Does not having life insurance impact on a mortgage offer
Discussion
So.... Several years ago I was fortunate to be able to pay off the mortgage and have lived well with the Mrs in my humble house but kept tucking the mortgage money away and then some each month. House prices have rocketed near me so its time to cash out and upgrade to a better area & bigger house. I will have to have an 80K mortgage again to buy the property we want which is about 20% LTV when combined with the savings I will put in & all the equity from the house sale.
Neither of us have life insurance policies although we have death in service benefit with company pensions, which is about 200k each. I have 12 months full sick pay with a further 60 months covered by way of insurance policy provided by my employer, the Mrs is not quite as lucky, I think her NHS contract is 6 months full pay dropping to 50% thereafter. Given we own the house & everything in it, have no dependants, earn good money & have a fair chunk in the bank (even after putting savings into the new property) we had consciously decided life insurance & critical illness policies were not necessary.
My question is, do mortgage lenders look unfavourably on potential borrowers with no life insurance? We could take a joint policy to cover the mortgage value relatively cheaply to start with I guess but is it really necessary? The mortgage won't be needed for the full term but for the sake of getting turned down I would suck it up and take a policy. The reason I ask here is our mortgage broker I am sure will want to push life insurance policies which they also promote along side mortgages, so asking in an environment that has no financial incentive to push in one direction or the other might be useful.
Shep
Neither of us have life insurance policies although we have death in service benefit with company pensions, which is about 200k each. I have 12 months full sick pay with a further 60 months covered by way of insurance policy provided by my employer, the Mrs is not quite as lucky, I think her NHS contract is 6 months full pay dropping to 50% thereafter. Given we own the house & everything in it, have no dependants, earn good money & have a fair chunk in the bank (even after putting savings into the new property) we had consciously decided life insurance & critical illness policies were not necessary.
My question is, do mortgage lenders look unfavourably on potential borrowers with no life insurance? We could take a joint policy to cover the mortgage value relatively cheaply to start with I guess but is it really necessary? The mortgage won't be needed for the full term but for the sake of getting turned down I would suck it up and take a policy. The reason I ask here is our mortgage broker I am sure will want to push life insurance policies which they also promote along side mortgages, so asking in an environment that has no financial incentive to push in one direction or the other might be useful.
Shep
Edited by shep1001 on Wednesday 1st March 18:13
shep1001 said:
So.... Several years ago I was fortunate to be able to pay off the mortgage and have lived well with the Mrs in my humble house but kept tucking the mortgage money away and then some each month. House prices have rocketed near me so its time to cash out and upgrade to a better area & bigger house. I will have to have an 80K mortgage again to buy the property we want which is about 20% LTV when combined with the savings I will put in & all the equity from the house sale.
Neither of us have life insurance policies although we have death in service benefit with company pensions, which is about 200k each. I have 12 months full sick pay with a further 60 months covered by way of insurance policy provided by my employer, the Mrs is not quite as lucky, I think her NHS contract is 6 months full pay dropping to 50% thereafter. Given we own the house & everything in it, have no dependants, earn good money & have a fair chunk in the bank (even after putting savings into the new property) we had consciously decided life insurance & critical illness policies were not necessary.
My question is, do mortgage lenders look unfavourably on potential borrowers with no life insurance? We could take a joint policy to cover the mortgage value relatively cheaply to start with I guess but is it really necessary? The mortgage won't be needed for the full term but for the sake of getting turned down I would suck it up and take a policy. The reason I ask here is our mortgage broker I am sure will want to push life insurance policies which they also promote along side mortgages, so asking in an environment that has no financial incentive to push in one direction or the other might be useful.
Shep
There is no requirements whatsoever to have any sort of policy outside of Buildings Insurance.Neither of us have life insurance policies although we have death in service benefit with company pensions, which is about 200k each. I have 12 months full sick pay with a further 60 months covered by way of insurance policy provided by my employer, the Mrs is not quite as lucky, I think her NHS contract is 6 months full pay dropping to 50% thereafter. Given we own the house & everything in it, have no dependants, earn good money & have a fair chunk in the bank (even after putting savings into the new property) we had consciously decided life insurance & critical illness policies were not necessary.
My question is, do mortgage lenders look unfavourably on potential borrowers with no life insurance? We could take a joint policy to cover the mortgage value relatively cheaply to start with I guess but is it really necessary? The mortgage won't be needed for the full term but for the sake of getting turned down I would suck it up and take a policy. The reason I ask here is our mortgage broker I am sure will want to push life insurance policies which they also promote along side mortgages, so asking in an environment that has no financial incentive to push in one direction or the other might be useful.
Shep
Edited by shep1001 on Wednesday 1st March 18:13
Life cover is essentially a risk based decision dependent on your circumstances and how am incident of ill health or death may impact you or the surviving spouse. Some people simply don't care, some will spend hundreds a month mitigating the risk, there is no right or wrong answer but there is no requirement from the lender for you to have cover.
