Whether you are buying your first home, moving house or remortgaging, it is a good idea to review your insurance requirements. Scroll down if you would like to read a real-life case study or our FAQs.
The main area of concern for most people is what would happen if you or your partner were to pass away. Life Insurance is a way of ensuring funds are available to repay the mortgage, should the mortgage owner pass away. The most cost effective policy is a Decreasing Term Policy which means that the initial sum assured is the same amount as the loan. The sum assured reduces over time as the mortgage is repaid.
Alternatively there are Level Term policies available, this means that the sum assured remains the same throughout the term. This provides additional financial security to the beneficiaries, as the mortgage loan reduces over time.
These plans can be set up on an individual or joint basis.
Could you afford your mortgage repayments should you be incapacitated due to accident, injury or illness?
Most people do not consider the implication of an accident, injury or illness which stops them being able to work. Do you know how long your employers would provide sick pay for? Some people have excellent benefits at work but that is the exception, rather than the norm. It is highly recommended you look into this, as if you can’t work and you no longer get paid it is not only the mortgage you need to pay, but also basic bills such as food and utilities.
Income Protection policies are designed to provide cover for this. These policies provide a monthly ‘income’ of up to 70% of your gross income should you be signed off work due to ill-health or injury. The policies are also available to a house person or a full-time carer. Income Protection plans are available up to a maximum term which runs until the expected retirement date. A ‘deferred’ period is chosen at the outset and usually matches the sick pay available from work. This means that the monthly income is available, after the deferred period has ended, following the first day of ill-health.
Have you considered the implications if you or your partner suffered a serious illness like Cancer or Cardiac Disease?
“Don’t worry, I am fit, healthy and young, I can’t see me having a serious illness”…until it happens! If it does it is then too late to insure. The best time in your life to think of this cover is when you are fit, healthy and young. This makes it the most cost effective it will ever be. The average age of a critical illness claimant with Legal & General in 2018 was 48 years.
Ideally, you should purchase enough cover to help you get back to full fitness, perhaps helping to pay for medical treatment which would otherwise be unavailable or altering your home to accommodate any possible disability. If affordable, you could also cover any debt, such as a mortgage.