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insurance on mortgage question

Discussion in 'General Discussion' started by wijcc, 9 Jul 2012.

  1. wijcc

    Mobster

    Joined: 10 Aug 2003

    Posts: 2,610

    Location: London

    Hi Guys...

    When I took out my mortgage some 6 or so year ago. I took out life and critical illness cover at the advice of my mortgage broker. I have been paying since then approx £52~ every month for this. I am wondering whether I need these?.
    I am regularly making overpayments so am on the way to ending my mortgage earlier, if I put this money I am spending on insurance cover and instead make overpayments to my mortgage that would be an additional £600~ off my mortgage every year.

    How many people on here with mortgages have taken out life and/or critical illness cover?

    If I decide to cancel these two insurance packages will i lose all the money i have paid so far for these?

    Thanks in advance
     
  2. Jez

    Caporegime

    Joined: 18 Oct 2002

    Posts: 32,661

    - It is up to you whether or not you value the products and therefore only you can decide whether you "need" them or not.

    - Your broker recommended you take them as he will have received a commission for selling them.

    - No you wont get the money back if you cancel them.
     
  3. Zogger

    Mobster

    Joined: 1 Aug 2006

    Posts: 3,469

    Location: GU21

    it sounds like quite a lot of money per month. Critical illness depending on your circumstances, due to the conditions often put on these policies you may well be better off self-insuring - i.e. putting x away in case you need it. (edit: having said that this may well cover stuff you wouldn't be able to save enough for by yourself so it comes down to your own value judgement really)
    Life assurance I would say is normally recommended but I would think you could get it a lot cheaper! I have critical illness & life assurance from my employer so make sure your employer doesn't already give you these benefits..

    Re the money you've already paid, that is lost whether you make a claim or not so I wouldn't let that skew your decision to cancel or not
     
    Last edited: 9 Jul 2012
  4. BDEE

    Mobster

    Joined: 21 Apr 2011

    Posts: 2,810

    Oh no, one of these threads.

    Unfotunately you will not get many responses of any value here on this subject. Mainly people who don't know what the cover is, people who have totally different circumstances to you, people whos finances are totally different to yours. (and this forum has a habit of every Tom Dick and Harry becoming financial advisers when one of these threads pops up, when mostly people have no idea and end up giving out very dangerous "advice").

    The simple fact is that as with all insurance, it is a waste of money. Until you need to claim on it, when it becomes a Godsend. You hope you never need to claim on it and if you never do then yeah its cost you money, but at least it gave you and your family peace of mind.

    Cost is relative - Consider how much / how long it covers you for and how much the sum assured is. Would you be able to come up with that sort of money if you were seriously ill and couldn't work for a long time? Consider your health - Insurance gets more expensive the older you get and the more your medial health becomes degraged, to the point you may be uninsurable.

    Ignore the comment Jez made "Your broker recommended you take them as he will have received a commission for selling them".

    Thats like saying "Jez doesn't go to work to get paid, he only goes for the lolz".

    Of course brokers get paid commission - It's called making a living. The vast majority do not just flog stuff, they have to show a demand and a need for something before setting it up.

    It is your choice, but consider carefully before cancelling.
     
    Last edited: 9 Jul 2012
  5. VelvetAcid

    Hitman

    Joined: 18 Nov 2003

    Posts: 869

    We took out a very basic joint life insurance plan along with our Mortgage which repays the total amount left owing if either of us die, it costs around £8 a month and reduces over the duration of the Mortgage.

    If anything critical happened to me I wouldn't want to leave my other half with the mortgage so I'd personally take it.

    The combined critical illness / sickness or lump sum policies we looked at ranged from £60 to over £100 per month so we took the risk with that one. However my current employer has a a decent level of extended leave / sick pay.
     
  6. BombayMix

    Wise Guy

    Joined: 24 May 2008

    Posts: 1,112

    Life assurance only recommended if you have dependants. If you have none its not needed.

    The Lloyds mortage advisor talked about critical illness cover. I'm not convinced, depends on how good your sickness package at work is. Mine rather good. Like a lot of insurance if it happens it could we worth it, if not is a waste of money.

