Mortgage Protection Question Please

Dubsey

Hi all,

My wife and I are in the process of organising mortgage protection as we are buying a house.

We are getting quotes for various packages all of which include:

Level term vs declining,
Joint vs. Dual and
Convertible vs. non-convertible.

Our preferred option is joint cover (where the policy pays out the full mortgage amount on the first death of either insured person). However, we are unsure as to the benefits of going for:

1. A level term policy (which will pay out the full amount of the mortgage regardless of what is left to pay on it) vs. a declining one (which will pay out only what is left on the mortgage). The difference in monthly repayments is around 20 quid.

2. Convertible (which can be converted into a life assurance policy after the mortgage term without having to be scruitinised regarding our health) vs. non-convertible.

Any advice much appreciated.

D.

killers1

Dubsey wrote: »

Hi all,

My wife and I are in the process of organising mortgage protection as we are buying a house.

We are getting quotes for various packages all of which include:

Level term vs declining,
Joint vs. Dual and
Convertible vs. non-convertible.

Our preferred option is joint cover (where the policy pays out the full mortgage amount on the first death of either insured person). However, we are unsure as to the benefits of going for:

1. A level term policy (which will pay out the full amount of the mortgage regardless of what is left to pay on it) vs. a declining one (which will pay out only what is left on the mortgage). The difference in monthly repayments is around 20 quid.

2. Convertible (which can be converted into a life assurance policy after the mortgage term without having to be scruitinised regarding our health) vs. non-convertible.

Any advice much appreciated.

D.

Hi Dubsey,

It's very difficult to give advice on this without knowing your full details as the type & level of cover will depend on your family circumstances, if you've any dependents, any existing life cover, death in service benefit provided by your employer etc etc. In relation to your questions;

Level Term Cover V Decreasing Cover
E.g if you are borrowing €200k over 25 yrs a declining policy is designed to pay off the mortgage in the event that either of you die at any stage during the 25 yr term. There is no lump sum left for the surviving spouse as the policy is designed to solely clear the outstanding mortgage amount. A level policy is where the cover stays at €200k for the 25 yrs so for example you die 10 years in to the mortgage. The policy will pay off the remaining mortgage,say €130k and a cheque is given to the surviving spouse for €70k as you have cover for the full €200k for the full term. Level term cover is important if you have no death in service benefit or have children as you need to consider how you would cope to pay the bills, childminding etc if you or your wife were to die ,particularly if there is a big contrast between your incomes.

Convertible V Non-Convertible
The convertible option just means that you can take out a further life policy in the future based upon your current medical records. If say you thought that in 10 years time you may want to trade up to a bigger house and bigger mortgage and would require an increased life cover policy it just means that you can convert the policy without worrying what has happened to your medical condition in the intervening 10 years. If you are now buying your family home that you intend to stay in for life you might decide this may not be needed.

As I said it is impossible and would be wrong for me to make recommendations based on the small amount of info you have provided but I hope it explains the differences a bit clearer for you. If you need anything else let me know.