What about joint-life policy

If you decide to take out a joint-life policy, however, there is one extremely important point to be made. You can choose either a `joint-life/last-survivor' policy, which will be marginally cheaper, or a Joint-life/first death' policy.

The latter is the only one worth considering. The former would pay out the proceeds only on the second death, not the first; so, if the main breadwinner of a couple died, the survivor would in effect not be covered by the insurance but would have to continue paying the mortgage.

Term assurance, in any form, is cheap -particularly if youre young when you take it out. These days, however, you can choose various `frills' to add on to your term assurance policy.

The policy can be `convertible', which means that at any time after you take it out (and while it is still in force) you can convert it to another form of insurance policy -endowment or whole-life -at the normal rates applicable to your age when you take it out, even if you have suffered a deterioration of health in the meantime.

A 'renewable' term insurance policy carries with it the right to extend the term of the policy at certain specified times -say, five or 10 years after it has been taken out. An 'increasable' term policy allows you to increase the sum at certain times. Some policies are index linked so that the sum assured rises each year in line with inflation.

All these 'frills' added to the basic term assurance cost more, but they are designed to make the insurance more effective. If you are a non-smoker, you will find that many companies will give you a discount on the rates.

As far as the straightforward mortgage protection policy is concerned, there is one point you have to watch out for.

The policy is worked out on the assumption firstly of a certain mortgage interest rate and secondly that you'll pay off the mortgage within the original term. If, however, you've extended the term at any time, it could be that the sum assured under the mortgage protection policy will not be sufficient to pay off the outstanding sum.

More on Endowment Mortgages

If you have an endowment mortgage, it is still sensible to take out extra insurance. The most cost-effective way of organising this is to have the endowment on a 'single-life' basis and arrange extra term insurance for the other 'life'. The difference in cost can work out astonishingly small.

Suppose, for example, that a married couple have decided to take out a low-cost endowment mortgage for 125000 over 25 years.

If they are both under 30, the endowment premium on a 'joint-life' basis (i.e. where the policy would pay up if either of them died) would cost them 129.39 a month net of tax relief.

If, however, they decided on a single-life endowment policy plus extra term assurance, they would have a choice as to . . .... see: More on Endowment Mortgages

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