Mortgage Protection Ins v Life Assurance

I

iandublin2

Registered User
Messages
49
Hi,
Myself and my wife are 30 years old
Owe 285k on a 2006 mortgage for our home and 30 yrs left on the mortgage.
Have a 35 year reducing amount Mortgage Protection policy in place at €30 a month on the mortgage since 2006.

Is it better to switch to a normal Life Assurance policy for say 300k?


The way I see it:
  • Lets say that in 29 years, we had 20k remaining on the mortgage.
  • One of us dies.
  • With Mortgage Protection the remainder of the mortgage would be paid off (20k) and surviving spouse gets nothing.
  • With a normal Life Assurance policy, the remainder of the mortgage would be paid off (20K) and spouse would then get 280k.
  • If we died in the next couple of years, the surviving spouse would still get a few quid from the normal Life Assurance policy
I've got a quote for joint cover for 300k for 30 years and it comes to about €36 per month.

From this example it seems that it would be far more beneficial to take out term Life Assurance rather than a reducing term cover Mortgage insurance.
 
Life insurance is there to replace income lost on death and to try and put the surviving spouse in a similar financial position as before the death occurred.

You've got to ask yourself the question whether one of you will be in a financially challenging position if the other dies - is one spouse the main breadwinner. If not then I would say stick with the basic mortgage protection and save your €6 per month. If yes then you should consider putting life cover in place for the breadwinner.

I understand your reasoning but you should calculate your life cover based on your income and outgoings not on the premium payable. Otherwise you have no yardstick to judge the amount you need.

On your own logic, why not pay €40 per month for €320,000 or €45 per month for €330,000 term cover etc.
 
NorfBank said:
On your own logic, why not pay €40 per month for €320,000 or €45 per month for €330,000 term cover etc.
Click to expand...

I dont necessarily want a life assurance policy as we both have stable professional jobs.
But the bank says we must have a policy to cover the amount in the event of death.
So I just fail to see the point in taking a mortgage protection policy over a life assurance policy.
For an extra 7 quid per month, the suriving spouse could be 280k better off if one of us died in the next 30 years.
Thats a good return on 7 quid a month.
 
iandublin2 said:
For an extra 7 quid per month, the suriving spouse could be 280k better off if one of us died in the next 30 years.
Thats a good return on 7 quid a month.
Click to expand...

But for an extra 10 quid per month, the surviving spouse could be 300k better off if one of you died in the next 30 years.
That's a good return on 10 quid a month.

Where do you stop?
 
You stop at whatever figure is enough to cover the mortgage should you die tomorrow as that is what would be needed to pay the bank.
As I said above its not about money for the surviving spouse, its about covering the mortgage.
One way is MPI which will pay only the mortgage (which could be very small should you die at the end of the mortgage term).
Other way is Life assurance which will pay the mortgage and then as an aside it could also potentially pay some monies to the spouse.
For a small increase in cost each month(at least in our particular circumstances).
 
iandublin2 said:
You stop at whatever figure is enough to cover the mortgage should you die tomorrow as that is what would be needed to pay the bank.
Click to expand...

i.e mortgage protection of 285k over 30 years.

iandublin2 said:
Other way is Life assurance which will pay the mortgage and then as an aside it could also potentially pay some monies to the spouse.
For a small increase in cost each month(at least in our particular circumstances).
Click to expand...

I think you could spend €36 more wisely by doing this:

1) Put mortgage protection policy in place for €285k / 30y.
€24 per month

2) Put 80k life insurance in place for 30 years.
€12 per month.

If the answer is you don't need that much life cover, well then you really don't need any life cover so just put mortgage protection in place. Otherwise you are paying extra (no matter how small) for something you do not need.
 
What way are you covered in your job from sudden death before retirement?

As part of their pension schemes, most jobs pay out 4 x Annual Salary to the next of kin in the event of an employee dying while in employment before retirement.
Also look at what the remaining spouse would get from State benefits to add to this sum. Is it enough for them to bring up the children on, for example.
 
