Mortgage Protection V Personal Life Cover?

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  • #11109
    Financial Companion
    Participant

    Hi Folks, just to clarify a point that we ran out of time on in today’s advice talk in the D Hotel. Some people think that their mortgage protection life cover is also their personal cover. It’s worth pointing out that the purpose of the mortgage protection is to clear any outstanding mortgage in the event of a fatality. The remaining financial loss that will be suffered is best thought of in terms of weekly or monthly loss of income, or put another way, what income would be required in such an eventuality. From this figure, and based on the length of time it would be required at that level for (ages of children being the biggest factor) we can calculate the level of personal cover required aside from the mortgage protection. It may sometimes be the case that the plan being used for mortgage protection has more cover that the mortgage. This surplus can be allowed for in any personal calculations.

    As always, feel free to let me know if you have any questions :wink:

    Cheers, Dave.

    #110183
    Fabienne
    Member

    After your talk this morning, I realised a bit more about our financial needs.
    We have a mortgage protection, and thought, if anything happens then house is paid off. But forgot to think (or did not want to think about something could happen) that if even no mortgage to pay still have to put food an the table and pay bills, that’s what the personal cover is for.

    Glad to have a financial advisor on MT.

    Fabienne

    #110278
    Financial Companion
    Participant

    Yes Fabienne, it’s those real-life, everyday things that people often forget will still have to be paid for even if a mortgage is wiped out. One of the clearest examples of this, was a close friend of ours (who tells me to use her situation as an example), they moved house from Dublin out to Kildare and when they changed the mortgage, we did a basic mortgage protection plan as they already had a very good life and specified illness plan in place. Less than a year later she was looking at her details and without talking to me, confused the new one with the existing one (thinking they only needed one of them) and cancelled the personal cover. Next month will be 3 years since her husband was killed in a crash just a few hundred yards from their new home on his way home from work. The mortgage is cleared but now she gets approximately €250 per week to raise her three children, compared to the €850 per week that they had been used to! It has completely changed the way they had to live and even her daughters have had to give up many of their hobbies due to affordability. When her car packs up, she will not be able to replace it and will face further restrictions. She now realises that the €400,000 cover she cancelled was not to make her rich, it was just to allow them maintain normal living.

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