Owning your own home is a great feeling but also a massive financial commitment. Like most people, you’ll most likely have to take out a mortgage on the property. However, if something were to happen to you, the debt wouldn’t just disappear. Instead, the lender would expect your family to continue making payments.
For many households, this could be a problem, especially if you are their main source of income. Without you, they may struggle to afford the payments without impacting their lifestyle. In this case, it may be wise to purchase life insurance to ensure they never carry such burdens.
Here are some compelling reasons to consider using life insurance to cover a mortgage.
Financial Security For Your Loved Ones
One of the main benefits of life insurance is the peace of mind it provides. In the unfortunate event of your passing, this insurance ensures that your loved ones will not be burdened with mortgage payments.
The policy can help pay off the remaining balance, allowing your family to stay in their home without any stress. But you don’t have to use life insurance just to cover a mortgage. It can cover other expenses such as daily living costs, education fees for your children, and even a funeral.
Keep Your Home In The Family
Without a solid plan, your family might face the tough decision of selling your home just to pay off the remaining mortgage balance. By having mortgage life insurance in place, you provide a financial buffer that can help keep your home within the family, maintaining those treasured memories and connections.
Decreasing term life insurance is often best suited for protecting a mortgage. It works by reducing the overall cover amount as you pay off your mortgage. The aim is to align the cover amount with the outstanding balance so that the payout is sufficient to cover the loan.
Affordability
It’s a common myth that life insurance is too expensive or not worth the money. But in truth, cover can be much more affordable than you may think. So long as you’re in general good health and of a certain age,, you should be able to get cheaper premiums.
By comparing quotes from different insurers, you can find the best deal available. Remember that the investment in life insurance serves as a safety net for both you and your loved ones, providing peace of mind at a price.
Flexible Cover Options
Life insurance offers a variety of options that can be tailored to fit your specific financial situation and needs. Whether you prefer a whole or decreasing term policy, you can find a plan to match your mortgage.
While decreasing cover is tailored to your mortgage, whole life insurance pays out regardless of when you die. This means that your loved ones can benefit from a more substantial payout, irrespective of the outstanding loan balance at the time of death.
Such a policy can provide additional financial security as it can be used for various purposes, whether that’s settling debts, funding future expenses, or managing everyday living costs.
Another option available is critical illness cover. This add-on pays out a lump sum if you are diagnosed with a specified serious illness that hinders your ability to work. The policy will pay out a predetermined amount, offering you financial relief during a challenging time.
How Much Cover Will I Need?
Ideally, you should have enough to pay off your entire mortgage if you pass away before it’s fully repaid. However, if you want the policy to cover more than just your mortgage, you’ll need to evaluate your overall financial obligations and your family’s needs.
Key factors to consider include:
- Ongoing living expenses
- Utility bills
- Your children’s future needs, such as education costs
- Any other outstanding debts like credit card
If you’re unsure about the type or amount of cover you need, consulting a financial adviser or insurance specialist is a good idea. Don’t delay in getting cover, particularly if others rely on your income.
