Do I Need Life Insurance With a Mortgage?

Buying a home is likely to be one of the biggest financial commitments you'll make. That raises an important question: what would happen to the mortgage if you died… this is where life insurance can form an important part of your financial planning.

Is life insurance compulsory when getting a mortgage?

Life insurance isn't generally a legal requirement for obtaining a mortgage.

However, that doesn't mean it isn't worth considering.

If you have a partner, children or anyone else who relies on your income, consider how they would manage the mortgage and other household expenses if you were no longer there.

How does life insurance work with a mortgage?

Life insurance is designed to pay out if the insured person dies during the policy term, subject to the policy's terms and conditions.

There are different ways cover can be structured.

For example, some people choose cover intended to reduce broadly alongside a repayment mortgage, while others choose a fixed amount of cover for the duration of the policy.

The right approach will depend on your circumstances and what you want the policy to achieve.

What if you're buying a property as a couple?

If you're buying with a partner, it's worth considering what would happen financially if either of you died.

Could the surviving partner afford the mortgage on one income?

It's easy to assume that the highest earner is the only person who needs protection, but the financial impact of losing either partner can be significant.

For example, childcare and other responsibilities carried out by a partner can have a substantial financial value even if that person earns less.

What if I already have life insurance through work?

Some employers provide death-in-service benefits.

This can be valuable, but it's worth understanding exactly what you have and whether it would provide enough support for your family's needs.

It's also worth remembering that employer benefits can change if you change jobs.

Is life insurance the only protection I should consider?

No.

Life insurance is primarily concerned with what happens if you die. You may also want to consider what would happen if you're alive but unable to earn your usual income.

Critical illness cover and income protection are designed for different circumstances and can form part of a wider protection plan.

How much life insurance do I need?

There isn't one answer that suits everyone.

Your mortgage balance is one consideration, but you might also want to think about other debts, household expenditure, children, childcare, education costs, existing savings and any protection you already have.

The aim isn't simply to buy the largest policy possible. It's to identify appropriate cover for your circumstances and budget.

Review your protection

If you have a mortgage – or you're about to take one out – it's a sensible time to review your protection arrangements. We can help you understand the different types of cover available and assess what may be appropriate for you and your family.