Undercover mortgages



Many mortgage lenders will request you have life insurance as a safeguard to cover any outstanding mortgage in the event of your death. Understandably, for many young people buying their first home it probably isn’t something they’ve ever looked at before but is a requirement that needs serious consideration.

 

Life insurance can cover any outstanding debt but ensuring your partner and/or family can continue to live in the family home is the best type of assurance you can give them.

 

What should you look for when buying life insurance with a mortgage?

It really depends on your individual circumstances as there isn’t a ‘one size fits all’ life insurance policy.

 

The two types of life insurance you can get to cover your mortgage are:

 

Decreasing term life cover-This is the cheapest type of life insurance which pays out the amount outstanding on your mortgage when you die. As time passes and your mortgage debt reduces, so does the amount paid out on death. Decreasing term insurance is often cheaper than level term insurance. This is because the premiums that you pay drop regularly until the end of the term.

 

Level term life cover-The premiums and the amount of cover remain the same for the life of the policy (set period of time). If you die outside of the fixed period there will be no pay-out. This type of policy is good for covering interest only mortgages or protecting loved ones. This type of cover is more expensive than decreasing term.

 

Other considerations

 

Already have a life insurance policy

You may be overpaying and if your circumstances have changed since you purchased the policy, it may be worth switching.

 

Looking to move to a bigger home

A bigger mortgage will require an update to any life insurance you already have.

 

Work benefits

Some employers offer a ‘death in service’ benefit which pays out multiples of your salary if you die whilst employed by them. It may not be enough to cover your mortgage but is worth looking at before buying life insurance.

 

For help and advice on life insurance call the Aspire team on 01928 735510 or complete the enquiry form.