Do you need life insurance to have a mortgage? What stages of life should you have insurance for? What is it for?

 


Do you need life insurance in order to have a home loan?  How long do you need life insurance for?  Why get it?  Who needs to have it?

I get it, life insurance is recommended to you by the bank when you buy a house.  They are responsible for making sure you don't get yourself into too much debt.  They have a duty to make sure you and your family will be ok should something terrible happen.  There are a few points I would like to make with regards to this.

One of the main reasons that people get life insurance when they get the mortgage is, they don't want their family to be left with their mortgage.  Well, as a mother or four and grandmother of many more, I can tell you this for free:  My children will inherit my property, and the property will always be worth more than any debt against it.  They will end up with money if they sell everything up, a substantial amount of money.

If they don't want to sell my property they have done nothing to get it mortgage free!  So if they inherit the property, they should inherit the debt.  I know you may think this is heartless, I am putting some common sense to this.  I know of people who struggle each month to pay their life insurance so their children will inherit a mortgage free home.  I am sure the children would rather you enjoy your life and didn't have to work so hard.  Maybe you could retire earlier or go on a trip!  Imagine!  Your goal should be to pay down your mortgage as quickly as you can and therefore leave your children more equity in your home.  I understand that completely.  

If you die the bank has no way of having access to your life insurance policy, the reason they sell it to you is twofold, one is to get the commission from the sale and the other is to make sure they are doing their duty to make sure your family are covered should anything happen.

The best way to cover your family is to reduce your debt, don't leave a lot of debt for them to inherit if you can help it.  

Remember that life insurance is no longer the investment that it once was, most people don't have a will which would make it tricky to cash in life insurance after you have gone.  It doesn't mature, if you don't die, you can't get it, tough way to win!

Have a look at what would happen if you placed your life insurance premiums into your fortnightly payments of your mortgage and see what a difference it makes to the length, and interest of your mortgage.  That will also increase the equity (the difference between the price of the asset and the debt against it) much quicker.

Start to take control of where your money goes each fortnight.  See what a difference you can make with your larger debts, particularly your mortgage.  You can become the expert in this area.  See how you go.

I hope this stimulates your thoughts a bit, feel free to comment, share, like, follow or question this, or any of my blogs.  Have a fabulous day, let's get ahead together!



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