30th July 2019
Whether you’re currently a homeowner or looking to get yourself on the property ladder, you’ve probably wondered as to the importance of Life Insurance and whether you need to have Life Insurance in place for your Mortgage.
Long answer: Though it’s not essential to take out Life Insurance for a Mortgage (unlike Building and Contents insurance), many advisers will recommend you have it in place. This is especially important when you’re a Contractor.
Regular PAYE employees receive benefits from their employer such as sick pay and death in service. However, when you work for yourself you no longer receive these extras, so it’s important to financially protect yourself. This is where Life Insurance comes into play. Having Life Insurance is equivalent to “death-in-service”, meaning your family will receive a large tax-free payout in the event of your death.
So what does this mean for your Mortgage?
When you pass away, your debts are left to your family members, meaning they will be responsible for paying the remaining mortgage balance. If they do not have sufficient funds or are unable to afford the repayments, the bank may request them to move out of the property in order to sell and offset the balance. However, with Life Insurance, you can ensure your family have a roof over the heads as the payout can be used to pay off part or all of the Mortgage debt.
This is why it’s important to have Life Insurance for Mortgages. Not only does it protect you but your family and your home too.
Top tip: Write your Life Insurance policy into a trust.
In doing so, if you were to pass away, your Life Insurance will not form part of your estate, meaning it will pay out directly to your dependents. Not only will this help them to pay off any remaining Mortgage debt but also to skip the long probate process and offset a large inheritance tax bill. Typically, there is no extra charge for writing your Life Insurance policy into trust but it important to speak to an expert in the industry to get the best advice. This is where we can help.
Our advisers at Broadbench are experts in Contractor Mortgages and Insurance so if you’re already in the process of buying a home or considering moving up the property ladder, get in touch to have a chat and organise your Life Insurance.
All content is accurate at the time of publication
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