Can we do better than the bank’s insurance?

Yes we can. In fact we might save them plenty say 3,672  & with a better plan.


How much total saving is that over the 25 years of the mortgage?

But there is more. What if it doesn't come from 'William's' cashflow?

On the 12^th October  ‘William’ went online requesting if we could do better than the bank which had offered mortgage protection on their new loan.

When you have a new mortgage of $591,000 & as always happens with a bank then yes cover is essential. The bank said they had a cooling of period of 21 days & hence some urgency from the bank.

As ‘Margaret’ had a accident a few years ago & it had cost them an out of pocket $100,000 in medical expenses they were very aware of the need for cover.

The bank as they do ‘offered’ them mortgage protection on each  for the debt of 591,000 & for the monthly  repayments of 3865p.m. for up to 5 years.

It also has in the interim policy schedule that the  

‘Policy Period               5 years (60 months) from the policy commencement date.  Renewal may be offered at the end of the 5 year period.’

The total premium is 820.96p.m.

That is a lot from their cashflow & all it does is look after the bank. It cover the debt & the monthly repayments only.

Fair enough & as we were aware of Margaret’s ongoing health challenges we weren’t going to challenge that when cover is needed by both.

If a disability does occur then how do they meet the other living expenses  such as meals, rates petrol,… as they have cover only for the monthly  payments.  These are the payments for 25 years. 

What if they want to accelerate the debt reduction.?

What happens at the end of 5 years if the bank doesn’t offer to continue with the cover?

The loan would hopefully be reduced but it will still be sizeable.

 They still will need the cover & as they will be 5 years older they are even more likely to need it.

 Maybe they won’t be able to buy other cover when they want it as they could be uninsurable.

When it comes to claim time then the real story comes out.

We are aware that the bank application form has few questions on application but a lot more on claim time.

We have listened to an insurer recently who does insurance directly with a few questions & through advisers who ask you 60+ questions.

The insurer stated that with direct insurance that not only do you pay more but on average 45% of claims are declined. 

Now you want to minimise that risk because at claim time it is too late.

With insurance through advisers then the claims declined is a lot lower which is what you would want.

We have just looked at one company each to ‘compare the two’

William’s premium is 267 p.m. i.e. a saving of 162 p.m. or 1944p.a.

Margaret’s through a different company is 256p.m. i.e. a savings of 173p.m. or 2,076p.a.

i.e. subject to underwriting an annual total premium 6,276

the bank mortgage protection  with a discount is 9,948p.a.

i.e. ideally we might save William & Margaret 3,672p.a.

Yes there are differences in premiums in that we guess that the banks premium is the same for 5 years whereas the insurers go up each year.

·         the bank also offers ‘Involuntary employment benefit’  does not cover ceasing work after contract ends·         our comment is that is usually at most 3 months & is just ‘cheese in the trap’.

Remember the insurance policies we action are non cancellable by the company.

Now we have only started our research. 

We are not aligned & we were instructed by William & Margaret so we work for them. We will research more closely the up to 17  companies that we might use.



The savings might be greater as how is this need to be paid for?

Suppose there is a better way for at least some of the premium to be paid from elsewhere.

If William wants us to give advice then we need & are required to 'know the client'.

 Blake asked for a quote recently which doesn't solve his problem as funding it is always  the challenge.

Of course we will wait until Margaret gets her cover & accepts any offer before we start saving the difference.

If you want to ‘compare the two’ or wish for a strategic review then you are welcome to call or email or contact us through our websites. 

Remember

‘if we were in your financial position what would we do so that you are better off financially in three years time’

William did enjoy our cooked breakfast & you too could check out our menu.

William  did comment that he checked us out with his ex colleagues & we passed all their  tests.

We knew that.

He might check up on the banks as they did in the UK.

John  McAuliffe