Do you need life insurance for a mortgage?
There is no legal requirement for you to take out life insurance when you get a mortgage, however it can make sense to have financial protection in place. If you are a homeowner, a mortgage is likely to be the biggest debt you leave behind should the worst happen, so having a policy in place can help give you peace of mind.
Average UK house prices were £228,147 in January 2019* – with prices this high, a lot of homeowners will have a mortgage to pay so its understandable that people want to spend any spare income wisely. However, if you have children, a partner, or other dependents living with you who depend on you financially, taking out life insurance to cover a mortgage could be considered important expenditure.
If you’re buying your home with your partner, your mortgage repayments could be calculated on the basis of two salaries. If you or your partner died while your mortgage loan was still outstanding, would one of you alone be able to keep up the regular mortgage repayments?
Mortgage life insurance can help protect the family home by paying out a cash sum if you die during the length of the policy. This could be used by your family to help clear the outstanding mortgage debt. Your loved ones could then continue living in your family home without worrying about the mortgage.
The types of life insurance we offer
There are two main types of life insurance that can help protect a mortgage. The right policy for you depends on your individual circumstances.
Life Insurance – this could pay out a lump sum if you die during the length of the policy, and help your dependents to pay the mortgage (interest only) or help maintain their lifestyle and everyday living expenses.
Decreasing Life Insurance – this is designed to help protect a repayment mortgage so the amount of cover reduces roughly in line with the way a repayment mortgage decreases.
If you do take out Life Insurance or Decreasing Life Insurance you can add Critical Illness Cover to your policy at an extra cost. Find out more about Critical Illness Cover here.
Please just remember that these policies are not savings or investment products and have no cash value unless a valid claim is made.
A home is so much more than an asset, and whatever type of life insurance you choose, paying a small monthly premium can help your family carry on living there if you are no longer around.