I’m buying a house in the next week or so (i hope), and I’m under the impression I need some sort of insurance to cover mortgages etc?

Basically, it sounds like a minefield, and everyone i speak to has a different opinion or wants to sell me stuff. in the tradition of STW I’m sure i’ll get a million and one opinions, but what do i need?

a few details…

1st time buyer
single, no dependents
parents who would just sell the house if i died
job which is secure in the short-mid term, but potentially not long term

my parents don’t think i need life cover at the moment, as i’ve no dependents, no spouse and they won’t keep the house if i die.

What do i need?

Life cover…no

Income protection…probably.

Critical illness…maybe.

You don’t need anything. But if you’re worried about not meeting your mortgage payments if you’re made redundant then you could take of redundancy protection.

What slo says, you don’t “have” to have anything other than building insurance (normally).

Life cover/assurance/insurance – is all about protecting those around you.

I’ve got cover to pay of the mortgage and leave the family some spending money should i croak it for whatever reason, and it costs me about £17/month, though its a relatively basic cover – i.e. if i die. Critical illness (i.e. cancer and can no longer work) will cover mortgage payments and/or immediate payout if that’s what you choose, but it is more expensive.

all you NEED to meet your mortgage requirements is buildings insurance.

Do you know if you have cover through work? Some companies provide free life cover as it’s a very cheap perk (for them to provide).

If you do go for income protection beware, all policies are not the same.

Find an IFA, get proper advice and don’t forget, the good thing about advice is you don’t have to take it.

You don’t need income protection but if you fall ill (long term) have a long term disability etc, you should be able to survive without losing your house (if you have insured for the right amount). If you don’t have it, it is probably back to Mum and Dad’s for you!

I suppose the thing is that to take out like cover now (set aside through work, what happens if you move jobs) is that it will eventually become quite expensive if you defer and take it out in later years. At what point do you pass the tipping point, I don’t know.

When I took out first mortgage, was a repayment when all around had endowments, and I got royally shafted for the privilege of taking out building cover with my own insurer rather than the mortgage provider’s tame outfit. Sharks.

.life insurance = pays out a lump sum to pay off the mortgage if you die, get this when you have a partner and/or kids

.critical illness – pays out a lump sum to pay off mortgage or just for some cash if you lose a limb, go blind, get cancer, it usually covers over about 15 types of incident. get this if you can afford it. Most employers give sick pay for at least 6 months, what if were in a car (bike?) and you couldn’t work? you couldn’t pay your mortgage and would have to move back in with mum n dad, so yeah get some if you can afford it. It is more expensive than basic life cover.

.income protection – pays out a % of your income (typically 75%) until retirement age if you are unable to do your own job through accident or illness. You might consider this if you are a big earner. If you had a machine that pays out 60k a year, would you insure it? This type of insurance is normally quite expensive too.

.mortgage protection. pays your mortgage (and a bit more if you want) for a period (usually 1/2/3 years)for 2 reasons, (accident and sickness) and (redundancy) you can choose if you cover both or just one, normally quite cheap ir you take a long deferred period.

In short you probably needs them all but none of these are mandatory for mortgages, the only one that is is building insurance. In case your house burns down for eg.

thanks jekkyl – that’s what i’ve been looking for! sounds like mortgage protection might be the one for me for now (and then think about critical illness/life if and when i get hitched…)

income protection might have to wait – high earner i am not 😉

Mortgage Protection really about insuring money/income, and only worthwhile IMO if when you lose your job and have to sign on you aren’t able to get the mortgage interest paid – ie your partner is earning; but you are single, so I wouldn’t bother.

spooky, just been looking at our situation this morning and wondering if we’re paying more than we need to.

im 50, married (wifes 40), kids left home, around £70,000 left to pay over another 12 yrs on a joint mortgage. (£535 p/m i think)
at present we’re paying £12 p/m life ins and £27 p/m critical illness. £40 pm is a fair chunk, but i spose sods law dictates that ill stay healthy until the moment i cancel one, so maybe i should keep them for the good of my health 😀

job would pay 6 months sick i think and then im led to believe theyd halve the payments but not too sure on that.

those figures seem about right? anyone else paying a lot more or a lot less?

cheers

27 pcm on cic cover is a great price, and life for 12 is also good, I wouldn’t go cancelling them iiwy

I must take issue with jekkyl here.

You don’t have to be a high earner for income protection.

Mortgage Payment Protection Insurance is fine if you are after a short term contract, two years cover maximum isn’t it? It is inexpensive but ultimately, vfm… I don’t think it is.

Income protection is a non-cancellable, long term contract which replaces your income in the event of sickness or injury. I have clients who have had claims extending beyond 10 years on income protection, some have returned to work part time and therefore get partial payments, others have returned to work only to have the problem reoccur and are back on claim, some are never going to work again. Had they taken out MPPI they would have been stuffed after two years. (Textbook stuff really)

The redundancy cover aspect of MPPI is different again.

IMO Income protection is the very first thing you should put in place. Your whole lifestyle is based on your ability to earn. Take that away and you have nothing. Not a risk I would be prepared to take, nor one I would expect my clients to take either.

:o)

Surely also the advice of a decent ‘all market’ FSA would make the most sense.

I say this based on using one who advised us of a policy we could take out at £360 p/m when we first got our mortgage, and his exact words were “You’d be better off putting that into an ISA each month”. So we did.

Income protection is a non-cancellable, long term contract which replaces your income in the event of sickness or injury. I have clients who have had claims extending beyond 10 years on income protection, some have returned to work part time and therefore get partial payments, others have returned to work only to have the problem reoccur and are back on claim, some are never going to work again. Had they taken out MPPI they would have been stuffed after two years. (Textbook stuff really)

We had a guy at work who had a sinus infection spread to the brain lining and inflame his brain, which led to seizures, strokes, having most of his skull removed, months in intensive care and some brain damage. Insurance policy kicked in after 6 months sick pay ended and we made him redundant. He was paid 75% salary for a few years before he eventually recovered enough to work again. The policy was a freebie with work, we are all covered by it. It would have paid out till he retired had he not recovered.

@toby1….it’s an IFA (FSA were the old regulators – now the FCA)but you are right. Find an IFA. Restricted model advisers aren’t necessarily bad per se, but a whole market IFA should give you the broadest range of options.