MILLIONS of Brits dream of owning their own home, but getting a mortgage can come with a long list of insurance and financial requirements.
One question that often leaves first-time buyers scratching their heads is whether they need life insurance before a lender will approve their mortgage.
Explore life insurance options with Polly Life Insurance
The good news is that you do not legally need life insurance to get a mortgage in the UK.
Having a policy could provide an important financial safety net for your loved ones if you die while still owing money on your home.
Find the right life insurance policy for you
If you’re buying a home or taking on a mortgage, it could be worth considering how your loved ones would cope financially if you were no longer around.
Polly offers life insurance designed to help financially protect your family, with cover from £5 a month.
Its policies include level term, increasing and decreasing term life insurance, with decreasing cover potentially suitable for those looking to match their cover to a repayment mortgage.
A life insurance payout could be used by your loved ones to help pay off some or all of the remaining mortgage, as well as cover household bills and other financial commitments.
Myth 1: You legally need life insurance for a mortgage
There is no legal requirement to have life insurance when taking out a mortgage.
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If a lender needs it as part of its offer, it will be made clear before you agree to the deal.
Buildings insurance, on the other hand, will be required before you complete on your property.
Mortgage lenders require buildings insurance to protect the property against risks such as fire, flooding and other damage.
Life insurance is designed to financially protect your loved ones and provide a payout if you, the policy holder, dies during the period covered.
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Myth 2: Coverage through my employer is enough
You may already have a form of life cover through your workplace.
For example, an employer may provide a death-in-service benefit, which can pay a lump sum if you die while employed by the company.
However, this isn’t necessarily a substitute for your own life insurance as there could be a significant gap in your coverage.
Different types of life insurance, and the right option depends on your circumstances and the type of mortgage you have.
For instance, decreasing term life insurance can be ideal for a repayment mortgage.
The amount the policy could pay out reduces over time, broadly matching the way the outstanding mortgage balance falls as you make repayments.
Because the potential payout decreases, this type of cover can be cheaper than level term insurance.
With level term insurance, the amount covered remains the same throughout the policy term.
This can be useful where you want a fixed amount of protection rather than cover that reduces alongside your mortgage.
It can also be suitable for an interest-only mortgage, where the amount borrowed doesn’t reduce through monthly repayments.
Myth 3: I’m young, single, with no kids – I don’t need it yet
Life insurance premiums are based on your age and health, so buying cover early ensures you lock in lower premiums.
Because your mortgage debt doesn’t automatically get wiped out when you die, it’s can be a smart move to get cover as a solo buyer.
What happens next depends on your individual circumstances, including who owns the property and what assets are left behind.
Without adequate protection, your loved ones could potentially be left having to continue making the repayments.
In contrast, having a life insurance payout can be used to help clear the outstanding mortgage, depending on the type and amount of cover you have.
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This could make it easier for your family to keep the property rather than having to sell it to repay the debt.
This promotion is brought to you by Clark Insurance UK Ltd trading as Polly and Polly.co.uk is Authorised and Regulated by the Financial
Conduct Authority and who are entered on the Financial Services Register under number 603273. Registered in England and Wales, company number 07279489. Registered Office: The Hub Aztec West, Almondsbury, Bristol, South Gloucestershire, BS32 4RZ. Policies and premiums are subject to underwriting. Terms and conditions apply.