Do you need life insurance to buy or remortgage a house?

Do you need life insurance to buy or remortgage a house?

A familiar question that only clients hold the answer to. In a legal sense, no. There is no compulsory law that states you must have a life issurance policy in place to protect your mortgage.

If you are considering taking on a financial outgoing however that carries a long term commitment, we ask clients to consider whether they do in fact need to protect their lives. Going a step further than this, we ask them to consider the need to protect their health. And their wealth. And we will cover these policies in a different blog.

Some people are huge believers in insurance. They will insure everything from their home, to their pets, their lives, their mobile phones and even their kettle. Other people prefer not to insure anything if they can avoid it and simply think they will live forever and nothing bad will ever happen to them.

Mortgage advisers like ourselves are not here to scare clients or make them dread the worst. We do however have a duty of care and a moral obligation to highlight what can happen without the relevant policies being in place. It is much better to have the unpleasant discussion at the outset of taking a new mortgage whilst you are healthy with no concerns, rather than later down the line when an unexpected tragedy arises that can threaten not only your life, your job and your family … but also the roof above your head. And in our line of work, we have seen this happen.

Specifically talking about life insurance, when a person dies, their debt does not. And therefore any mortgage on a property needs to be repaid. Many single people with no dependents see no benefit of life insurance as they are not wishing to leave their property to anybody and therefore if they did pass away the property can be sold and the mortgage will be repaid. If you have a family however, it may be time to consider what impact this would have on them. Could they maintain the mortgage without you? If not, where would they live? How would they survive without you? Do you realise the value you bring to your household?

For clients that sincerely do not wish to take life issurance alongside their mortgage, we will still of course complete the mortgage application. We will also ensure however that clients are fully aware of the implications of not taking our advice. After all, a well insured kettle will not keep your family in a secure home.

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