Do I Need Life Insurance To Get a Mortgage?
With so many different insurance policies available that it’s not always clear which ones you need to get a mortgage.
Some insurance policies are required by law but some are also optional. You need to be sure that nothing delays you from getting the keys to your brand new home.
Check out the insurances you need in place to qualify for the mortgage.
Do you know what policies you need as legal requirements to buy a new home?
What insurances do I need to get a mortgage?
Buildings insurance is legal requirement when getting a mortgage.
Lenders need to know you have buildings insurance as their main concern is the value of your home.
Building insurance only applies to the structural aspects of your house, not the contents of it.
Life insurance IS NOT required in the same way you get a mortgage, it is still a good idea, but buildings insurance is necessary when you’re buying a new home.
Mortgage Life Insurance
Despite popular belief, you don’t need life insurance in order to get a mortgage.
People take out life insurance to ensure their families can carry on paying the mortgage.
Not being able to pay your mortgage could mean your family being forced to sell their home and move out or even potentially risk being repossessed.
Do I need Life Insurance At All?
My answer is yes. Just to recap on life insurance:
You have two options if you want to protect your family. First, you can buy a policy to cover
your spouse and your children or buy a policy to protect the mortgage or have both.
This is usually what mortgage lenders suggest but do not make it mandatory.
People often have a mortgage debt and other bills that they have to pay. They often use the
credit cards, take loans and build up other types of debt.
If they were to die, they would leave behind a mortgage debt, other bills and credit card debts for their loved ones.
These could seriously impede your spouse’s or children’s financial freedom
Have you already got Life Insurance Policy?
If you have an employee package that includes a tax free ‘death in service’ benefits, it will cover you for a multiple of your salary and you might not need additional life insurance.
Bear in mind if you stop working for that employer, you won’t be covered under their policy anymore.
It’s up to you to work out if this policy is enough to cover your needs or if you need an additional insurance policy.
As Life Insurance mortgage brokers we will also recommend that you protect the full mortgage. We will consider your current life insurance policies and try and make sure the cover you put in place will pay off your mortgage.
How much does life insurance cost?
Younger you are and less likely you’re to die from a medical condition, which means a cheaper policy is likely to be.
But monthly premiums do vary, so it’s good to have a mortgage broker shop around for you.
The price you pay depends on a number of factors such as age, health status, types of life insurance, mortgage term, whether you want a decreasing term or a level term policy
Check exactly what is covered for the level of the monthly payment.
If you have a medical illness and want to make sure it’s covered, this might require some manual underwriting and could possible make your life cover insurance quite a bit more expensive.
What Type Of Policy Suits You?
When you get advice for like insurance the broker will offer you several different protection policies, depending on your financial situation.
Life Insurance – Pays out a lump sum to someone such as a friend or family member.
Critical Illness Insurance – Critical Illness Cover also pays if you fall very ill. Unlike income protection, you pay in a lump sum. This lump sum is the level of cover you state you wish to cover at the beginning of the policy.
Income Protection – With income protection the insurer covers some or all your regular income if you are unable to work.
Nobody wants to think about falling ill or dying. So it’s harder to talk about protection than getting finance to buy your own home. But the type of insurance you would need is critical to many people and is worth considering at any time.
Do I need life insurance if I’m single?
There are various situations where getting individual term life insurance as a single person could be good idea.
An example of this would be, you may have children from a past relationship that you want to provide financial protection for should you pass away.
You may have other family members that depend on you financially.
If you own a property that you would like to leave to a loved one if you were to die, life insurance could cover the cost of your mortgage if you pass away while covered.
Life insurance as a landlord
If you are buying a home as an investor or you’re looking to rent it out, you may still need life insurance.
You might want to increase your life insurance cover to account for the higher mortgage liability.
Life insurance is not the same as landlord insurance, which refers to enhanced coverage for the structure of your home and your possessions (buildings insurance).
In the unfortunate event you pass away, life insurance will help cover the remaining balance.
At Alexander Southwell Mortgages you will not be treated like a number and not get the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
- There is no fee for our service
- We are independent and impartial
- AS Mortgages isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.