Throughout the process of buying my first house people kept mentioning my untimely death. What sort of cover do most people get?

I have a couple of policies – one to pay out a fixed sum if I die before I hit 70 (ie, if I die on the day I am 70, my wife and kids get nothing, if I die the day before they get a lump sum of about £300k) and a second policy that is a ‘decreasing’ policy linked to the mortgage amount so if I die tomorrow it would pay out around the outstanding amount on the mortgage but if I die the week before the mortgage is paid off, it will only pay out a few £££s.

Basically, these policies cost me very little in the grand scheme of things (about £80 a month) but give a certain re-assurance to my family.

Neither of them cover for critical illness though so if I get cancer and can’t work, nothing gets paid out (ie, I have to actually march off this mortal coil for them to pay out). We took this decision as we have lots of equity in our house (approx 33% on mortgage) so it I was critically ill we would just have to downsize (critical illness cover costs much, much more).

ok thanks. Your approach seems very sensible. So at the very least I should have a plan that pays off the mortgage.

Very little – that’s nigh on £1k a year! I would self insure at that cost.

I get both Life and Critical Illness free through work, both come as part of the medical cover policy we have….

I would self insure at that cost

I am 49 now – if I die at 60 having ‘self-insured’ I would have only saved £12,000 (I took the policies out last year) which is some way off what my wife and kids would get via insurance (ie, mortgage paid off and £300,000 lump sum).

But you take your choice like I took mine.

(BTW, just checked and it’s actually just shy of £60 and my wife has another policy costing £12 a month which covers her ‘contribution’ to household costs at the current level should she die and I am left to support the children which is why I thought it totalled about £80).

for £15 per month I can get the mortgage paid off if one of us dies – this seems like a no brainer. Not sure if I need anything else – critical illness cover seems to have a lot of caveats.

I agree.

*Caveat* A good friend took out ‘critical illness’ cover and his wife went on to have several brain tumours and eventually died – however it meant they were able to live comfortably (the policy paid out when the first tumour was diagnosed) and get to spend quality time together without additional stress & worry in the years before she died at just 42 🙁

thats really horrible Johndoh, does make you think hard about this sort of thing.

I’ve had “Term assurance” with Legal and General, via Cavendish for a few years. It was taken out to cover the mortgage if I peg out. A £300k bonanza for the missus costs about £35 a month, but as with Johndoh, if I live beyond 2029 she’ll get nowt. That’ll teach her to feed me healthy food…

I’ve got enough cover that means that if I or my wife die, our mortgage gets paid off, the survivor doesn’t need to work until our youngest child is 18, and both kids have a fund for university.

It’s only £50 quid a month, and frankly pays for itself in gym discounts and free cinema tickets! Prudential Vitality.

thats really horrible Johndoh, does make you think hard about this sort of thing.

Yeah, it wasn’t nice – she got the first tumour just before I got married 10 years ago (I remember her wearing a head scarf at the wedding to cover the missing hair and big scar) and she died 2 years ago. In fact it would have been her birthday yesterday. 🙁

So with term insurance can you cover the mortgage + a cash payout? e.g if i die the mortgage would be paid and they would get 100k.

Yes. You’re insuring yourself, not the mortgage. You decide on how much cover you want. I took the balance of the mortgage, added £1k per month for 16 years, and £100k for uni and that gave me the level of cover I needed for the next 16 years. Assumption is that the protection is only needed until the kids are old enough to look after themselves. At that point, our mortgage will be paid off anyway and the survivor would have no dependants so can support themselves.

My level of cover also increases in line with inflation. Obviously this means the monthly payment will increase on a yearly basis.

A couple of ways of doing it – the cheaper way basically covers the cost of the mortgage which obviously goes down as you carry on paying it over the years (hence premiums are lower). Other way basically you choose a figure, say £300k and you keep paying until you die or stop paying.

If you’re single it’s worth considering if life insurance is worth it – if you do die early then selling the house will cover the mortgage with maybe a little spare. Though obviously nothing much to pass on to relatives.

If you’re partnered up, we had a tip from someone to look at doing two seperate life insurance policies instead – it was only a couple of quid more than doing a single joint policy. That way when the first one dies the house is covered. When the second dies my daughter gets another lump sum.

The most important question to ask is whether you actually NEED any life insurance. I’ve not had any in the past and only have it now that it is provided by my employers as part of my remuneration package.

For the record I have no dependants so in the event of my death the house would be sold. I see no need to pay for insurance that will only serve to cover the bank’s risk.

my wife and I took out life insurance when we got our house, think it pays out 120k which was the mortgage value, costs us 5 less than 5 pounds each per month. I was 26, GF was 22 at the time.

we could have made it cheaper still if we had that 120k reduce in line with out mortgage, but we decided to keep it fixed at 120k pay out.

Seemed like a no brainer.

When we move back to the UK and buy a bigger house we will take out a second policy to cover the extra mortgage amount.