With regards to the Broker, to transact the mortgage compliantly they will have to speak to you about Life Cover......it's an FCA requirement now.....but there shouldn't be any inference that taking cover is in anyway linked to the chances of securing the lending you required.
Sarnie said:
There is no requirements whatsoever to have any sort of policy outside of Buildings Insurance.
Life cover is essentially a risk based decision dependent on your circumstances and how am incident of ill health or death may impact you or the surviving spouse. Some people simply don't care, some will spend hundreds a month mitigating the risk, there is no right or wrong answer but there is no requirement from the lender for you to have cover.
With regards to the Broker, to transact the mortgage compliantly they will have to speak to you about Life Cover......it's an FCA requirement now.....but there shouldn't be any inference that taking cover is in anyway linked to the chances of securing the lending you required.
Thanks Sarnie. I just wanted it straight in my own mind before the broker rocks up tomorrow, to do our mortgage application. I am of the opinion if my mrs dies, then as I am making the mortgage payments anyway its still affordable including all the bills & living so nothing would change - I would not do it otherwise. If I kick the bucket, I want to make sure she is sorted so she has no debt from the house and the choice to continue living there or sell up and re-settle somewhere else. Life cover is essentially a risk based decision dependent on your circumstances and how am incident of ill health or death may impact you or the surviving spouse. Some people simply don't care, some will spend hundreds a month mitigating the risk, there is no right or wrong answer but there is no requirement from the lender for you to have cover.
With regards to the Broker, to transact the mortgage compliantly they will have to speak to you about Life Cover......it's an FCA requirement now.....but there shouldn't be any inference that taking cover is in anyway linked to the chances of securing the lending you required.
Do you pay into a company pension scheme?
If you do it's highly likely you have life insurance be it 3/4/5/6 x salary for death in service. It will also assume you would have carried on working for them up to normal retirement age and pay the spousal rate out to the Mrs.
So often overlooked extra of having a co pension.
If you do it's highly likely you have life insurance be it 3/4/5/6 x salary for death in service. It will also assume you would have carried on working for them up to normal retirement age and pay the spousal rate out to the Mrs.
So often overlooked extra of having a co pension.
Welshbeef said:
Do you pay into a company pension scheme?
If you do it's highly likely you have life insurance be it 3/4/5/6 x salary for death in service. It will also assume you would have carried on working for them up to normal retirement age and pay the spousal rate out to the Mrs.
So often overlooked extra of having a co pension.
Yep, 4x pensionable salary for death in service for both of us, that would cover the mortgage value from the outset If you do it's highly likely you have life insurance be it 3/4/5/6 x salary for death in service. It will also assume you would have carried on working for them up to normal retirement age and pay the spousal rate out to the Mrs.
So often overlooked extra of having a co pension.
shep1001 said:
Welshbeef said:
Do you pay into a company pension scheme?
If you do it's highly likely you have life insurance be it 3/4/5/6 x salary for death in service. It will also assume you would have carried on working for them up to normal retirement age and pay the spousal rate out to the Mrs.
So often overlooked extra of having a co pension.
Yep, 4x pensionable salary for death in service for both of us, that would cover the mortgage value from the outset If you do it's highly likely you have life insurance be it 3/4/5/6 x salary for death in service. It will also assume you would have carried on working for them up to normal retirement age and pay the spousal rate out to the Mrs.
So often overlooked extra of having a co pension.
Welshbeef said:
certainly reduces the risk to the lender.
It makes ZERO difference to any risk assessed by the lender.There isn't one lender that I can think of that asks what provisions are in place.
Ultimately, the lender will take the property back if required.
The risk, is the applicants, not the lenders.
Sarnie said:
Welshbeef said:
certainly reduces the risk to the lender.
It makes ZERO difference to any risk assessed by the lender.There isn't one lender that I can think of that asks what provisions are in place.
Ultimately, the lender will take the property back if required.
The risk, is the applicants, not the lenders.
Logically if the bank knows that a mortgage applicant does have life insurance which is greater than the mortgage should the worst happen? Likewise do the banks not consider 1 months work notice more risky than 2/3/6 etc notice and price it accordingly
Welshbeef said:
Don't they ask if you have life insurance - or is purely an angle to upsell a product?
Logically if the bank knows that a mortgage applicant does have life insurance which is greater than the mortgage should the worst happen? Likewise do the banks not consider 1 months work notice more risky than 2/3/6 etc notice and price it accordingly
Sorry, but with respect, but you are wrong with most things you are posting.Logically if the bank knows that a mortgage applicant does have life insurance which is greater than the mortgage should the worst happen? Likewise do the banks not consider 1 months work notice more risky than 2/3/6 etc notice and price it accordingly
They may ask you if you have life cover, and if you indicate a desire for it, they'll happily provide you with it. But it's in no way linked to the chances of them agreeing to lend to you. If you say no, you are no less likely to be accepted than if you say yes and take out a policy via them.
