Tel: 01208 872689
Life insurance is where you pay a premium each month or annually if you prefer to a Life Assurance company. There are two forms of life insurance namely Term Assurance and Whole of Life insurance. Life insurance could give your family the vital protection it needs helping your family financially if you die during the term of the cover but can also include critical illness cover.
Term insurance is a policy which pays a tax free lump sum should you die at any time during a fixed policy term. Whole of Life insurance provides cover for the rest of your life and are made as a series of payments.
The premiums charged will vary according to how long you want life insurance cover for and other factors such as your age, occupation and medical history.
You may wish to consider taking out a term life insurance policy for the duration of your mortgage. The term is generally between 5 - 25 years and the amount of cover taken would be to repay the outstanding capital balance of the mortgage in the event of either death and /or critical illness depending on the policy type during the mortgage term.
Level Term Assurance - this provides a fixed level of cover over a fixed number of years.
Decreasing Term Assurance - this provides cover that decreases over a fixed number of years.
Most mortgages taken for residential purposes are repayment mortgages which means that the amount owing to the lender decreases throughout the term of the mortgage so the sum you will need to cover the remaining mortgage decreases and therefore the life insurance cover you need to pay it can be less if you chose a decreasing term life insurance policy.
For example; at the start of a 25-year mortgage for £150,000, you would want cover of £150,000 to be available. Were you to die soon after taking out the mortgage, both a decreasing term life insurance and level term life insurance would pay out £150,000 at this time? But after 20 years, your mortgage may only have £18,000 outstanding. If you were to die at that point, your decreasing term life insurance policy should provide enough to cover the outstanding mortgage amount (figures are estimation and will vary depending on actual interest rates). Please note that the amount of cover decreases roughly in line with your mortgage during the term. But were you to opt for a level term insurance policy where the level of cover was £150,000 this would remain at £150,000 until the end of the term and would mean that on your death the level term policy would provide £150,000.
If you would like to discuss your life insurance options with one of our advisors they will be happy to guide you through all the terminology and offer you quotes from the whole of the market.
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