# Mortgage Protection Vs Life Assurance



## Sunflower123 (21 Aug 2008)

HI

Myself and my partner are about to take out a mortgage (that has all been approved) in order to draw down the funds we need to obviously take out mortgage protection. Our broker has been trying to get us to take out Life Assurance with critical illness (which we cant really afford).  

My question is, is it ok to take out mortgage protection, then say in 6months time want to chage to life assurance when we know how the monwy situation is.  Are there any additional charges which we could face for cancelling the policy? 

Thanks


----------



## mf1 (21 Aug 2008)

Mortgage Protection and Life Assurance ARE the same thing. 

Its the critical illness cover that is in issue. You do not need it for your mortgage. Your broker may be pushing it but you are the only ones who know if you want it. 

So why not take out your life cover now and review whether you want an additional policy for critical illness cover in due course. 

mf


----------



## NorfBank (21 Aug 2008)

Not exactly.
Mortgage protection will pay off your mortgage on death and is the most basic protection required when taking out a mortgage. Protection decreases as mortgage decreases.
Life assurance will pay out a lump sum when you die. Level protection for the term of the policy.
You can review your policy in 6 months time if you like but you may have to assign this to your lender. Make sure a new policy is in place before cancelling old.


----------



## ClubMan (21 Aug 2008)

NorfBank said:


> Not exactly.
> Mortgage protection will pay off your mortgage on death and is the most basic protection required when taking out a mortgage. Protection decreases as mortgage decreases.


Not necessarily - e.g. level/convertible term policies.

Mortgage Protection and Mortgage Repayment Protection Policies


----------



## StevieC (22 Aug 2008)

Mortgage Protection cover will work out cheaper for you in the short term. While it can be argued that Term Life and Serious Illness cover is a better policy, we all know that many new home owners and especially first time buyers face a lot of bills and every penny can count.

There is nothing to stop you reviewing your situation down the tracks but as the previous poster mentioned you will need to take out a new policy and have it assigned to your lender before cancelling the old one.

The only charge you might face for this was if you received a commission rebate from your broker and you cancelled the policy in the first year, then they may ask for a proportionate amount of the rebate back. Other than that, there should be no charges. You should double check the brokers terms of business letter to confirm this though.


----------



## ClubMan (22 Aug 2008)

Personally I would almost always keep mortgage protection life assurance and general life assurance and related cover (e.g. _PHI/CI _salary protection etc.) separate. And just go for the most basic cover for the mortgage (cheap decreasing term policy).


----------



## RS2K (22 Aug 2008)

ClubMan said:


> Personally I would almost always keep mortgage protection life assurance and general life assurance and related cover (e.g. _PHI/CI _salary protection etc.) separate. And just go for the most basic cover for the mortgage (cheap decreasing term policy).



Agreed. Assign a basic minimum cost policy to satisfy your lenders interest. You personal insurances should be kept separate.


----------



## ClubMan (22 Aug 2008)

Oh - I presume that you are expecting your broker to do the legwork and get you the best deal on the most suitable mortgage, mortgage protection life assurance etc. but if they are trying to upsell then I would wonder about why they are doing this and would consider sanity checking things by shopping around independently just to see what you get elsewhere.


----------

