Why should you buy Life Insurance when getting a Mortgage

The main reason to buy life insurance if you have a mortgage is to ensure that all or part of your mortgage is paid off in the event of your death. This means your partner or family can continue to live in the family home  without having to worry about making mortgage repayments when they have already lost one household income.
                                                                                                                                                                                                                                                                                                                                                         The different types of insurance plans you can buy are:
                                                                                                                                                                                                                                                                                                                                                              - Decreasing term insurance – The life assurance amount on the policy decreases with the outstanding balance of the mortgage until both reach zero.                                                                                                                                                                                                                                                                                                                                                                        - Level term insurance – The size of the life insurance policy does not decrease. This would be more appropriate if you have an interest only mortgage.

If you have a partner or family, then having life insurance when you have a mortgage is a very good protection tool. If you don’t, then your mortgage lender will reclaim the outstanding loan amount when you die. Your family may not be able to pay this and have to move house, causing a lot of distress to them.
                                                                                                                                                                                                                                                                                                                                                            If you are buying the house on your own and do not have a family, then it may not be worthwhile for you to get life insurance but it is important for you to consider critical illness cover or income protection. This insurance is there to protect you if you become ill and can’t work. The insurance pay out can be used to pay your mortgage repayments so you wouldn’t need to worry about your monthly repayments when you are sick.
                                                                                                                                                                                                                                                                                                                                                      When buying a house, many mortgage companies will attempt to sell you life insurance at the same time. This coverage will usually be more expensive, so make sure you shop around and use comparison websites such as MyMoney.com.hk.