Hi dwightvanman.

This really depends upon how your life insurance policies have been set up. We, and quite possibly your trustee, are limited to the extent that we can advise you about this. That's because advice about this subject should come from a regulated financial adviser.

I'm not sure what you mean by "only the balance which was accepted by your creditors". How is this different to the full outstanding balances?

The simple way to answer your question is that it just the same whether you are in a Protected Trust Deed or not. Either way, if your policies do not pay out a sufficient amount to cover all of your liabilities, including your mortgage, then your house may have to be sold instead.

Ok, so if my total debt when I went into the trust deed was 50k and the creditors accepted 20k on the basis of my afforability (just for example, cant remember the exact figures) and I die during the trust deed term, am I right in thinking that the total outstanidng balances rather than the figures that were agreed as part of the trust deed are what would be applied to my estate?

Hi dwightvanman.

The creditors didn't really accept the lower figure. What they accepted was the terms of a trust deed that was projected to collect in this sum of money, but which might collect a different sum of money if things changed for the better or worse.

If you were to pass away the trustee would, to the extent that it's possible, seek to recover enough to fully repay your debts, the trust deed fees, and possibly some interest on the debts.

Might be worth talking to a financial adviser in respect of how your existing policies are set up.

Thanks, thats what I was wondering. So essentially I just need to make sure I have enough life cover for the full amount of the debts plus the mortgage.

Well... answering that question might be considered to be financial advice, which we're not qualified or regulated to provide I'm afraid.

Sorry - definitely wasnt asking for financial advice! Just for clarification on the figures I need to consider, which you've done, so thanks!

Hi dwightvanman,

Are you having some health difficulties that has prompted you think this seriously about this? How long left do you have on your Trust Deed?

Like Kevin and TDA have advised the balance that would need to be paid under these circumstances would be the total debt and possibly interest and the fees and outlays of the Trustee. This could potentially amount to more than the total debt of £50,000 that you went into the Trust Deed with.

If there are some health issues then it’s a good idea to discuss this with your Trustee so they can discuss specifically how this would impact on everyone.

No health issues (touch wood), just a close friend died recently and his partners been left with a mortgage as his life cover wasnt enough to clear off the mortgage and his debts. Just got me thinking that the main reason I went into the trust deed was to give the family financial stability which, if I died, they definitely woulndt have...

Hi swightvanman,

Good to hear that there are no health issues.

I can understand with a close friend passing away why you would think about things like this and it’s always good to be prepared.

A review of the life insurance does sound like a good idea.