Mortgage payment protection, ASU

[pharmvrs]

The time has come where my mortgage agent is trying to hard sell mortgage protection and no doubt everyone has had to deal with this.

I'm currently looking at taking out life insurance to pay out a lump sum reflecting my current mortgage (£174k) so that will cover any outstanding mortgage and leave something of an inheritance for future wife/kids. I have opted against a decreasing term as i'd likely die just before the last payment is due on the mortgage.

Critical illness appears to have too many constraints and stipulations that i doubt if they would ever pay out unless in very specific cases so i will give this a miss.

So with death covered the next big one is accident, sickness and unemployment..... This is the one that will pay my mortgage whilst i get back on my feet so i need to be certain i choose the right package. The questions i have cover;

- Are payments capped at £xxx per month?
- Do they start paying immediately or back dated?
- Do they pay out for a set time or until recovery?
- Will they cover me if my partner/daughter becomes ill and i take time off to care for their needs?
- Will it cover redundancy?

Or do i take a risk and not take protection cover and if the worst happens and i'm off for 2 years or whatever i change my mortgage to interest only or take a mortgage holiday if its short term.

Also are there any little extras i can add in such as fracture protection etc etc?

All help/advice welcome.

[scotal]

pharmvrs said:

The time has come where my mortgage agent is trying to hard sell mortgage protection and no doubt everyone has had to deal with this.

He's required to offer it to you. It's also good commission, and he probably has a target to meet.

pharmvrs said:

Critical illness appears to have too many constraints and stipulations that i doubt if they would ever pay out unless in very specific cases so i will give this a miss.

Bloody useful if you are diagnosed with a qualifying condition. Do the work on the policy, pick the right one and its may be very useful one day. Like all insurance you hope its a waste of money, if however it isn't you'll be glad you had it.

pharmvrs said:

So with death covered the next big one is accident, sickness and unemployment..... This is the one that will pay my mortgage whilst i get back on my feet so i need to be certain i choose the right package. The questions i have cover;

- Are payments capped at £xxx per month?
- Do they start paying immediately or back dated?
- Do they pay out for a set time or until recovery?
- Will they cover me if my partner/daughter becomes ill and i take time off to care for their needs?
- Will it cover redundancy?

Or do i take a risk and not take protection cover and if the worst happens and i'm off for 2 years or whatever i change my mortgage to interest only or take a mortgage holiday if its short term.

Also are there any little extras i can add in such as fracture protection etc etc?

All help/advice welcome.

Please take this in the spirit its meant:-

These are the most basic questions about ASU/MPPI. They should (have) to be answered during the advice process and prior to sale. If you don't trust your mortgage guy to answer these questions truthfully, why are you dealing with him at all?

Ignoring that subrant, and more in the spirit of PH..

Are payments capped? Yes, varies from policy to policy, and can depend on your income an your outgoings. You need to check that the policy being arranged will pay what it says, and what conditions there are on payment.

Are payments backdated? Some are, some aren't Depends on which policy you opt for.
Some have an excess period, some are what is known as Back to day one cover.

Do they pay out for a set time? Most have a 12 month payment term, some can be arranged with a 24 month term.

Will they cover you for family sickness. Not to my knowledge.

Will it cover redundancy. Yes,(assuming you pick full ASU, not AS.) That's what they are desingeed to cover, what they wont cover is voluntary redundancy, you resinging from a job becuase you fancy a little break, or you being fired. Are you self employed? If so its highly unlikely the Unemployment part will pay.

Only you can answer the question about going without cover, its entirely down to your comfort with risk. Bear in mind that the only insurance you are required to have under the majority of mortgags is buildings cover, the rest are entirely up to you.

Bear in mind that not every lender will allow you to switch to interest only, or inded take payment holidays unless you have made overpayments.

You surely must have an illustration and Key features on the insurance form your broker.
IF you don't have one, why not?
IF you do have one, answering all those questions will be in the paperwork.

[Sarnie]

pharmvrs said:

The time has come where my mortgage agent is trying to hard sell mortgage protection and no doubt everyone has had to deal with this.

I'm currently looking at taking out life insurance to pay out a lump sum reflecting my current mortgage (£174k) so that will cover any outstanding mortgage and leave something of an inheritance for future wife/kids. I have opted against a decreasing term as i'd likely die just before the last payment is due on the mortgage.

Critical illness appears to have too many constraints and stipulations that i doubt if they would ever pay out unless in very specific cases so i will give this a miss.

So with death covered the next big one is accident, sickness and unemployment..... This is the one that will pay my mortgage whilst i get back on my feet so i need to be certain i choose the right package. The questions i have cover;

- Are payments capped at £xxx per month?
- Do they start paying immediately or back dated?
- Do they pay out for a set time or until recovery?
- Will they cover me if my partner/daughter becomes ill and i take time off to care for their needs?
- Will it cover redundancy?

Or do i take a risk and not take protection cover and if the worst happens and i'm off for 2 years or whatever i change my mortgage to interest only or take a mortgage holiday if its short term.

Also are there any little extras i can add in such as fracture protection etc etc?

All help/advice welcome.

You need to differentiate between ASU and Income Protection or PHI (Permanent Health Insurance) as it used to be called.

ASU is a policy that is usually used as short to medium term cover. It will pay out for 12 months usually although most will allow you to increase this to 24 months which will be reflected in your cover.

