Why do I need life insurance?

There are many reasons why taking out a life insurance policy makes sound financial sense, not least because of the peace of mind you’ll have if the worst was to happen. If you take the right steps to protect your loved ones and your assets now, you’ll save your family and people who might be affected by your death or illness considerable stress.

Do I need to take out life insurance to get a mortgage?

Contrary to popular belief, you do not need to take out life insurance to get a mortgage.

One of the main reasons why people take out life insurance is to ensure that their families can carry on paying the mortgage, in the event of your death. The consequences of not being able to pay your mortgage could end in your family being forced to sell their home and move out.

Why do you need life insurance?

We understand that insurance isn’t the nicest thing to talk about, but we want you to be able to stay in your home no matter what might come your way.

Not only can we make sure you stay in your home, but we can also help ensure you maintain your current lifestyle, so your family don’t have to go without things such as family holidays, Christmas and birthday presents, and you don’t have to worry about paying the bills every month.

Unfortunately, we cannot always predict the path that our lives will take. Certain things can take us by surprise, including:

• Unemployment
• Illness
• Accidents
• Death

Depending on your situation, there could be various outcomes that leave either yourself, your family, or both, under a certain amount of pressure that could’ve been avoided with a little forward-thinking and the help of our protection advisers.

If you’re not sure why taking out a life insurance policy is for you, here are the top four reasons why you should be thinking about doing just that.

1. You have children

If you have children, whether they’re still at school or college or have flown the nest, they’ll have their own set of financial needs that you’ll want to plan for if the worst was to happen to you. A life insurance policy will give you peace of mind that your family’s financial future is protected, whether that means covering the essentials after the loss of your income, paying for their education or providing a monetary gift to use as they like.

2. You want to cover the cost of your funeral

Nobody wants to think about how they’ll pay for their own funeral, but if not now, when? The cost of a funeral has become more and more expensive – according to a 2022 SunLife report, the average cost of dying is £8,864, with a basic funeral costing £4,056. If you take out a life insurance policy, you can use it to cover the cost of your funeral and remove the financial burden from your family during what’s likely to be a distressing time.

3. You have a mortgage on your home

If you have an outstanding mortgage on your home, how will you cover the outstanding repayments if you become seriously ill and can’t work or pass away? If you have a partner, will their income be enough to cover them? A life insurance policy and critical illness protection will pay out a lump sum and enable you or your dependents to pay off your mortgage balance if things take a big turn for the worse.

4. You want to cover your inheritance tax burden

Depending on the value of your assets when you die, Inheritance Tax (IHT) is the tax your family will have to pay. If your assets amount to more than £325,000, your estate will be liable for the standard IHT rate, which in 2022/23 is 40%. You can take steps to reduce your loved ones’ IHT liability by, for example, leaving everything over the £325,000 threshold to your spouse, civil partner or charity. However, if you take out a life insurance policy, you can cover your IHT bill with a lump sum payment and save your family the stress of having to find a way to fund it.

Worst case scenario: how could you pay your mortgage without your salary?

If you’re the breadwinner in your household, do you know who would pay your mortgage off if you were unable to work for 6+ months, lost your job, or even worse if you were involved in an accident and died? These aren’t nice things to think about but it’s important to consider all eventualities when it comes to protecting yourself and your family. And having life insurance could protect you from that, and prevent unnecessary worry.

What insurance do you need for a mortgage?

The only insurance you need as a legal requirement when getting a mortgage is buildings insurance.

Buildings insurance covers your home against any damage that may need to be repaired. This type of insurance only applies to the structural aspects of your home i.e. the walls, roof, floors, fixtures and fittings etc.—not the actual contents of it.

However, there are lots of other types of insurance that will benefit you and your family’s future. Mortgage insurance covers the cost of your mortgage if you become unwell or unable to pay the bills and similar to life insurance, it offers a level of security against the worst. Contents insurance is another good one to consider when buying a home, protecting your belongings within the house from theft or natural damage.

How we can help keep you protected

Our protection specialists can look at any provisions you currently have in place to see if these are sufficient enough for what you need.

Perhaps you have employment benefits, such as sick pay or death in service which could help make things a bit more comfortable for you. However, you may find that this isn’t enough to sustain your current standard of living, or even less than this. If this is the case, we can look at what solutions there are that could, for instance, give your dependents a long-term wage, or pay off your mortgage entirely. And the best part is, these provisions don’t even need to be expensive!

Bespoke solutions and extra benefits

Here at Mortgage Decisions, we understand that there are no two people the same. That is why we look at every case on an individual basis so you are getting the cover that is specific to you.

If you would like more information, feel free to get in touch with one of our expert advisers. With mortgage and protection advisers in Winchester, Southampton, Farnham, Bishops Waltham, Alton, Chandlers Ford, Alresford, Romsey and Park Gate, you are never too far from insurance advice.