Do I need life insurance to get a mortgage?
Buying a home is exciting but there’s a lot to think about including making sure you put the required insurance in place. Many homebuyers ask, ‘Do I need life insurance to get a mortgage?’
So if you’re wondering which insurance is a legal requirement when you take out a mortgage and which is just a good idea, this article explains everything you need to know.
Life insurance and mortgages
‘Do I need life insurance to get a mortgage?’ is a common question from many homebuyers. And considering the vital role that life insurance can play – providing a financial safety net for your family if you or your partner pass away – it may surprise you to hear that it’s not actually a legal requirement when you take out your mortgage.
That said, it’s worth considering taking it out, especially if you have children. That’s because while none of us like to think about bad things happening, the reality is it can and does happen. And if you don’t have life insurance and you or your partner pass away, this could cause severe financial hardship for those left behind. And if your family can’t afford to keep up with the mortgage payments they may need to sell the house and move elsewhere.
Taking out a life insurance policy gives you peace of mind that if the worst happens, at least your loved ones won’t have to worry about how to pay the bills.
What insurance do I need to buy a house?
When you take out a mortgage, the only insurance you’re legally required to put in place is buildings insurance. Buildings insurance covers the cost of repairing damage to your property’s structure such as your roof, walls and windows as well as permanent fixtures and fittings like a fitted kitchen. It will generally cover damage caused by fallen trees, fires and floods and so on. However it won’t cover your personal belongings and valuables – that’s what you need contents insurance for.
Buildings insurance for a mortgage
So why do you need to have buildings insurance when you get a mortgage? When you take out a mortgage on a property the lender will want to make sure that you’re able to keep up with your monthly repayments. But they’ll also want to be confident that their investment is secure too.
And if you were to buy a house and major damage was caused to it, whether by a house fire or flooding, and you didn’t have buildings insurance in place to take care of the repair costs, your property’s value could decrease.
This could have the knock on effect that the lender wouldn’t be able to recoup the same amount they had lent you for the house because of its decline in value. This is the reason why buildings insurance is legal required whereas that’s not the case for life insurance.
How we can help you
While life insurance isn’t a legal requirement, ensuring your loved ones are taken care of financially is always a wise move. So if you would like to find out more about life insurance or you would like to find out more about what other insurance options available contact us today. Our expert team of protection advisers can answer all your questions and help you choose the right insurance policy for you. Phone us on 01603 405070 or click here to arrange a call back.