At Boon Brokers, we view life insurance as the most important of all insurance offerings. Sadly, many people in society do not share our perspective. They believe that life tragedies “happen to other people”.
However, even if you have enjoyed a life free of trauma, no one can predict the future. A difficult truth for borrowers to comprehend is that lenders lack financial sympathy for the death of a partner or other joint borrower.
If mortgage defaults persist at any time, the lender eventually has the right to repossess the secured property. Many borrowers do not appreciate this ruthless mentality until it is too late.
Acquiring adequate life insurance will provide financial protection against an unexpected fatality. For example, if our advisers arrange a life insurance product that covers your mortgage sum, upon death of an insured party, your mortgage would be redeemed in full. However, there are two different life insurance products to choose from:
The first is level term life insurance. With level term products, the sum assured will remain for the duration of your policy. For example, if you insure for a sum of £200,000, that figure would never reduce on your policy.
Therefore, for mortgages paid on capital and interest basis, if a claim is made after your first mortgage payment, the sum insured will be higher than your outstanding loan sum.
This means that if a fatality occurred to a borrower, and a claim was made, the mortgage would be redeemed and a cash surplus would be provided to the beneficiary. Level term is the more expensive of the two life insurance products because of this surplus.
However, our advisers often recommend level term insurance. This is because, from our experience, after borrowers have experienced such trauma derived from the fatality of a loved one, the cash surplus provides extra security for the client to mentally recover.
The second type of life insurance is decreasing term. With decreasing term products, the sum assured decreases in line with the mortgage amount outstanding. Therefore, if a claim is made, the mortgage sum is redeemed in its entirety.
However, no cash surplus is provided to the beneficiary. As explained previously, decreasing term is the cheapest form of life insurance and may be appropriate for those that require protection but cannot afford level term.
If you are interested in life insurance, our advisers will provide a free consultation to discuss your requirements in depth. Free home consultations are provided in Norfolk and Suffolk. Advice and arrangement of your life insurance is free of charge.
For our existing mortgage clients, we often arrange life insurance consultations at the mortgage offer stage. This is because we then have an understanding of the accurate sums to be insured.
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