Many people regard a mortgage as being one of life’s essentials.
It might permit you to keep a roof over your head and provide a genuine home for your family. Knowing that a property and the land it stands on is yours rather than someone else’s, is a very big psychological reassurance to many people.
Nor should the sense of having something to pass on to future generations be overlooked either. The idea that should something happen to us, our family will be able to continue living in the house if they wish to, is important to many of us.
However, would an assumption that your family will be able to continue living in their home following your premature death be entirely justified?
Life isn’t predictable
Sadly, every year significant numbers of people die at what might be considered to be a relatively young age; you need insurance.
Should that happen in circumstances where the deceased also happens to be a major income contributor to the household, it might not take long for their family to start encountering financial difficulties. Perhaps chief among those might be just how to continue paying the mortgage.
Don’t rely on the government or lenders
In such tragic circumstances, help from the government with the mortgage may be extremely limited and perhaps typically insufficient to keep up full interest and capital repayments.
Although the mortgage lender might be sympathetic for a short period of time, perhaps faster than you might imagine they will start regarding the account as being in arrears and considering moving towards repossession.
Couldn’t happen to you?
There is always the temptation to presume that such misfortune could never happen to you.
Yet official statistics published by the Office of National statistics indicate that in the UK in 2011, around 1.73 males per 1000 and 1.06 females per 1000, died between the ages of 40 and 44.
That of course excludes those who may have died in their twenties or thirties. So, these tragedies do happen and it might make sense to put in place some contingency plans in case something similar happened to you.
Insurance as an option
The idea of protecting the future of your family through some form of mortgage insurance isn’t radical.
It is possible to find products like Mortgage Life Insurance that can be taken out with the specific objective of paying off your mortgage should you or any other major income provider covered by the policy, die leaving a substantial mortgage debt still in place.
Typically, this type of cover comes under one of two general headings:
- fixed term policies – these will pay out a specified lump sum at any time during the term of your mortgage, typically being of sufficient size to pay off the remaining debt and perhaps leaving a little extra for your family to help them cope;
- decreasing term policies – this type of cover will typically pay out a smaller sum as each year of your mortgage passes, based upon the logic that as each year of the mortgage term passed, your family would need a smaller amount to settle the reducing debt. This type of cover might typically be the most cost-attractive.
You might also be able to combine this type of policy with critical illness protection.
Tom Conner from Drewberry Life Insurance says, “Mortgage life insurance is a very popular policy but too few people stop there and only cover the risk of passing away. Sure that risk is very real but the risk of illness is far greater and therefore it makes sense to include critical illness cover or take out a separate income protection policy”.
Finding out more
If you do not currently have such protection in place, it might be advisable to find get more information on mortgage life cover as soon as possible.