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Mortgage and life insurance

(4 Posts)
Spikeinhiscoat Sat 06-Jun-15 12:58:14

We've recently increased our mortgage (for home improvements). DH and I have both got life insurance/assurance (can't remember the difference) combined with a critical illness policy. This policy has been in place for a number of years now. When we took it out, it was for a decreasing amount (e.g. if the mortgage was £200,000 over 25 years, the amount insured would decrease over time as we paid off the mortgage). We've made overpayments on our mortgage, so the amount on this policy is only £5,000 different from our increased mortgage (e.g. say if we borrowed an additional £25,000 on the mortgage to increase it to £175,000, currently oyr insurance policy covers us for £170,000).We've contacted the insurance company to get a quote to be covered for the additional £5,000, and for the two of us, they would increase our premiums by £40 a month, when the repayments on the additional part of the mortgage would be £100. Do we need life insurance for the entire amount of the mortgage?

Should we die, there is enough to repay the mortgage in full (as well as the life insurance policies we both get death in service benefits from our employers). We also think that as we hope to continue making overpayments on the mortgage the discrepancy in the amounts would only be there for a few years over the term of the mortgage. Or are we being stupid to even consider not taking out the additional insurance?

Drquin Sat 06-Jun-15 13:09:49

Not stupid necessarily .....
First is to confirm what the mortgage company may require as a condition of the mortgage.
If they "allow" you to have a lesser amount, then it's up to you what you feel comfortable with.

If you're in a position to cover the "gap" by other means, then that's fair enough.

Spikeinhiscoat Sat 06-Jun-15 13:29:41

Thanks drquin. The paperwork says the only mandatory insurance is buildings insurance, there is no mention of life cover.

Rockchick1984 Sat 06-Jun-15 19:26:31

The mortgage company aren't allowed to insist on you taking life insurance, the only insurance that they can stipulate is essential is building insurance.

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