Good question – and one often asked by most people when buying a UK property. According to financial website This is Money and Sainsbury’s, four out of ten UK mortgage holders have no life insurance protection for their mortgage.
If you’re looking at properties for sale in London or flats for sale in Manchester, chances are you’re putting every penny towards a deposit, stamp duty and legal fees. Most financial advisors and mortgage brokers will have a crack at trying to get you to take out life insurance as well, regardless of whether you’re looking at new homes in Derby or a property for sale in Islington. It doesn’t matter where you want to buy, life insurance will be sold to you as an important part of the home purchasing process.
But is it really essential?
Sainsbury’s Life Insurance conducted a study that (perhaps unsurprisingly!) put forward a strong case of taking out life insurance on a mortgage. According to their study, one in three 35-44 year-olds (the age group most likely to have dependents) don’t have cover. Furthermore, it suggests that seven million people could leave behind £245bn of unpaid mortgages. Dependents would be left to cope with making monthly repayments or be forced to move out of the family home.
Helen Williams, head of Sainsbury’s Life Insurance, told This is Money: “Mortgage repayments are one of the biggest financial commitments in many peoples’ lives but, as our research shows, unfortunately it is not something that enough mortgage holders have taken steps to protect.”
Whilst all this is very well and good, life insurance is unlikely to be top of your list when you’re making all the payments associated with buying a home. But should it be?
Yes... and no. It all depends on your personal circumstances. Having said that, get the right cover and you’ll get peace of mind without paying over the odds for it. Most lenders will recommend you take out a life insurance policy and in principle it’s a good idea. The problem is that many policies are eye-wateringly expensive, which naturally puts people off. Premiums vary according to age, sex, occupation and health.
If you die or become seriously ill, your spouse or dependents will be financially secure. However, that only applies if you take your time and choose a decent product. As mentioned above, the product you choose depends on your personal circumstances. Think carefully before agreeing a term and work out how much those left behind would need to clear debts.
The trick is to shop around and get the best deal on life insurance.
Your lender’s life insurance product might well be the best deal but don’t automatically assume that to be so. As you did with the mortgage, shop around. You’ll be surprised by the differences between mortgage protection products.
Speaking of differences, take a bit of time out to get the difference between similar policies. There’s life insurance as a whole, level term insurance and mortgage payment protection insurance. Money Saving Expert outlines the differences clearly and succinctly.