And with regards to works notice period.......in 15 years I've never had a single lender ask about an applicants notice period......
And they certainly couldn't be seen to be pricing rates in line with applicants notice periods..........
Is it highly advisable to protect yourself from the inherent risks that can occur? Yes.
Do you have to? Will you be more likely to be accepted if you do? Will you get a cheaper mortgage if you do? No.
TwigtheWonderkid said:
You cannot rely on death in service cover. Most people who die within working age don't die in service. They get ill, cancer or whatever, and have left work by the time they die a couple of years later. Death in service is great for the heart attack / car accident type death.
Indeed........Jockman said:
TwigtheWonderkid said:
Doesn't that depend on you age and health?
Indeed. The younger the better.Welshbeef said:
Jockman said:
TwigtheWonderkid said:
Doesn't that depend on you age and health?
Indeed. The younger the better.TwigtheWonderkid said:
You cannot rely on death in service cover. Most people who die within working age don't die in service. They get ill, cancer or whatever, and have left work by the time they die a couple of years later. Death in service is great for the heart attack / car accident type death.
Really? I'm surprised at that. Have you got anything to back up that statement?I'm not challenging aggressively, I'm just surprised/sceptical - I would have expected people who get seriously ill while in employment would go on long-term sick leave and so remain covered by death-in-service. People who die suddenly while in employment (which is a large proportion of working age people) would obviously remain covered by death-in-service benefits.
Zigster,
Inability to carry out your required work functions is a reasonable and surprisingly common basis for an employer terminating an employee's contract of employment. In this event, death in service life cover will, of course, cease. It may be the case that you will meet the criteria for ill health early retirement pension but that will be all.
Some companies do make available a long term disability benefit in which case the employee will remain in employment but on long term illness related absence. In this event, death in service life cover will be in place. This will end if employment is later terminated, or if you reach normal retirement age, etc.
Personally, I think that you should never rely on employment related death benefits. This can always change in the future eg your job can become redundant in which case death cover will cease. In my view it's best to have your own separate decreasing term assurance specifically geared to the mortgage. This cover is not expensive.
R.
Inability to carry out your required work functions is a reasonable and surprisingly common basis for an employer terminating an employee's contract of employment. In this event, death in service life cover will, of course, cease. It may be the case that you will meet the criteria for ill health early retirement pension but that will be all.
Some companies do make available a long term disability benefit in which case the employee will remain in employment but on long term illness related absence. In this event, death in service life cover will be in place. This will end if employment is later terminated, or if you reach normal retirement age, etc.
Personally, I think that you should never rely on employment related death benefits. This can always change in the future eg your job can become redundant in which case death cover will cease. In my view it's best to have your own separate decreasing term assurance specifically geared to the mortgage. This cover is not expensive.
R.
The Leaper said:
Zigster,
Inability to carry out your required work functions is a reasonable and surprisingly common basis for an employer terminating an employee's contract of employment. In this event, death in service life cover will, of course, cease. It may be the case that you will meet the criteria for ill health early retirement pension but that will be all.
Some companies do make available a long term disability benefit in which case the employee will remain in employment but on long term illness related absence. In this event, death in service life cover will be in place. This will end if employment is later terminated, or if you reach normal retirement age, etc.
Personally, I think that you should never rely on employment related death benefits. This can always change in the future eg your job can become redundant in which case death cover will cease. In my view it's best to have your own separate decreasing term assurance specifically geared to the mortgage. This cover is not expensive.
R.
^^^^This, in bucket loads.Inability to carry out your required work functions is a reasonable and surprisingly common basis for an employer terminating an employee's contract of employment. In this event, death in service life cover will, of course, cease. It may be the case that you will meet the criteria for ill health early retirement pension but that will be all.
Some companies do make available a long term disability benefit in which case the employee will remain in employment but on long term illness related absence. In this event, death in service life cover will be in place. This will end if employment is later terminated, or if you reach normal retirement age, etc.
Personally, I think that you should never rely on employment related death benefits. This can always change in the future eg your job can become redundant in which case death cover will cease. In my view it's best to have your own separate decreasing term assurance specifically geared to the mortgage. This cover is not expensive.
R.
You would not believe the amount of people who I speak to, who are happy to rely on an employer provided benefit to protect them and their family should the worst happen.
It should be viewed as a great perk of employment, to potentially provide surplus funds to a surviving family, it shouldn't be the sole thing a person relies to look after their family..............don't forget, your employer is a corporate entity.......they may be good to you and pay you a year or two sick pay if you are really ill, but if you look like never returning to work or worse and a potentially DIS payment may be looking likely to be on the horizon..........I wouldn't want to rely on the trustees of the fund to look after my family.
As The Leaper says, DTA cover for most people is pretty cheap......probably about as much as 3 or 4 pints in London, per month.......
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