The importance of life insurance when taking out a mortgage
There is an array of different insurance products offered to first-time home buyers and home movers when applying for a mortgage or remortgage and life insurance is probably the most importance of all. A life insurance policy protects those who are closest and most dear to you in the event of your untimely death.
Different Types of Life Insurance
There are many different types of life insurance products which makes it very confusing to anyone applying for their first mortgage or a remortgage. Below are three of the most popular life insurance policies that you could consider buying with your next mortgage:
- Single life insurance – normally based on a fixed amount of money that is paid out on the death of the policy holder or a decreasing death benefit that pays out the balance owing on your mortgage at the time of death
- Joint life insurance – normally based on a first death basis which can be based on a fixed sum of money or on a decreasing sum of money as discussed above to protect your mortgage.
- Critical illness insurance – this kind of policy will pay out a sum of money if you suffer from an illness that the policy covers, you do not need to die to be paid out. This kind of policy can be based on a single life or a joint first claim policy and can be based on a fixed sum of money or on a decreasing sum of money as mentioned above.
Do you really need home emergency cover and additional boiler insurance? What’s the difference between buildings and contents insurance? Does life insurance cover illness? What is a mortgage payment holiday?
All these questions and more can make it seem a dizzying task.
There are a few policies which are essential. Most mortgage providers insist on buildings insurance, although you shouldn’t need to purchase it from them and can shop around for the best deal.
Home contents insurance is always a good idea, especially if you have any expensive jewellery or electronic equipment.
If you are taking out a joint mortgage or have dependant children, life insurance is the other necessity. Compare a number of quotes before you commit – Consider visiting lifeinsurance.org.uk as they let you check out premiums and levels of cover before making a decision.
Don’t Forget Life Insurance For Your Partner
Life insurance covers your partner or dependants in the event of your death. You can also take out policies to include critical illness cover.
This means that, should you die prematurely or have to take early retirement due to illness, your partner or children are not left liable for the remainder of your mortgage repayments.
The death of a loved one is a hard enough time as it is, without suddenly being saddled with huge amounts of debt on top. If you take out an interest-only mortgage, your life insurance premiums will remain constant throughout the lifespan of the policy.
If you decide on a repayment mortgage, the premiums will decrease over time as your mortgage balance lessens. Whichever you choose, the peace of mind that comes form knowing your loved ones will be protected from debt should you not be there is priceless.
It can be strange arranging life insurance when in a normal situation you would never benefit from buying a life insurance policy unless you had a critical illness policy that paid out on a illness covered. Life insurance provides you the policy holder with ‘peace of mind’ and the knowledge that your family will be taken care of in the event of your death.