Generally speaking it is. If this happened on every mortgage UK families would be considerably better protected than many are today. However, how good is it really?
The discussion point here is about what actually happens when the main earner can no longer earn? If the insurance policy pays off the mortgage that is a huge relief, but what about the rest of the bills?
What about the food, childcare, council tax and the general cost of living, where does that money come from? Sometimes families find they cannot afford to live in the house despite having paid off the mortgage and end up moving as a result. The mortgage itself may have been financially protected, but the house where they live was not.
4. Term assurance vs whole of life
There are advisers who only sell term assurance and advisers who only sell whole of life policies. Neither is particularly wrong – but put them together over a beer or two and the debate is quite interesting.
There are perhaps four common reasons to buy life cover: debts, dependents, lost income and tax. Three of those are linked to a time period: the mortgage has an end date; the children will grow up; and everyone intends to retire at some point. This suggests that term assurance is suitable for those three.
The arrival of any IHT bills, however, are difficult to predict as we do not know when death with occur, which is where Whole of life comes in. It can also be argued that the need for life cover never really goes away, so if you can afford it get it while you can.
5. Should couples buy joint life policies?
Probably not. There are over a dozen reasons why single life plans can often represent better value for money, however a number of advisers, and indeed their networks, insist that if joint life cover is cheaper, even if only by 2p a month, it must be the better option.
A joint policy is one policy that will pay out once. Should both lives pass away either at the same time or ten years apart, separate policies would both pay out, creating twice the cover for a similar premium.
Should the couple split it may not be possible to do the same with a joint insurance policy, as it is quite probable that the needs for two people are not identical. It is also more robust to place single life policies in trust.
6. Partial payments: good or bad?
