Life Cover - How often do you review ?

[Tubbs]

We needed to get life cover (assurance?) when we bought our house for the banks/mortgage sake.

I had no idea of the nitty gritty of the type of cover I was getting really.

I just looked for a cover where if me or Mrs Tubbs kicked the bucket the house would be paid off for the remaining party.

I did hunt for the cheapest premiums and knocked the cheapest down further and got it at about 1/3 of dearest quote I was given.

Anyway, how often should this be reviewed ? Is it worth looking at this every year ? Or do people just stay with the same people for a long time ?

Should I be paying less life cover premium the less I have outstanding on my mortgage ?

 

[ClubMan]

Mortgage protection life assurance will usually comprise a cheap (ideally) and cheerful decreasing term and should not require regular review unless you can save money by switching to another provider.

General life assurance is usually kept separate and what level of cover individuals/couples/families need really depends on their specific circumstances. Unless there are good reasons do link them I would be inclined to keep the two separate.

 

[DrMoriarty]

Should I be paying less life cover premium the less I have outstanding on my mortgage ?

As ClubMan says, ideally you should (and probably do?) have basic reducing term insurance, joint life. When you initially took out your mortgage, this cover would have had to match the original term and amount of the loan. However, even if you subsequently reduce your term/loan, by accelerating your repayments or making a lump sum repayment, it may make sense to leave that 'excess' cover in place — it's cheap 'n' cheerful extra cover, and the premiums will have been calculated on the basis of your then younger age.

For example:

• Borrow €300K in 2000, age 25, over 25 years, and buy insurance to match.
• By 2006, you're in a position to boost your monthly repayments, so shortening the remaining loan term from 24 to 15/16 years — or, alternatively, you use a windfall to clear a large chunk of the capital amount.
• You could now cancel your old 25-year, (reducing) €300K policy — then you'd have to replace it with a new policy (for a lesser sum/term), but you're now in the 31-40 bracket and have, say, taken up smoking in protest against the pub ban . Suddenly your premiums for a 16-year/€200K policy look very close to what you were originally paying for another 24 years' cover at a higher ('though still reducing) level.

(I'm open to correction on all of this, and of course other factors may come into it too — insurance premiums rise and fall over time, just like interest rates...)

Two good times to review/renew your cover are
(a) if you give up smoking or your risk profile changes in some other way
(b) as you approach the cut-off between age bands. Some insurers distinguish between a 41-year-old/44-year-old/49-year-old, others seem (?) to lump everyone from 41-50 together.

If you have (or 'acquire') dependents, then of course that's a whole new ball game...!