Life Insurance - what happens if DH AND I both die?

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DH and I both hold Life Insurance policies with critical illness cover for the term of our mortgage. Each is with a separate provider. I know that if one of us dies then the policy will pay out to cover the mortgage.

I was wondering earlier - if we BOTH die then does that mean that one policy would cover the mortgage and the other would be paid as a lump sum? We have a DD and neither of us have a will but assume that any left over money would be hers (we do plan to make a will, ours became void when we married).

Just that as we are both paying premiums, it would seem ridiculous that only one policy would need to pay out if it just covered the mortgage.

You can make a will in comtemplation of marriage and in comtemplation of future children.

Do you mean if you both die at the same time? I think the oldest person is deemed to have died first.

you probably need a joint policy set up to pay off mortgage on first death and pay a lump sum to support your dd should you both die, or for that matter if one of you died.

Yes Hulababy - if we both die at the same time, so if we died in an accident (for example) would both policies pay out (one on the mortgage and one in cash) or would one pay out and the other one not (which seems a bit bloody unfair, given that we're both paying in)?

ruddynorah Paying off the mortgage if one of us dies is the main aim, however if neither of us is about to support DD, that's when I would be concerned about making sure we'd made some provision for her financially.

Make a will!

Ripeberry We fully intend to, and soon - but will that mean we can stipulate that one policy is to pay off the house, and the other is to be a lump sum, or does that mean that one will pay the mortgage (DH's if Hulababy is correct about the eldest being considered to have died first) and the other won't pay as the mortgage is then paid?

Is the pay out linked to the mortgage?

It decreases the longer we're in the house...I suppose that means it is, and therefore only one would pay out, wouldn't it?

Hmm. Something else to add to next week's to-do list...

Both would pay out, one would go to pay off the mortgage and the other would be a lump sum available to the children.

Insurance policies are set up to pay out money, how this money is used is generally up to the beneficiary of the policy. Policies are often set up with the aim of providing a payout sufficient to pay off a mortgage but the actual payout will be a specified cash sum. Therefore if the payout terms of both policies are met, they will both pay out. Some of the cash can then be used to pay off the mortgage but I don't believe that this would actually be compulsory.

Sounds like you have a decreasing term policy which is is designed to have a lower payout as time passes to take into account the amount of the original mortgage which will have been paid off at any point in time. The policy will expire on the date the mortgage is due to be fully paid off.

I would see an IFA and look into the options for transferring your life insurance. It may well be that a joint policy which covers both of you and pays out on the first death would be cheaper than the two separate policies and would serve the purpose of paying off the mortgage if one or both of you die. You might want to use the balance of the amount you were paying for the two single policies to increase the sum assured to provide an extra lump sum which can be invested to provide an income. This will be important as the income earned by the partner who dies needs to be covered for even if there is no mortgage to pay.

It is a good idea to regularly review your insurance policies to make sure you have adequate cover and also to get quotes from alternate providers which could well be a lot cheaper than your existing cover.

See an IFA who can research the market for you and get the best deal.