Mortgage loans and life insurance

Tue, 31 Oct 2006

Paying for life insurance can be a necessary part of taking out a mortgage, and it is clear why. Any person with dependants should have a contingency plan in place should in place in case of death or serious illness. Yet as mortgage loans grow in size, it appears that the demand for life insurance is diminishing.

According to a set of figures released by the Association of British Insurers, life cover sales peaked in 2004 and have been on the way down ever since. Swiss RE figures indicate this so-called ‘protection gap’, is enormous, with a £2.3 trillion disparity between the cover we need and the cover we buy.

Experts question whether people are fully informed about what could happen in the event of their death. Relying on payment protection insurance, for instance, may be a glaring mistake. In order to be adequately covered, the size of mortgage owing must be met by the level of life cover in place. Being aware of the effects of different types of life cover (decreasing term assurance) on different types of mortgage is also essential.
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