Research from Sainsbury’s Life Insurance Finance claims that almost one in two mortgage holders do not have life insurance in place to pay off their mortgage in the event of their premature death. The report then goes on to claim that this would indicate that around 7.1 million people with collective outstanding mortgage borrowing of £318 million are in this predicament.
While the accuracy of the later extrapolation could be questioned the findings make alarming reading. Among the reasons cited for this trend is recession hit household budgets leading to spending on insurance being squeezed out. But I would suggest that apathy and ignorance play a large part in this worrying trend.
So why do you need to get life insurance to cover your mortgage?
Ask yourself the question ‘how would my family cope financially if I died?’ As morbid as it sounds you need to consider the impact of your own death on those left behind, particularly if you are the main breadwinner. Unless you have left them with sufficient assets the chances are that they may well struggle to cope. What sort of legacy is that to leave behind?
In the event of your death your mortgage doesn’t simply disappear, the debt still stands. Obviously the bank will want their money so if your mortgage is jointly held with your spouse then they will become solely liable for the monthly mortgage payments. This could be disastrous if their own income is insufficient to meet the monthly bill. This might lead to your home having to be sold in order to pay the outstanding debt so rendering your family homeless
For more information on how much and what type of insurance you might need to protect your mortgage read my Money tip #105 – Take out life insurance.