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Life insurance for mortgage - is it compulsory?

Life insurance for mortgage - is it compulsory?

12 Jan 2022

Many people think they’ve gotta have life insurance before they take out a mortgage, but this is only half true. There are mortgage providers that will only lend the money to you if you have a life insurance policy or mortgage protection policy in place before completion, but this depends on the lender. It’s not legally mandatory to have a life insurance policy in place before you complete on your mortgage, but it is sensible.

If you’ve got big financial commitments that you don’t want to burden your loved ones with if you pass away, it makes sense to take out life insurance. For the vast majority of homeowners, having financial protection in place makes sense. If you own a property, 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. 

Why should I get life insurance with my mortgage if it’s not compulsory?

As of July 2021, the average house price in the UK is £265,668. With house prices this high, wanna take a guess on the average outstanding mortgage? No? That’s cool, we’ll tell you. In the UK, the average person with a mortgage has £137,934 of outstanding mortgage debt. Would you want to leave your loved ones saddled with over a hundred thousand pounds of debt, and none of your salary left to help pay it off? Nah, we didn’t think so. If you have children, a partner, or other dependents living with you who rely on you financially, taking out life insurance to cover your mortgage is an important expenditure.

How can life insurance help me with my mortgage?

If you and your partner buy a home, your mortgage repayments will 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?

Life insurance or mortgage protection insurance can help protect your home and your family from big financial strain by paying out a tax free lump sum if you die during the course of your policy. This money can then be used however is needed, which means your loved ones can clear any outstanding debts and continue to live the lives they love. 

Do I need life insurance if I don’t have a mortgage? 

The short answer to this is….. Probably. Sure, you might not have a mortgage to pay, but there’s no such thing as a free lunch. When everything but breathing air costs money, leaving your loved ones without your salary and with almost as many outgoings (plus your funeral expenses, and, news flash, funerals are pricey) can put them under a huge amount of financial stress. 

There’s more than just a mortgage to think about, basically. There’s childcare, car payments, bills, food, clothes, school… the list goes on and on. If there are people who rely on you financially, leaving them with a nice little chunk of money can really help them out in an already difficult time. 

If you’re considering life insurance or mortgage protection but you don’t quite know where to start, give us a call here at LifeSearch on 0800 316 3166 for friendly, no strings attached expert advice. Alternatively if you’re already sold, you can contact us for a quote today.  

 

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