A life insurance policy can be purchased to fulfill a variety of needs. A good reason for buying a life policy is to pay off any remaining mortgage debt, in the case that the life insured dies early. To meet this purpose there is no need to buy an expensive whole life policy. An affordable term policy is all that is required to provide protection for a home and peace of mind for its owner.
House prices are high and to get on the housing ladder a homebuyer will have to put all their spare money into their home purchase. This will often lead them to shun insurance. However, the consequences of not having insurance may later prove dire, should the worst happen. First time buyers, in particular are likely to disregard the need for life insurance. However, such buyers are well advised to purchase a life policy to protect their mortgage. A young and healthy applicant will receive the cheapest premium, whilst an older applicant, who is in poor health or smokes, will pay much more for their cover. It makes financial sense for a homeowner to purchase mortgage insurance, along with their first home, whilst they are young.
A mortgage protection plan will usually be an inexpensive decreasing term policy. This means that the premium paid and sum assured decline over time. The pay out is designed to decrease in line with the value of the mortgage it covers; and the term of a policy will equal the length of the mortgage term. It is important that the insured informs the insurer about any changes to their mortgage; if their mortgage amount or term is increased, the amount of cover will need to be increased accordingly.
Whilst some homebuyers will already have life insurance in place, day-to-day living expenses may have been neglected when the policy was set up. Upon death of the insured, if financial protection is not sufficient to cover both the outstanding mortgage and other expenses, funds originally intended to pay off the mortgage may be absorbed by other debts and living expenses. In such a case, a family, unable to keep up their mortgage repayments, may be forced to sell their home.
Unless an existing plan has an allowance for both the entire mortgage debt and dependants, it is unlikely to provide enough cover, in the event of the death of a family's main provider. It is advisable to carefully review any existing plan and if necessary seek a separate mortgage protection plan.
A home is likely to be the biggest purchase made in an individual's lifetime and it makes sense to protect it. If the worst happens, with inadequate life insurance, a family home may be repossessed, leaving the remaining family members homeless. The purchase of an affordable term life insurance plan will protect a family from this risk.