Should I Take Life Assurance to Cover a Mortgage in Retirement?September 25th, 2013
There are various forms of retirement mortgages. While some only require monthly interest repayments for life, such as the Stonehaven interest only lifetime mortgage, there are others that last a fixed term and need to be repaid after that. The Leeds Building Society and Mansfield Building Society are such retirement mortgages that will run for a fixed number of years into retirement.
Irrespective of the type of mortgage you have, it may be a good idea to get life assurance depending on whether you are single or married/in a relationship. The point to consider is whether someone will suffer a financial burden or difficulty if you die.
A single person may not wish to get additional cover for their mortgage, as the balance can be repaid from the proceeds of the sale of their property once they have died or moved into permanent care. In such a case, it is not necessary to opt for life assurance to cover the mortgage as there is no need for a cover to protect the mortgage.
A life assurance cover can be more useful in the case of couples, where one party dying can be an issue. If one partner dies early, the surviving partner has to make payments in order to continue living in the house, as well as to manage other household bills on one person’s retirement income. In a case like this, a life insurance cover can be used to pay off a chunk of the mortgage, or to keep it in the savings and use it to make monthly payments.
In case of couples, both parties can be covered under a joint life policy. If the cover is taken on a first death basis, therefore if one of the partners dies, the lump sum from the life assurance cover can be used to pay off the mortgage. If the entire mortgage can be paid off there will be no more monthly payments remaining, thus reducing the financial burden on the surviving partner considerably.
Even if the life assurance is not sufficient to pay off the entire mortgage, it can still be useful in reducing the balance. The money can be kept in the bank and can go towards several years payments on the mortgage. It can also be used to make a lump sum repayment on the mortgage, thus reducing the balance, and therefore the monthly payment on the mortgage. All life insurance cover can help financially.
Getting life assurance to protect a mortgage can be useful for couples as a joint life cover can be taken out. Irrespective of whether you have an interest only mortgage like the Stonehaven Interest Select Plan, or any other type of mortgage on your property, a life assurance policy can help you plan better for your joint retirement.