An in law is paying 176 euro/month for 570k life cover and the same accelerated illness cover, for 30 years. I gather the mortgage part is only 30 euro the rest is for the illness benefit. The list of illnesses covered is quite short and specific. He showed me the plan and he has already paid in 13K into this policy over the last 6 years. Anyway his finances are stretched and he is thinking of reducing the illness amount. Is this a good idea ? He is 40 and in good health currently. He is married and his wife has a good salary, although they are both stretched at the moment with a high mortgage but she could manage fine if the mortgage was paid off in the event of his death. I felt the amount he is paying is excessive and they would be better of if each took out a lower amt of illness cover. She has none currently. They have no children and are not likely to. Any advice from AAMers ?
 
While illness benefit is expensive €30 would seem cheap for 570k of life cover even for a young person, are you sure that is correct?
 
Laois1.

worth while repricing the risk however the one thing the internet will not give you is advice.

In my opinion there should be enough illness cover to at least provide 6 months income but this depends on other areas such as is there healthcare in place.

Is there any salary paid from the job in the event of long term absence due to injury or illness, if not has income protection been considered. As tough as your in law is finding things now how tough would they be should they suffer a serious illness and not have any back up in place.

People insure their cars,homes, mobile phones and even pets and yet fail to have adequate cover for their most important asset, their ability to make an income.

Lots to consider before making this decision, ask them to sit down with an advisor before making any final decision.
 
I actually didnt see the breakdown but i know its total 177 per month. Is it possible for him to alter the cover now at this stage in the policy or do you just get a new one ? Would he have to do a medical ?
 
Unlikely he could alter existing policy if it is a term plan taken out 6 years ago, if it is a unit linked plan it will be possible to amend, as I said get them to sit down with an independent advisor who will talk them through the different options available to them
 
Yes he would get standard public service sick pay benefits. He has no income protection policy. Income would be c 90 K pa. He has private health insurance. My gripe with these policies is that they are very limited ie pay out on only about 25 specified illnesses, a lot of which are very very unlikely to occur ie loss of sight, paralysis of two or more limbs, benign brain tumour etc Admittedly they do cover for cancer and heart disease which are a lot more likely. The benefits drop each year obviously so there is diminishing returns. Im not sure that its worth all the extra expense. 177 a month is a lot of money. Am i correct in believing these policies are worth nothing once the term expires ?
 
Newer SI plans cover in excess of 40 illnesses, would question the level of cover considering his salary is somewhat protected, income protection to pick up the slack once employers benefits cease would be more beneficial in my opinion.He needs to sit down with someone to discuss options!
 
Who would you recommend ? Is there anyone truly independent. Im sure someone got a large commission on his policy. Would a broker not just be looking for a similiar commision and would he be charged more now because he is over 40. Any recommendations welcome. One of the posters mentioned a fund type policy are these any better value ?
 
speak with a couple of different advisors and see which one you are comfortable with.Someone has to be paid either via fee or commission.
 
Income Protection and Specified Serious Illness / Critical Illness cover are sometimes confused although they are very different in terms of what they cover. Specified Serious Illness cover typically pays out a lump sum if you are diagnosed with one of the listed illnesses. Income Protection pays out an ongoing income if you are out of work for longer than the waiting period, due to any illness or injury. While both forms of cover have their respective merits, if your budget does not stretch to both, I would always recommend Income Protection as a priority as the range of events covered is broader.
The standard Public Service illness contract will pay the man his full salary for six months and half salary for another six months. It would be possible to construct an Income Protection plan to dove-tail with this - paying a partial claim after six months and increasing after twelve months.
If his job is office-based, the cost would be lower than what he's paying at present, when you take into account the tax relief on Income Protection premiums at 41%, which doesn't apply to Specified Serious Illness cover.
I would agree with leroy67 - talk to a few advisors and choose one you're happy with. Alternatively ask around some trusted friends or relatives to see if they have a Financial Broker they would recommend based on personal experience.
 
Thanks for advice. If anyone has any personal recommendations for a good broker please PM me. Some of the brokers I googled offer execution only. Its some good advice he is looking for. Is there a key post on this topic i cannot find one. Thanks again !
 
You must log in or register to reply here.
Back
Top