Most mortgage lenders will encourage their customers to protect their financial interests and take out a life insurance policy alongside their mortgage. Even though thinking about death and leaving family behind is difficult, failing to sort out a good life insurance policy ahead of time could expose your loved ones to financial and material risks.
Being covered could mean the difference between your dependants struggling and them being able to pay off any remaining mortgage costs while still being able to maintain a similar standard of living.
‘Term insurance’, the most effective form of life insurance policy, pays out an agreed amount—called the ‘sum insured’—as a lump sum or a regular income if you pass away within a specific period of time (known as the ‘term’). You will be able to choose the length of the term as well as the size of the payout.
According to experts, a good sum insured figure is around 10 times the annual income of the primary earner in a family. ‘Whole-of-life’ insurance is another common policy. This type of insurance will offer protection for your lifetime until your passing. With the latter, premiums tend to be much higher.
Common policies tend to start from just £5 a month, but can vary due to a range of factors and whether or not you opt for add-ons such as critical illness cover. When looking around for insurance, make sure you compare a wide selection of policies to find a deal that best suits your needs. Look for additional perks, too; some providers will offer cash gifts or vouchers and certain employers provide ‘death in service’ benefits.