expensive at your conversion age. As others say, you should/would have lump sums from your pensions around the 60 to 70 years of age mark.

The reason for age 70 for me would be the fact that I will be 43 having my first baby. Saying it the way you do, I sense you would like more children. If 45 or 46 having your next baby, it would give your a good 25 years cover to get your children up to and beyond college. You would get away with a lesser term as your children will not need caring for should something happen you or your spouse before they get through college. On the other hand a lump sum at any time can be a great benefit to those left behind. If the term of the policy expires and your are both still around, happy days, you will have had 20/25 years knowing that should something happen you, the children can be looked after, ie peace of mind.

Both of your need to find out from HR/employers

1. What happens to our salaries if we are out sick either short term or long term?
2. What happens if we are still working for you when we die? Is there any death benefit payable to our next of kin?
3. How do our pensions work? What does my retirement benefit look like now? Do I need to take action to improve it?

Also

1. Make a will
2. As soon as your baby is born make sure the will is updated with named guardians who have agreed to step in and look after your baby and their welfare until such time as they reach adulthood.

Income benefit does not pay out a lump sum and I think should be considered only when basic life assurance is in place.
 
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