Life Insurance & Mortgages | What You Need To Know | Help

Introduction

Welcome back to Let’s Talk Money and Mortgages. Today, Gemma is joined by Abdul, WIS Insurance Manager, to discuss life insurance, including its importance for mortgages, online quotes, and benefits of going through a broker.

What is Life Insurance?

Q: What is life insurance?
A (Abdul):
Life insurance is a policy that pays out on death.
Its sole purpose is to provide financial support for your family or loved ones.
Compared to other insurance types, life insurance is straightforward and simple.

Why Should Someone Have Life Insurance?

Q: What are the benefits of having life insurance?
A:
Life insurance is mainly for the family or dependents, not the policyholder.
Mortgage protection: Pays off the mortgage in the event of death, ensuring your family isn’t burdened with debt.
General family protection: Provides financial security if the main breadwinner passes away.
It offers peace of mind and allows your family to focus on grieving rather than financial stress.

Is Life Insurance Required for a Mortgage?

Q: Is life insurance compulsory for a mortgage?
A:
No, it’s not compulsory, but highly advisable.
Example: If two people are on a mortgage and one passes away, the other is left responsible for the full debt.
A life insurance policy ensures the mortgage can be paid, avoiding financial strain during difficult times.

Timing and Health Considerations

Q: Why is it important to get life insurance early?
A:
Age: Premiums increase as you get older.
Health: Pre-existing conditions can affect eligibility and cost.
Delaying could result in higher premiums and possible health restrictions in the future.

Types of Life Insurance Plans

Q: How do life insurance plans work and what are the main types?
A:
Level Term Assurance
Fixed monthly premium and cover amount for the entire term.
Cheapest and simplest option.
Increasing Cover (linked to Retail Price Index)
Cover increases each year in line with inflation.
Ensures the payout maintains its value over long-term policies (e.g., 30 years).
Mortgage Protection Plan
Cover reduces over time to match a reducing mortgage liability.
Premiums often remain the same, but starting cost is cheaper than level term.
Best for capital repayment mortgages, not suitable for interest-only mortgages.

Online Quotes vs Broker Advice

Q: Why are online life insurance quotes often cheaper than going through a broker?
A:
Online quotes may not fully consider your family’s needs or mortgage requirements.
Brokers provide a thorough review of financial circumstances, affordability, and long-term suitability.
Brokers help ensure coverage is adequate, sustainable, and tailored, while online quotes are often generic.
WIS provides free reviews to enhance policies for affordability or correct coverage.

Changing Your Policy

Q: Can you change life insurance policies as circumstances change?
A:
Level and increasing plans: Simple to manage. You can opt out of inflation adjustments any year by notifying the insurer.
Decreasing plans (Mortgage Protection Plans): Cannot be switched back to level term; a new plan must be sourced.

Top Tips for Life Insurance

Q: What are your top tips for anyone looking for life insurance?
A:
Get it early – Lock in lower premiums while younger and healthier.
Be honest about health – Non-disclosure may result in denied claims.
Consider lifestyle changes – Quitting smoking can significantly reduce premiums.

Closing Advice

Life insurance is long-term protection for your family.
Premiums should be affordable throughout the term, not just initially.
Always consult a qualified insurance advisor to ensure the policy fits your personal circumstances.
Reminder: A mortgage is secured against your home or property. It may be repossessed if you do not keep up with payments.