Do I need life insurance for a mortgage?

Having an offer accepted on the house of your dreams, followed by the confirmation of your mortgage approval can be one of the happiest moments of your life. After all of the stresses and worries, you are finally able to relax and look forward to life in your new family home.

Once you are set to move in, all that is left to do is sort out the correct insurance policies. However, for many people, especially new homeowners, figuring out which insurance policies to take out can bring some added confusion.

With so many different insurance policies out there, knowing which policies are a legal requirement versus those that are optional can often be uncertain.

When buying a house, there is so much to consider. How to protect it is definitely one of them. However, does life insurance fall into this bracket and is it a legal requirement for a mortgage? In this article, we will answer these questions and bring much-needed clarity to those who are uncertain about the topic at hand.

Can I get a mortgage without life insurance?

Yes, you are able to get a mortgage from a mortgage lender without taking out life insurance. Despite many people assuming it is a legal requirement to do so, it is in fact not!

However, that is not to say it isn’t recommended. Despite it not being a legal requirement, it is certainly a sensible option to consider.

A life insurance policy can be a vital piece of insurance to take out when dealing with a mortgage. One of the main reasons people do so is to protect their families and their home. In the event of your death, a life insurance policy would ensure that your family would be able to continue paying the mortgage. After all, should this unfortunate event take place, the last thing a loved one wants for their family is to be forced to sell their home and move out. A life insurance policy would mitigate any of these fears.

At Eden Hawk, our team of dedicated mortgage brokers and advisors fully understand the ins and outs of the home purchasing process. If you remain uncertain about which insurance policies are a legal requirement when getting a mortgage, our team of experts will be on hand to assist. If you require assistance, one of our advisors will be able to talk you through the process, bringing much-needed clarity to the situation at hand. Please contact us today for a free no-obligation initial consultation.

What insurance do I need when buying a house?

Your house is likely to be your largest asset, so in that sense, it seems sensible to protect it at all costs. There are various insurance policies that can help to protect yourself and your property, which we highlight below.

Mortgage Life Insurance

Whilst not a legality, taking out a valid life insurance policy during a mortgage term can be vital in particular circumstances, such as the ones we mentioned above.

Taking out life insurance will ensure protection for your family and your property, in the event of your passing. In this unfortunate situation, the life insurance policy would be provided as a lump sum payout and would help to alleviate any worries of repossession or mortgage debt. On top of this, critical illness cover can be added to the policy, allowing you to make an early claim in the event whereby you face a serious illness and are unable to work.

When it comes to a life insurance policy, the exact type of mortgage you currently have will determine which form of insurance remains the most suitable.

Level-term life insurance – With level-term life insurance, the term (length of cover) is set to the same amount as the mortgage duration. For example, a 30-year mortgage term would be matched. Also, the sum insured will match the amount borrowed. This way, there will be enough money to pay off your mortgage in the event of your passing, before the end of the term. For these reasons, this type of life insurance is relevant to cover an interest-only mortgage.

Decreasing term life insurance – When it comes to decreasing term insurance, your payout amount reduces over time. This type of life insurance policy remains relevant to that of a repayment mortgage, whereby you pay off the loan with interest. When dealing with this type of life insurance policy, the sum assured reduces in line with that of your mortgage balance. Therefore, as you pay off your mortgage over the years, the total amount you owe the lender gets smaller, so in the event of your passing before the mortgage term has ended, the sum needed to cover it is lower.

Income Protection Plan

Income Protection provides a regular tax-free income if you are unable to work due to an accident or ill health, regardless of whether you are employed or self-employed.

Once the benefits have started, they will continue until the insured person returns to work, dies or the policy comes to an end. Usually, the policy will have a fixed term to the standard retirement age.

Contents insurance

Contents insurance is designed to protect the things inside your home. This basically includes any of your belongings inside the family home. For example, any item you would take with you were you to move home.

This type of insurance will cover you against, theft, loss or damage to any of your personal and home possessions. It will cover both your possessions and your family’s possessions, provided they are living with you.

How much is a mortgage life insurance policy?

When it comes to the price of a mortgage life insurance policy, there is no fixed amount. Your personal circumstances will directly reflect on the price of the life insurance cover.

When applying for life insurance policies, you will be asked a particular set of questions concerning:

• Your age – The older you are, the higher life cover premiums you will be expected to pay, and vice versa.
• Health, medical history and well–being – Any type of significant pre-existing health or medical conditions, that increase your risk of dying earlier, will lead to an increase in your life cover premiums.
• Lifestyle Choices – Your lifestyle choices such as smoking status and alcohol consumption are mitigating factors when it comes to the cost of your mortgage life insurance policy. You will be required to provide an honest declaration and it will need to be supported by your GP.
• Level and length of cover required – Both of these requirements will affect the cost of your claim.

Eden Hawk – Helping you make the right decisions

Whilst some of these types of insurance are not a legality when taking out a mortgage, they offer protection and provide peace of mind for you and your family. The types of cover mentioned in this article will help to financially support your family, if you are no longer around, as well as protect your property should something unexpected happen.

At Eden Hawk, with access to a range of leading insurers, we assess the type of cover that will be most important for you and the level of cover you require to:

• Protect your income
• Protect you if you become critically ill
• Protect your family should you die

If you have recently taken out a mortgage or are looking to do so, but remain unsure about the appropriate course of action for taking out a life insurance policy, the team at Eden Hawk is on hand to assist you.

At Eden Hawk, our dedicated team of mortgage advisors will be able to give expert advice on the matter at hand, guiding you to take the most appropriate course of action, leading to a healthier and happier financial future.

Due to being a leading mortgage broker in South Wales, we are proud to be able to offer our clients the most competitive solutions and offers.

If you are currently looking at taking out life insurance with your mortgage, but feel a little lost or confused, contact us today to receive a free no obligation initial consultation. A member of our expert team will then be in contact to assist you, answering any questions or queries you may have. As a leading mortgage broker, our goal at Eden Hawk remains simple: to help plan and strengthen your financial future.