Income Protection will pay out the nominated amount until your fit enough to return to work or until the end of the policy. Therefore, if you set the term to 20 years for example, you could potentially be paid out for 20 years. Set the benefit to £1k a month x 12 x 20 gives you a potential maximum payout of £240k over the 20 years, which if your premium is £40 or £50 a month becomes a great deal! Naturally to claim you'd have to be too ill to work which wouldn't be great but you would have the peace of mind that your outgoings are covered.

Due to the additional benefits of IP, the premiums will tend to be higher than for ASU.

Both policies will have to be medically underwritten, so any health issues could affect your premium or whether they will cover you at all. Your occupation will also play a major bearing on what the premium will be.

Both policies will have a deferred period. This is the period of time between when the claim is lodged and from when they start to pay you. Specify a long deferred period and the premium will drop and vice versa. Some providers will give you a Day One option whereby they will backdate the benefit to the point of claim once you have reached the deferred period.

There are providers that will offer Redundancy but in todays climate, premiums are high. Again, how high they are, will depend on the details in your application.

As you say, you can take no protection at all and risk it, it just comes down to how risk averse you are. Bear in mind that reverting to Interest Only is at the lenders discretion so should not really be relied upon as your get out if you can't work.

We are doing a few of these a week at the moment so if you need anything more specific, drop me a mail.

HTH?

Liam

[dalenorth]

HI,

We are happy to help, but we dont want to stand on your current mortgage brokers feet. ASU contracts differ from provider to provider, but i will try and answer some of your questions below;

- contracts are annual so premiums may increase year on year.
- Deferment periods are on all ASU contracts, especially on the unemployment side.
- Payment terms again differ, but the payments normally last one year
- the cover will only cover the person they are underwriting
- Yes redundancy is covered under ASU

PM me if you want any more detail as we have a cashback offer for pistonhead members.

[pharmvrs]

Thank you all for the detailed replies, i am currently doing my homework on the subject so have not got into any major discussions with my mortgage agent and as such do not have a keyfacts document to refer to.

As a pharmacist i deal with illness daily and as a good pharmacist i speak to people about their illness and how their lives are changing as they deal with longterm illness. Unfortunately i have heard detailed stories of people who have been paying into insurance premiums sold to them by men in shiny suits that are now not worth the paper they were printed on and by the time the payout happens the patients are either dead or too unwell to put it to use. Alas where i see commission i do not place true trust.

Have any of you had dealings with friends life?

[scotal]

pharmvrs said:

Have any of you had dealings with friends life?

Yes, but thankfully I have no claims info about them.
Thery'e ok as far as I know.

There is one very large company in the MPPI market that I would avoid.

[Sarnie]

pharmvrs said:

Thank you all for the detailed replies, i am currently doing my homework on the subject so have not got into any major discussions with my mortgage agent and as such do not have a keyfacts document to refer to.

As a pharmacist i deal with illness daily and as a good pharmacist i speak to people about their illness and how their lives are changing as they deal with longterm illness. Unfortunately i have heard detailed stories of people who have been paying into insurance premiums sold to them by men in shiny suits that are now not worth the paper they were printed on and by the time the payout happens the patients are either dead or too unwell to put it to use. Alas where i see commission i do not place true trust.

Have any of you had dealings with friends life?

Unfortunately there will always be 'stories' of where companies don't pay out, with the main reason being non disclosure. So generally as long as you provide them with 100% accurate information and inform them of any fundamental changes along the way there shouldn't be anything to worry about. Remember, bad news travels faster than good news; people will always tell everyone they can when they feel hard done by but not many propogate when they do actually pay out.

In ten years, I've only had one claim (on a BUPA critical illness policy) which was actually for a policy I wrote for my sister in-law. She had a brain tumour removed and they paid her £245k within 10 days of the diagnosis, so they do pay out.

With regards to Friend Life, they are an amlagamation of a few companies (Friends Provident, AXA & BUPA etc) and as far as I'm aware the provide IP and not ASU, so if unemployment cover is a requirement then you may want to look elsewhere.

[pharmvrs]

The drawbacks i have identified so far are;

PPI - Only pays mortgage and no allowance for other bills.
ASU - Time limited to 12 to 24 months.
MPPI - Time limited and only covers mortgage.
IP (long term own occupation) - Does not cover redundancy or unemployment.
Critical illness - Minefield of small print!

From my homework IP plus ASU will cover me for life's nasty turns covering mortgage plus bills and whole of life insurance will pay out a lump sum which will either pay off the remaining mortgage and/or provide inheritance to whoever is left.

Would anyone like to hazard a guess at the monthly premium for this level of cover?

[Sarnie]

pharmvrs said:

The drawbacks i have identified so far are;

PPI - Only pays mortgage and no allowance for other bills.
ASU - Time limited to 12 to 24 months.
MPPI - Time limited and only covers mortgage.
IP (long term own occupation) - Does not cover redundancy or unemployment.
Critical illness - Minefield of small print!

From my homework IP plus ASU will cover me for life's nasty turns covering mortgage plus bills and whole of life insurance will pay out a lump sum which will either pay off the remaining mortgage and/or provide inheritance to whoever is left.

Would anyone like to hazard a guess at the monthly premium for this level of cover?

You have mail.

[pharmvrs]

Quick update for any interested parties and i see from recent threads there are people in a similar boat.

I have decided;
- Level term life insurance cover (pays out on death and will cover mortgage with surplus for dependants).
- Income protection to start after deferment period of 12 weeks (covers all sickness and accidents for term of 20-25 years instead of 12-24 months with ASU cover and no stiputations like critical illness, it is also own occupation).
- Unemployment cover to start after deferment period of 12 weeks and to last 12 months.