‘Til Death Do Us Pay – Why you should have life insurance if you buy a house with a partner
It's not a fun conversation, but discussing why you should have life insurance if you're buying a house with a partner is an important one to have...
March 3, 2017
Buying with a partner? Here’s why you should have life insurance
What did you think about before moving in with your partner? “Will this be our family home?” “How important is off street parking?” “Is being within walking distance of a fantastic pub and a top notch Chinese really the top of our priority list?” How about, “What will happen if my other half dies“? Kind of kills the mood, eh?
It’s not exactly a conversation people want to have at any point, least of all during such an exciting and fun time. But while buying a property together is fun and exciting, it’s also a massive financial commitment. And not having a discussion about how each of you would cover the costs of the property if the other were to pass away could leave you in serious financial trouble. This is where life insurance can help.
Life insurance can provide financial help for your partner or loved ones after your death and it’s particularly important if your partner is going to be saddled with a major debt, like a mortgage, once you’ve gone.
Will my mortgage lender require me to have life insurance?
It’s a common misconception that to get a mortgage you should have life insurance too. However, this isn’t actually the case. The only insurance your mortgage lender will require you to have is buildings insurance. They’ve lent you a large amount of money to buy that property – they want to know the funds will be there to rebuild it if, one day, it should fall down!
As for protecting all of your belongings inside the house? The lender isn’t fussed. And while lenders will expect your mortgage to be paid even if you’re no longer here, they don’t dictate how that will happen. So, no, you don’t need to have life insurance, BUT your partner will still need to repay the mortgage if you pass away so it makes sense to make sure they have help to do so.
I’ve just bought a house – I’m broke. I can’t afford life insurance?
We get it. Buying a house is an expensive business. Aside from the actual cost of the property, you’ve got stamp duty, solicitor’s fees, removal costs – and that’s before you factor in the money needed to decorate (you may think you’ll be able to live with those garish 80s carpets for a year but, let’s face it, you won’t). Now just doesn’t seem like the right time to pay out for something else. But life insurance may not be as expensive as you think.
According to a recent study by Royal London, nearly one in three Brits who don’t have life insurance said they thought the products were too expensive. However, analysis of premiums that Royal London customers pay reveals the average life insurance premium is just £21.28 per month for over £120,000 of cover.
There are several different types of life insurance available, including level term cover (where the amount you’re covered for and the payments you make stay the same throughout the term) and decreasing term cover, which will see the amount you would receive decrease over time – as your mortgage debt decreases, although the premiums you’ll pay will remain the same. Decreasing term policy can be cheaper than level term. It’s important to understand what you want from the product before signing a policy.
OK, I’m sold, what now?
Now, have an open and frank discussion with your partner about the type of cover you need. It may be that you decide against term insurance and go for a whole-of-life policy – which will last for your entire life, rather than just a set term, and will pay out a lump sum whenever you die. Or perhaps you’ll decide that you want financial protection for your loved ones, not only if you die but if you become unable to work due to illness. Critical illness cover can pay out if you are diagnosed with a serious illness. The fact is the more open and organised you are, the better off your partner will be if the worst happens.
This article was provided by Royal London, the UK’s largest mutual life and pensions company, with over 5 million policy holders and half a million members. Get a free quote today for your life insurance policy here