Insurance that pays your loan(s) off on death.

[Olly]

When I was married we had insurance on my husband so that if he died the PPOR mortgage was automatically paid off. It was paid at the same time as our mortgage payment. When we divorced I transferred it to my life. I can't think what this type of insurance is called (don't want to say mortgage insurance as it's not the same is it?!)

Anyway my question is do you guys have this type of insurance on your IP loans? Do you have one for each loan or one for all the loans and alter the details each time you add an IP? What is this insurance called? Any recommendations who to get it through please. Cost?

Ta muchly
Olly

 

[DaveP]

I dont bother Olly.


I try and keep my LVR down a bit and like to have a wee bit in reserve just to fund until you can sell and meet the market if needed.

I also like to lower my LVR in not so steady times. Like now where I feel a change is on the horizon and a wee correction shouldnt be too far away

Hope this helps.

DP

 

[asy]

Hiya Olly,

I know the insurance you are talking about, and I seem to recall having it built into my last PPOR loan...

Maybe talk to your lender?

If you can't find an answer, PM me and I will investigate a little for you.

DaveP... Sorry, not sure I understood your post... What did it have to do with insurance? If someone dies, the LVR isn't going to pay the loan out...

asy

 

[lissie]

Insurance on loans

I believe that the product is called term life (in NZ) anyway - which pays when the holder dies. There is also a variation called endowment which pays either on death or at age 65 - which ever comes 1st .

I too am wondering whether its worthwhile. I am also considering a new product in NZ where your premiums are returned to you after 10 years. Thye catch being that the prermiums are a lot higher e.g.for $100k cover - 40 year old female
normal term cover : total premiumus $2426
premium return cover total premium $12,131 they return $11,771 - they retain $3/mo admin fee. Note you dont have to cash in after 10 years - can go for as long as 20 - but you dont get most of $$ back unless you hold for 10

What I am trying to work out is this a good deal - or am I better off using the $$ I would pay on the priemum to accelerate debt repayment (IP property debt only) .

 

[Andrew]

I've heard it referred to as "Mortgage Death
Insurance."

Make sure you compare the cost with an
ordinary term life policy before you take it
out.

Esanda will provide $250K coverage for
around $30/month for a 21-34 year old.
Esanda don't seem to discriminate based
on sex.

AMP is cheaper but has a different premium
for each year, females are cheaper (significantly.)

andy

 

[abcdiamond]

Make sure you really NEED the insurance.

Remember it only benefits your Dependants, after your death.

If you are married then it can be important, especially for PPOR.

If you have Children, then Yes, they get the benefit.

If you are single ? Ask yourself who will get the benefit from your payments.

 

[Kevmeister]

Originally posted by asy
DaveP... Sorry, not sure I understood your post... What did it have to do with insurance? If someone dies, the LVR isn't going to pay the loan out...

The point DaveP was making was that if you hold property at a reasonable LVR, the value of the property itself (when sold) covers the loan.

As others have said, the insurance doesn't benefit you, only your beneficiaries.

The need for such insurance is different if you are a couple, however. You don't want your widow having to sell everything to keep paying the loans...

 

[MarkB]

Recent article in "The Age" (Melbourne) on the different types of insurance on offer and what each does for you:

http://moneymanager.smh.com.au/articles/2003/09/17/1063625061912.html


MB

 

[Olly]

MB [/B][/QUOTE]

Originally posted by abcdiamond
Make sure you really NEED the insurance.
Remember it only benefits your Dependants, after your death.
If you are married then it can be important, especially for PPOR.
If you have Children, then Yes, they get the benefit.
If you are single ? Ask yourself who will get the benefit from your payments.

OK, my questions now then are these -

While I'm doing it to benefit me in the short term it would be nice if I could leave my affairs in a tidy state for my kids to benefit from as well, without having big decisons to make.

Assuming you are single and have kids (like me) - what happens if you cark it while still having outstanding loans? Are you leaving the kids or executor to sort out your financial dealings? To sell off (some or all of) the properties and disperse the proceeds according to your will? Take over the loans?

