Is mortgage term life insurance compulsory?

To take out a mortgage is it also compulsory for me to take out mortgage life insurance so the bank would get the loan back if I died?

Question asked by Ben Pound
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Answered by Tom Conner

Although it usually makes sense to consider taking out life insurance to cover your mortgage loan it is not normally compulsory. If you were to pass away the lender/bank would be able to reclaim the remaining loan amount from your personal estate (thus rendering life cover irrelevant for the lender).

However, if you have a partner or family it is definitely worth considering mortgage life cover irrespective of whether it is compulsory or not. With a joint life plan the policy would payout a lump-sum to repay the loan if either partner were to pass away, leaving the remaining partner without a potentially unmanageable mortgage debt.

If you are buying a house on your own and do not have a family to protect then mortgage term insurance may not be worthwhile for yourself. However, taking out critical illness cover or an income protection plan to cover your loan/repayments if you became ill or injured is definitely worth considering. With critical illness plans it is usually cheaper to combine this cover with life insurance under one combined policy.

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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