Do I really need life insurance?
The best way to answer this is; if you died could your dependents cope financially?
Would they, for example, be able to pay the mortgage and cover other monthly bills without you?
If the answer is no, then life insurance is critical for the protection of your family.
If you are the main earner could you cope financially if your spouse died? You could suddenly find yourself out of work due to childcare commitments, as the main earner could you do this and still afford your mortgage and credit commitments?
If you have no dependents and no-one is relying on you financially, life insurance is unlikely to be a priority. If you are much older, you’ll need to think carefully about whether the cost is affordable, as premiums become higher the older you get.
Your employer may offer a “death in service” benefit as a multiplier of your salary.
This may not be enough to cover your mortgage and additional life cover may still be needed. We also find that death in service benefit cannot usually be linked to your mortgage.
How much does life insurance cost?
The cost of a policy depends on a number of factors such as your age and health, including whether you have any pre-existing medical conditions, how long you want cover for, how much cover you need and the type of policy you’ve chosen.
Premiums for decreasing policies are usually cheaper than for term assurance policies because the level of cover is reducing as your mortgage is paid.
As an example of costs:
A 30 year old non-smoker with £100,000 worth of life insurance over 25 years for just £6 a month. And adding the same amount of valuable critical illness cover could cost as little as £20 extra
How does life insurance work?
At Hello Mortgage we always recommend that life insurance is “written in trust”.
This simply means the proceeds from the policy can be paid directly to your beneficiaries and not your estate, therefore the payment is not subject to inheritance tax.
When you buy life insurance you pay a monthly premium, if you due during the term of the policy it will pay out a tax-free cash lump sum to your dependents.
The term and amount can be subject to the type of policy you have.
There are three main types of life insurance:
Level term assurance, the amount of cover you have remains the same during the term of the policy. Ideal for interest-only mortgages, as the capital you owe, does not decrease over time, or those wanting to specify a set level should they die.
Decreasing term assurance, the amount of cover reduces over time. Ideal if you have a repayment mortgage, so that the amount of cover you have decreases along with the capital you owe.
Whole-of-life insurance protects you for your lifetime, but means you’ll pay premiums right up until the point you die, and costs are steeper because you’re guaranteed a pay-out.
Here at Hello Mortgage we believe customer service is key, in a world full of online advice we still like to offer that personal, human touch.
Our Mortgage Advisors are based in South Shields but we offer our services nationally. As a whole of market Mortgage Broker we offer a completely bespoke service based around your own unique needs and circumstances. We take the time to understand your requirements before sourcing you the perfect product.
We are here when you need us! Our offices are open out of hours and weekends, so an appointment is always available. Use our handy online appointment booker to find the perfect time for a face to face, home visit or online chat with one of our Mortgage Advisors.
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Hello Mortgage Limited is registered in England and Wales. Registered Office: Suite 20, Cookson House, River Drive, South Shields, Tyne & Wear, NE33 1TL. Company Number: 10414170. DPA number ZA332902
Hello Mortgage Limited is an Appointed Representative of MyInfinity Finance Limited which is authorised and regulated by the Financial Conduct Authority 672182.