Is life insurance a MUST if you have a mortgage?

changingstars

Hi

I am buying my first home on my own, is life insurance essential when getting a mortgage?

I have researched it online but can't seem to find a definite answer. I have seen it is recommended but wondered do i need it to complete on a house?

The house would be in my name and i have no dependents.

Thanks for any advice

Quentin

The only time it is a must is if the lender makes it a condition of getting the loan which you must agree to.

Otherwise no requirement to get it but expect an attempt to sell you life insurance if you use any mortgage broker

kingstreet

If you are single with no dependents, you have no need for life cover unless you want to leave the unencumbered property to a next of kin.

Your executor/administrator is responsible for disposing of the property to settle the estate debts, such as the mortgage. If they have the benefit of the life cover, the above can be achieved.

dunstonh

Nowadays, you only tend to see it as a mandatory requirement on commercial borrowing (business). Not on personal borrowing.

Most people do have life assurance to cover their mortgage as a common sense choice as they dont want their spouse and children kicked out of the house if they die. Single people, living alone with no dependants wont need any life assurance.

DazCM

Sorry to hijack and re-awaken this old thread. Me and my partner are buying our first house together, should both of our life insurance policies pay off the full mortgage should one of us die?

Putting sentiment and grieving to one side for the moment, it just seems to us that if one of us does pass away, surely we'd only need a lump sum to pay off that person's half of the mortgage commitment whilst the remaining person continues to work and pay off their half of the mortgage.

Luckily we both earn the same amount and have no kids, so it could be a 50/50 split.

dunstonh

Me and my partner are buying our first house together, should both of our life insurance policies pay off the full mortgage should one of us die?

See my previous response. However, yes. If either of you die, the other is left with the debt. Can they (or do you want them to) pay the mortgage on a single salary? Or would you rather it was paid off.

Putting sentiment and grieving to one side for the moment, it just seems to us that if one of us does pass away, surely we'd only need a lump sum to pay off that person's half of the mortgage commitment whilst the remaining person continues to work and pay off their half of the mortgage.

1 - that is mean
2 - do you plan to have children during the term of the mortgage?
3 - cost difference between the full amount and the half amount is minimal (may not even by any different due to minimum premium levels)

jamesd

DazCM wrote: »

it just seems to us that if one of us does pass away, surely we'd only need a lump sum to pay off that person's half of the mortgage commitment whilst the remaining person continues to work and pay off their half of the mortgage.

That's a sensible way of looking at it.

If children enter the picture then there is a need to factor in things like cost of raising them in what you might have to assume is a single parent household with high childcare costs if that parent is working. In that case, having an expression of wishes which leaves all or most of the money to the children with the other parent as trustee is an approach that can protect the children.

What you have to watch out for when children are involved is unpleasant scenarios like one parent dies then the other remarries and dies soon afterwards with potentially a new parent with relatively little attachment to the children but total control of all of the money if it's not in trust. Even in trust it can be abused but the trustee aspect won't get inherited unlike money in a person's estate.