Life Insurance
What it is. Why you need it and if you have to have it!
What is Life Insurance
Life insurance, depending on the type of cover you have opted for will provide one or more of the following benefits:
- A lump sum payment to your dependents if you should die
- A regular monthly payment to cover your mortgage and other bills if you should die
- Some policies pay out on diagnosis of a terminal illness too
Why do I need it?
The purpose of this type of insurance is to provide financial support to your beneficiaries in the event of your death.
This could be:
- A lump sum to pay off the mortgage (and / or other debts)
- Provide a regular income to maintain repayments on a mortgage (and/or other debts)
- A combination of both.
Types of policy
Decreasing Term Assurance: This is where the life insurance is specifically to provide cover for a capital and repayment mortgage, the level of cover is taken out for the initial loan amount and then reduces over time, as the balance on the mortgage goes down.
Level Term Assurance: This is a policy that has a fixed amount of cover for the life of the policy. The level of cover depends on what you agreed when the policy was taken out.
Joint or Sole Policies?
Life insurance policies can be taken out for a single person, or as a joint insurance policy for two or more people.
Where a single life insurance policy is taken out you should consider placing the policy into trust for the person you intend to receive the money. This person is known as the beneficiary.
A joint policy is slightly cheaper than 2 separate policies.
🤔 Do I have to have it?
No. The only insurance that is a condition of your mortgage contract is Buildings insurance. BUT if you have a joint mortgage and the surviving partner can’t pay your mortgage on a single income then your home will be repossessed, so if you have the budget available for it, it is advisable to have cover in place. If you are single you would only need life insurance if have dependents.
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