Mortgages

Life Insurance

Finances Like most things financial, we are often inundated with offers and advice on whether we should or should not have a particular type of loan/policy. There can be little doubt though, that we should invest in some sort of life policy. Most people decide on life cover when they take on financial responsibilities such as a mortgage.

If there is only one earner with almost total responsibility for any outgoings it is imperative that, should there be an unexpected death, those left behind are able to remain financially stable.

The Life Insurance Market Research Association (LIMRA) recommends people take out 15 times their annual salary, less any death in service benefit provided by their employer. This could enable dependants to maintain their standard of living and may mean that they do not have to face a financial crisis.

 

The list of benefits vary from company to company but some of the main ones could be;

Life stage options - This means you can increase the level of cover without the need for a further medical assessment. Even if your circumstances change by having to cover a bigger mortgage, getting married or the birth of a child.

Guaranteed fixed monthly payments - This allows you to budget more easily. Your monthly premium is based on personal circumstances including age, sex, state of health.

Terminal illness cover - early pay out if you are diagnosed with a terminal illness at no extra cost.

You may wish to opt for Mortgage life insurance. This is the term that is usually given to life policies that are specifically taken out to cover the repayment of a mortgage in the event of death or critical illness. They are also known as decreasing term assurance policies and run in tandem with your mortgage. This means that the level of cover decreases as the capital amount borrowed decreases, yet there is still always the guarantee that in the event of a pay-out the whole amount outstanding on your mortgage will be repaid.

This policy type only works with repayment mortgages where part capital and interest is repaid monthly. If however you take out an interest only mortgage where each month your repayment only pays the interest element of your loan then the life cover will remain the same throughout the term and so payments for the life cover will also remain the same because the outstanding debt remains unchanged throughout the mortgage term.

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