Life Insurance – Protect What Matters Most

Life insurance is a type of life insurance policy that runs for a set period of time, so is an ideal way to protect a mortgage. As long as you pay your monthly premium, a lump sum will be paid out to your dependents should you pass away during the term.

This type of life cover is different to life assurance because providers of this type of policy are expected to pay out at some point, so it tends to be more expensive than standard Life Insurance.

Life Insurance only pays out in the event of death. If you are after a lump sum in the event you suffer a serious illness or injury, you may wish to consider some Critical Illness Cover.

Before choosing a life insurance policy, you should calculate how much of a lump sum you would want to leave in the event of your death. When considering a mortgage it is standard practice to take out a plan which is equal to the amount you are borrowing.

A monthly premium can then be calculated depending on what you want this figure to be.

Certain policies allow you to review this if your circumstances change. Other types of life insurance policies let your insurer invest your monthly premiums to increase your final payout. However these plans will then be more expensive and therefore not ideal if you are looking to protect your mortgage as economically as possible.

Life insurance covers you in the event of your passing during a set period, known as the 'policy term'.

So, if you die outside of the term, there won’t be a pay out, even if you’ve been paying the premium for some time. These plans are generally used to protect a mortgage.

Life Insurance only pays out in the event of death. If you are after a lump sum in the event you suffer a serious illness or injury, you may wish to consider some Critical Illness Cover.

A life insurance payout is not seen as a taxable benefit by HMRC. Many people take out this kind of cover to help their families avoid paying inheritance tax. Any assets you had are passed on after your death.

If they add up to more than £325,000* then the remainder is taxed at 40%. As any inheritance cannot be shared until the tax has been paid, it means a family often has to borrow money to pay this bill. Taking out a life insurance policy is a potential way around this.

*subject to change, for latest Inheritance Tax thresholds, allowances & rules click here.

Although many assume life assurance and life insurance are the same things, there are differences between the two. Life assurance has no fixed end, so will pay out a sum of money in the event of your death, no matter when this might be.

Life insurance only covers you for a certain period of time. If you pass away during this period your family will receive a sum of money. However, if you survive the term, the policy will end without any pay out. This is the cheapest form of life cover and therefore a cost effective way to protect your mortgage.

With the support of an adviser, you can make sure you secure the policy that's right for you.

No, Life Insurance is no longer a condition of a mortgage. However, for most borrowers it continues to play a key role in protecting a mortgage. At Beechwood Mortgages, we understand the importance of having the right protection in place for your mortgage. While it's not compulsory, we highly recommend considering Life Insurance to safeguard your mortgage in case of unexpected life events. Our team can offer advice and guidance on the best Life Insurance options tailored to your mortgage and financial situation.