Really silly question.

The only mandatory insurance, unless you are over 55, if life insurance for the term of the mortgage.

There are optional expensive other insurances such as income protection.

Shop around for life insurance. I recently switched to Royal London and I am now paying 21 EUR a month on a large mortgage. LA Brokers and Bonkers are 2 good sites to view different life insurance packages. Don't just go with the policy sold by your mortgage provider.

They are really all the same in what they do, you insure your life for a set length of time, it's either attached to a mortgage or not. If not, then the payout goes to whoever is left, if attached to mortgage payout goes to lender.

Within the description of life/mortgage/insurance/assurance there is lots of variety and levels of policies with various add ons etc. It's like just saying there is bread in a bread shop, there is, but there is loads of different types within that one description.

Most basic cover is on your mortgage on a decreasing basis for life only, so basically if you die only what you owe is paid off as the amount insured decreases along with the balance of the mortgage (it's slightly more complicated but only slightly but this is sufficient to know for a start). Therefore if you died with the last payment only due then that is all that would be paid out (approx).

Next step up is level cover which means the sum you insure for is paid out regardless of what is owing on the mortgage, so if you insured for 100k and died on the last mortgage payment then the 100k is still paid out and any surplus after mortgage is cleared goes to your estate (obviously slightly more expensive than decreasing cover but worth looking at the figures anyway)

On to either of these you can usually tack on additional benefits such as critical illness cover, whether that is wise or not is for a good advisor and you to decide.

An insurance policy on your life that is separate to your mortgage can run for any term you like as opposed to one attached to your mortgage which runs for the term of the mortgage. This type is usually taken to provide a lump sum for dependants and may run for example until eldest child is past college age or whatever other term you want. The amount you insure your life for can be an amount of your choosing, there are formulas to work out how much is needed to replace income but a lot of the time it comes down to what you can afford to pay each month. No point advising someone they need 500k of cover if they can only afford 50, some cover is better than none.

And then there is whole of life, I won't get into that as while there is no end term it gets reviewed as you get older, ask the advisor to advise Personally I don't think it's a good deal, it almost always ends up too expensive to continue so not really whole of life at all.

A good advisor will advise the ideal sort of cover you could do with, after that what you can afford will determine which bits of the package you go for.

from_atozinc wrote: »

this is my first time seeing the term "dual life cover"

A search brought up this:

Dual cover is insurance on two people but a claim can be paid on both deaths. If one person dies, the policy continues in the name of the survivor

So lets say my wife and I are covered for 250k. If I die first, she gets 250k...........and the policy continues.

when she dies, I presume there is another payout of 250k, but who does that go to ? its only my wife and I on the policy.......... and at this point both of us are dead........so where does the dosh go?

If your wife dies, the second claim of €250k goes to your children or back to your estate (parents/siblings etc).

from_atozinc wrote: »

ok, with ya now. thanks.

so is this classed as Life insurance OR assurance.

Seems like I am guaranteed a payout, so is it assurance?

Life assurance policies were traditionally Whole of Life policies ie. you pay premiums for life, with a guaranteed payout at the end. WoL policies are still available but less popular for a few reasons: mainly they had reviewable rates which means that the monthly premium increased as you aged, and often premiums were no longer affordable, also they are not as flexible as newer Life Insurance products.

Life insurance policies have a fixed term eg. 250k for 20 years. If you don't die within the term of 20 years, the policy ceases* and there is no maturity value/payout.

*You may choose to continue the policy at the end of 20 years (this is available on policies with an option to extend the cover without the need to go through medical underwriting). Some providers will offer cover until age 90.

from_atozinc wrote: »

thanks, so life assurance is not really that common then.

so I am 37 now, lets say I take out a 25 year term, that brings me up to 62 years old.
if I didn't die during this period, I presume the natural thing is to then try and take out a new policy, would companies just go feck off, your too old or would the monthly cost be very dear at 62 years of age etc ?

Ok so the 'convertible option' I mentioned is a great feature. Basically it allows you to extend the cover at any time before age 65 without providing medical info.

So say at 55 you get diabetes or cancer, and at 64 you still want cover - You don't have to disclose med problems to the life company and they have to allow you to take out a new policy for 10/15/20 years. The premium will be higher because you are older, but it will be based on you as a healthy 64 year old, rather than a 64 year old with a host of medical problems (which drives up the premium or can lead to a flat out decline to cover you).

Serious/critical illness cover is handy if you can afford it, however it is a lot more expensive now than it was 10 yrs ago so will up your premium significantly which is fine if you can afford it.

You need to go to a broker who can advise on which policy/company suits you best for your circumstances.

No point getting bogged down in the terms of insurance/assurance, neither here nor there really, you just must decide what level of cover you want and for how long and what can you afford so a good broker is your best bet.

PokeHerKing wrote: »

Hi folks,

Just want to jump in here with a slightly off topic question. I have a friend who apparently has no mortgage protection. Claims to have changed mtg providers years ago and stopped paying it.

How is this possible if it's actually insurance for the bank itself?

Cheers

It's surprisingly common. A mortgage provider will only allow you to draw down your mortgage upon receipt of the policy schedule for a life cover policy. This policy is then re-assigned to the lender so if the borrower dies, the bank gets paid directly by the life company.

A lot of people stop paying & cancel the policy mainly to save cash. The life company will let the lender know that the assigned policy has lapsed & the lender will usually write to the borrower a few times to remind them that they are legally obliged to have cover. Borrower ignores letters and take the chance that they die and leave their family with a mortgage to repay/family home ends up being sold. Incredibly irresponsible but common.