How Life Insurance Can Protect Your Mortgage
Life insurance policies are incredibly helpful to ensure your loved ones are able to afford living expenses and pay off bills, including your mortgage. This is important if you have dependents that would not be able to afford the bills without your income. There are specific policies designed to provide this.
This type of life insurance is known as mortgage life insurance, or decreasing term life insurance. Taking out a policy of this kind is a common consideration when you buy a house, and it can be used to pay off a repayment mortgage.
Why should you protect your mortgage?
A mortgage is usually a family’s biggest monthly expense, and your home is probably the family’s largest asset. If you had no form of insurance in place, your assets are combined to create your estate. If there is not enough in your estate to pay off the mortgage, the lender will repossess the property.
This could be devastating for your family, who are already dealing with a loss, without having to worry about keeping a roof over their heads too. In many cases, it can be difficult to keep paying the mortgage without that extra income that has now been lost.
Taking out life insurance for your mortgage can be a huge weight off your mind and can create some reassurance for your family.
How does mortgage life insurance work?
Mortgage life insurance is ideal for repayment mortgages. It can provide a pay-out if you were to pass away within the term of the policy, which can be a financial lifeline for your partner or children.
It works very closely with your mortgage; the amount of cover will decrease over time, in line with your mortgage repayments. As you pay your mortgage each month, the amount of cover will reduce with it. What is more, the mortgage life insurance cover will last as long as your mortgage term.
It is the perfect type of cover if you are looking to help your loved ones pay off a repayment mortgage, and it is a very cost-effective way to protect your mortgage.
What are your other options?
Other types of life insurance can also be used to help pay off a mortgage, so it is important that you consider your options. For instance, level term life insurance can be used to pay off an interest-only mortgage.
Both level term and mortgage protection insurance pay out in a cash lump sum, but they are designed with different purposes in mind. Level term life insurance is a popular solution for ensuring loved ones have financial help for things like everyday living costs, funeral costs and childcare, as well as an interest-only mortgage. Mortgage life insurance is designed specifically to cover the cost of your mortgage.
Your options in regards to the right policy can be dependent on your circumstances, and how you want to help your family financially. To find more advice on the right policy for your needs, get in touch with our team of UK advisors.