    Comes down to if you could cover the mortage is something does happen really.
     
  7. wijcc

    Mobster

    Joined: 10 Aug 2003

    Posts: 2,610

    Location: London

    May i should go see a financial advisor/broker and see if I can get a better package and/or see if the two policies i have are the best for me.
    Are independent financial advisor free and where would i go to find a good IFA?
     
  8. BombayMix

    Wise Guy

    Joined: 24 May 2008

    Posts: 1,112

    Its unusual for them to charge directly for services but they get commission on what they sell, which you end up paying for. So, only free if don’t buy something off them.

    In my experience they only talk about policies they know or can sell. These days you can find great deals on the Internet and I’ve yet to met one who will discuss them. I suspect partly because they don't know them and partly because they won't get any commission if you buy them.
     
  9. aproctor

    PermaBanned

    Joined: 26 Apr 2008

    Posts: 4,078

    Location: Lincolnshire

    I appreciate it is a heavily regulated industry and not every FA is so unscrupulous but I think it is fair to say that commission is slightly different to a salary. Unfortunately less honest people (read most people) will be more inclined to recommend a product which pays more commission.
     
  10. Tachyon

    Wise Guy

    Joined: 26 Dec 2003

    Posts: 2,120

    Location: Same oul' town

    When we took out our mortgage we took out critical illness cover but it wouldn't have been as much as £52 p/m. Anyhow, we're now mortgage free after my wife was diagnosed with cancer. It's a very specific cover, in that you can still be very seriously ill but not be covered by critical illness cover.

    Bitter sweet in that we have no mortgage but won't be able to have any more kids. My wife has been clear for a few years and had a recent check up and all is good.
     
  11. Jez

    Caporegime

    Joined: 18 Oct 2002

    Posts: 32,661

    Of course the mortgage advisor sold it for the commision, it is not breaking regulation to push a suitable product, the guy saying i was incorrect wasnt worth responding to :)

    I have had more than my fair share of mortgage products in the past, in general i have found mortgage advisors to be nothing more than typical salesmen.
     
  12. The Halk

    Capodecina

    Joined: 13 May 2003

    Posts: 11,862

    Location: Hamilton

    Those are term policies and they'll have no surrender value - so think of them like car insurance. You either make a claim or you don't. They're not whole of life policies - those are the ones which always have a value.

    My guess it's you've overpaying, even a joint first death policy with CI shouldn't come out to that unless you're in your 50s or have medical conditions.

    In your position I'd shop around and see what I can find elsewhere. The next step would be to see if the provider will lower the level of cover - since you've been overpaying your mortgage you may have too high a level of cover (e.g. 150K compared to an 80K mortgage)

    Personally I prefer a simple life policy along with income protection - but it's really personal preference.

    I'd not bother with an IFA, they'll help you find the right policy - if you feel you need one. But nobody can answer that question for you apart from yourself. At the moment they're 'free' - but soon they won't be.

    So start here and find out how much you would need to spend for cover.

    The money you've paid is already gone, don't get it into your head that by cancelling you lose it - you've already lost it by not dying. :)
     
  13. bullit in head

    Hitman

    Joined: 21 Jan 2004

    Posts: 952

    Location: Derbyshire

    yay

    not nesessarily we had a policy running from the start of our first mortgage about 10 years ago, it was and life, CI and sickness policy and at the time it was about 24quid amonth, we then moved to a larger property the price shot up to £60 pm. I cancelled the sickness and renegociated the life cover down to £8 a month and forgot about it. scroll on five years and the PPI scandel breaks, what Sickness insurance is was a PPI, so we claimed back the 3 years payments (all including the life cover and interest)


    bullit
     
  14. The Halk

    Capodecina

    Joined: 13 May 2003

    Posts: 11,862

    Location: Hamilton

    He has a life and critical illness policy. That's not PPI.
     
  15. aproctor

    PermaBanned

    Joined: 26 Apr 2008

    Posts: 4,078

    Location: Lincolnshire

    I just wanted to see if he would bite.