Do you need life insurance for a mortgage?
Ready to start the next chapter of your life? Find out more about life insurance for mortgages and settle into your new home.
Provided by L&G.
Is it a legal requirement to have life insurance with a mortgage?
No, it’s not a legal requirement to have life insurance with a mortgage – but there is a caveat. Mortgage providers can request that you take out life insurance as a condition of approval.
So, while you may be able to secure a mortgage without life insurance, the mortgage provider has the right to deny the application if it forms part of their terms.
Benefits of life insurance with a mortgage?
Protect your family home
The amount you can borrow on a mortgage is determined by the salary (or salaries) of the applicant/s. Applying for a mortgage with a partner may mean that you can afford a home you might not have been able to on your own. But what happens if you secure a mortgage as a couple, and one of you passes? If you pass away and your partner or spouse makes a valid life insurance claim, you can dedicate a cash amount to support with the mortgage. This means they can continue to live in your shared home, even when you’re not around to help.
Assurance for the mortgage provider
While life insurance isn’t a legal requirement, many mortgage providers won’t approve a mortgage without it as it could cover them in the event of your death. Taking out a life insurance policy could increase the likelihood of you being able to buy your dream home, as you’ll have access to more potential lenders.
Cover if you’re ill
There are also add-ons to life insurance policies. Critical illness cover for example could provide financial support to help you cover mortgage payments, if you develop a critical illness or a condition covered by the policy.
Life insurance options with a mortgage
Not all life insurance is the same – get a policy suited to your needs with our range of life insurance cover:
Decreasing life insurance
Often people may take out a decreasing life insurance policy to secure a mortgage with their lender. With this type of cover, your level of cover decreases over time as you pay off your repayment mortgage, but your monthly payments will stay the same. An advantage of this policy is that it’s often more cost effective than a level policy.
Depending on the amount of cover you need, Sainsbury’s Bank Decreasing Life Insurance can start from as little as £5 a month.
Level life insurance
With Level life insurance the cover amount and premiums stay the same for the duration of the policy, unless you make any changes. Simply put, you would get the same payout if you made a valid claim at any point during the policy term. Because of this, it’s usually a bit more expensive than decreasing life insurance. A non-diminishing payout could provide even more security and comfort for your loved ones in the event of your death.
Joint life insurance
Joint life insurance covers you and your partner – if one of you passes, the other gets a payout. Once a named person on the policy dies, the joint life cover ends.
Joint life insurance protects you whether you’re married or not.
Critical illness cover
If you were diagnosed with a critical illness, it could impact your lifestyle and your financial situation. You may need to take time off work, make modifications to the house or incur additional childcare costs. Critical illness cover can offer protection if you become seriously ill with a condition covered by the policy, and the payout can help with the costs of bills if you’re unable to work.
Adding critical illness cover to a policy means if you were diagnosed with a critical illness outlined in the policy, you’ll have extra peace of mind when you need it most.
Do I need life insurance if I don’t have a mortgage?
No, you don’t need life insurance if you don’t have mortgage – but it could still benefit you and your loved ones. If you held life insurance, in the event of your death, the payout of a life insurance claim doesn’t always have to go towards a mortgage.
It could:
- Cover your loved ones’ living expenses.
- Put money towards your children’s future.
- Take care of bills and debts for your financial dependants.
When it comes to taking out life insurance, it’s best to think about the impact that might be felt by those dependent on you if you weren’t around to support them. If your sudden lack of financial support would cause difficulties, then life insurance could be a good idea.
Need more information about life insurance?
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