If you’ve recently started a family or you’re looking to buy your first home, the chances are it’s time to reassess your finances. And life insurance is probably top of your list.

On top of choosing the right type of policy, you’ll also need to consider the amount of cover you’ll require, as well as the length of your policy, to make sure your partner or family are protected for as long as they need.

To give you a helping hand, here’s a quick guide to the type of cover you might need if you were buying a house or looking for additional financial protection for your loved ones.

Need life insurance to cover a mortgage?

Your mortgage is most likely the biggest financial commitment you’ll ever have to make. So if you’re buying with a partner, it’s worth making sure that, should the worst happen to either of you, there won’t be the worry of having the added financial burden of meeting the repayments.

If you’re unsure about the amount of cover you need, it’s probably best to have enough insurance in place to cover the amount you have borrowed from your mortgage provider. That way, your partner will always be able to clear the debt entirely. Don’t forget that your policy should also last for the duration of your mortgage term.

When it comes to deciding on the type of insurance that you’ll need, one of the most popular choices is level term life insurance, especially if you have an interest-only mortgage.

Simply put, level term life insurance usually provides a cash sum if a claim is made within your policy term. So if you have a mortgage of £200,000 which you’ve agreed to repay over 25 years, you could take out a 25 year level term policy, with an assured sum of £200,000. This means that this policy would pay out £200,000 as a cash sum, should a successful claim be made during the 25 year policy term.

Alternatively, if you have chosen a repayment mortgage, it might be worth considering decreasing term life insurance.

As the name suggests, with decreasing term cover the cash sum you receive decreases in line with your mortgage payments over your policy term. This is the key difference between decreasing and level term. Whereas a decreasing term policy will always pay out just enough cash to cover your outstanding mortgage when the claim was made, a level term policy could provide a cash sum that’s more than your mortgage debt.

When it comes to comparing the prices of the two policies, you’ll usually find decreasing term life insurance is less expensive than level term life insurance. And this is simply because the cash sum paid out is less, and therefore the risk that the insurance company is taking is smaller.

Need life insurance to protect your family’s financial future?

Have you ever wondered how much it costs to raise a child? £100,000? More?

If you think about the financial commitments you would leave your family, if you weren’t there to support them, your mortgage probably tops the list. But even if your mortgage is covered by an existing life insurance policy, it’s also worth considering all the other everyday living costs, as they quickly mount up.

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