Your mortgage is likely to be your biggest monthly outgoing. But what would happen to the repayments in the event of your death? In the latest article in our series on protection from mortgage intermediary Alexander Hall, Hatice Karadal (pictured), manager of the protection team, talks us through life cover and how it can provide a vital safeguard.
What is Life Cover?
Life cover is a type of insurance that enables you to leave behind a lump sum of money for your loved ones in the event of your death. If your loved ones rely on you to pay the bills or bring home the income, having life cover in place means you can provide a financial safeguard.
For most people this can be used to support your family for a number of years by replacing the loss of income, or by paying off a mortgage debt. Taking out a mortgage loan is one of the largest financial commitments most people make in the UK, so it is important when considering life cover that you know what types of cover are available, the amount of cover that suits your needs and how long you might need the cover for.
There are two types of life cover. The first is ‘decreasing term life cover’, which is generally the cheapest option, as the amount of cover you have usually reduces in line with your outstanding mortgage balance.
The second type is ‘level term life cover’, where the amount of cover stays the same over the length of the policy. ‘Level term cover’ comes at a higher cost when compared to a decreasing term, but would be more appropriate if you want a leave a surplus amount of money for your family or pay off an interest-only mortgage.
When might you need life cover?
Your mortgage is likely to be your largest monthly outgoing. If you are the main breadwinner living with others who rely on you to pay the mortgage, it is important to consider how they would meet the monthly repayments without your income.
One in four UK breadwinners do not have life insurance and leave their family with very little savings, as they are unaware of the consequences this can have on the household. Unfortunately, your mortgage lender will expect you to keep up with your mortgage repayments even if the unexpected happens.
Arranging life cover will give peace of mind for when your family needs it most. It will provide a lump sum of money to help pay off the mortgage debt, leaving your loved ones in their home debt-free.
Get cheaper life cover while you can
A common misunderstanding among customers is that life cover in only suited for older people with families. However, if you are single with no dependents, premiums are likely to be more competitive when compared to waiting and arranging the cover a few years later.
Life cover premiums are based on your age, so the younger you are the lower the premiums will be. The average age of a first-time buyer in the UK is 30 years old. And, for a non-smoker age 30, Life cover of £250,000 will cost as little as £8 per month, or £2 per week. The average cup of coffee is £2.90!
How can you get covered?
Most of us tend to put off thinking about bad things and how to protect against them. However, whether you are single or have a family, it is important you speak to a trusted adviser. My team and I are impartial and focus on finding you a suitable level of cover at the right cost. As our clients often comment, “you cannot put a price on peace of mind”.
