mortgage protection policy

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PGD1

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If you have a mortgage protection policy for an amount greater than the mortgage and you croak it... will you get the full amount or do you just get what the mortgage is worth?

I'm guessing you get the full amount but you never know.........
 
If it's level term then your estate/next of kin gets the difference between the sum covered and the mortgage outstanding. If it's decreasing term then it just covers the outstanding mortgage and there is no excess to distribute to the estate/next of kin.
 
ClubMan said:
If it's level term then your estate/next of kin gets the difference between the sum covered and the mortgage outstanding. If it's decreasing term then it just covers the outstanding mortgage and there is no excess to distribute to the estate/next of kin.
Click to expand...

My understanding is that if, for example, you have been overpaying your mortgage, this isn't strictly correct; the mortgage protection policy forecasts the capital balance per the original term. Therefore if I have made significant overpayments for a couple of years and have an unamended mortgage protection policy, and then tragically die:eek:, the capital balance of the mortgage will be less than the cover afforded at that point... and my OH will reap the benefits of our fiscal rectitude by having the balance of the mortgage paid off, and getting some cash in hand.

This is definitely the situation with our current mortgage protection policy (yes, I asked), though I don't know if all policies are constructed in the same way.
 
The total amount currently covered under the policy is paid out. The type of assignment that is taken over the policy by the lenders only entitles them to take what they are owed, any surplus is paid out to your next of kin. The mortgage protection policy does not go down exactly in line with your mortgage, when you effect the policy a certain % rate is selected that will cover up to that %. In general, the selections on such policies is 0 - 5%, 6 - 9%, 9- 12%. The higher % chosen the dearer the policy.
 
Dreamerb is correct. A decreasing term policy decreases at a nominated % and if your average interest rate is lower than this then there would be an excess over what is outstanding on your mortgage. Conversely, if the average interest rate exceeded the nomonated % then there could be an additional amount owed.

Post Crossed
 
Just wondering if the mortgage protection policy takes into account inflation? If I spend 300k on a house with a 25 yr policy would the the payout after say 20yrs be 300k if i get a level term policy?
 
OK. What I'm wondering is if I have a mortgage for €250,000 and I take out a policy for €300,000 decreasing...... is it a waste of money?

If we were to remortgage in a few years there are lots of delays with mortgage protection policies due to a medical condition. So it's easier to take out a larger one in advance. If we dont' remortgage it still has it's own worth and they aren't that expensive a policy.

But if the extra 50k was wasted/lost then it's not worth it.
 
IMHO Better to elect to take out a convertibe term assurance over the longest period possible, but that is dependent on what on your other finiancial circumstances.
 
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