What are you guys doing (if it's not too personal a question)?

Cheers
Olly

 

[abcdiamond]

Originally posted by Olly
MB

OK, my questions now then are these -

While I'm doing it to benefit me in the short term it would be nice if I could leave my affairs in a tidy state for my kids to benefit from as well, without having big decisons to make.

Assuming you are single and have kids (like me) - what happens if you cark it while still having outstanding loans? Are you leaving the kids or executor to sort out your financial dealings? To sell off (some or all of) the properties and disperse the proceeds according to your will? Take over the loans?
[/B][/QUOTE]

If you have sufficient life cover to repay all the loans, then your kids would inherit fully paid for IP's with an income. If they are under 18, an executor (or similar) would still be required to manage the affairs.

If you did not have life cover, then the Banks would require enough property to be sold to cover the Loans. Again an executor would be required to do this.

You say "While I'm doing it to benefit me in the short term "
I don't understand this comment. How does life cover benefit you? It's still a bit early, so I may not be thinking clearly yet

What are you guys doing (if it's not too personal a question)?

Each personal situation will be different, Myself I do not have life cover; I am not bringing in an income, and premiums for my age are too high!
My wife, a wage earner does have cover.
If we were both to die together, my child would be left with a mess.... mmm thinking I'm off to see a solicitor now to set up a new will.

 

[Alan H]

I simply use a sufficiently large Term Life policy to ensure that if(when?) I kick the bucket my family is not burdened.

Unfortunately I've seen it happen too often that a big effort is put into arranging loans, structures etc. but little thought is given to what happens to the family if the unthinkable happens.

It will happen.......no need to be morbid........but adequate planning in this area is important.

 

[Olly]

You say "While I'm doing it to benefit me in the short term "
I don't understand this comment. How does life cover benefit you? It's still a bit early, so I may not be thinking clearly yet

I meant property investing benefitting me in the short term (5-10 years to retirement) not life cover.

 

[handyandy]

Hi Olly

I have term life cover to the tune of $1.5m. This is paid for by my SMSF so it is tax deductable (at 15%) and making use of some of my super fund monies.

My concept is that this money will cover all the loans and have some left over so that my benificiaries are not left with any problems.

I suspect that the loan life insurance are generally not good value for money as they are smaller policies and and such have higher overheads. (my unsubstatiated opinion )

hth

 

[Starting out]

insurance

Hi Olly,
We are the same as handyandy.
When one of us departs, its good too know the other partner has ips fully paid off and income coming in, so does not have to work or be extra stressed about this fact of life. We also have trauma insurance and income protection insurance for the highest income earner.
Regards Starting out

 

[arriety]

Olly,

All I know is that when it comes to insurance, you've got to keep your wits about you because this is what happened to me.

About 12 years ago when we took out our first morgage together, (100k) we looked into insurance options. I took out a life insurance policy for 100k in partner's name (because I took it out, I would be beneficiary - it had nothing to do with him). I also took out one for myself for same amount. I organised and paid for both as auto. deducted from my savings account. My partner was a high income earner at the time and I was not. If he died, the morgage would be covered. If I died I left a will stating the insurance goes to my kids (who are from first marriage) and my share of house to my partner (so my kids don't have to hang around waiting for him to die before they get their inheritance!).

I thought all this was a smart move but somewhere down the track the insurance company sold out to another company and I obviously didn't read the fine print (I remember reading a letter) as only this year I discovered I am paying money for an policy I no longer owned. It was only in my partner's name and my policy wasn't even there anymore! I couldn't even find out any info about the policy (even though I was paying for it) - it had to come in writing from my partner. Luckily we're still together and he knew about the arrangement!

Now that we own IPs as well, I think I will stop the insurance next year since the LVR is healthy, as DaveP pointed out - the partner left behind can sell one property if needs be. However if on very low income, the insurance pay out is essential.

Arriety.