I’ve come across a lot of people lately telling me they’ve taken out a mortgage cover through their mortgage broker as its less hassle & obviously a better price as they’ve also done their mortgage. So what stimulated me really to write about this is the fact that there’s still so much ambiguity around life insurance which is a bit of a shocker to me given today’s day & age when everything is out in open. I mean all you have to do is just Google it, isn’t it.
I am not suggesting that people should invest a lot of time reading about and researching life insurance & various other protection products, but it’s definitely good to have some basic knowledge about life insurance.
Now then, different companies sometimes use different terminology when talking about life insurance. The most commonly used terms are life cover, family protection, life insurance or simply cover, when used in this context. The same way a life insurance to cover a mortgage i.e. to ensure the mortgage balance is paid should you die, can be described as a mortgage cover, mortgage protection or mortgage insurance.
The 2nd point you’ve got to bear in mind is that a life insurance can be arranged or taken out through various channels viz. banks, online, mortgage broker, life insurance broker or an independent financial adviser (IFA). So the answer to your question is “Yes” you can, if you wanted to, take out a life insurance to cover your mortgage independently.
Further, a life insurance, whether it is to cover your mortgage or not, would usually cost you lesser if you go through a life insurance broker as opposed to a mortgage broker as they’re usually more expensive. Another channel which appeals to most of us for majority of our needs is “online shopping”, but you’d be surprised to know that, by and large, life insurance brokers would be able to offer you a better price for the exact same product, now that’s a trade secret nobody would tell you about. So the next time you want to buy an insurance make sure you get in touch with an IFA or a life insurance broker firm.
Another thing that I find quite funny is that some people tend to cling to the same provider for their life insurance even though they’re getting a better price elsewhere for the exact same thing. Now the reasoning, when asked, is that they’d lose all their money if they change providers. Let me try and explain in simple words. Life insurance works exactly like your buildings & contents insurance, or even car insurance. When you take it out you don’t expect anything in return, do you. The only time it pays out is when there’s an incident, that’s exactly how life insurance works, they don’t offer endowment or cash back policies any more so the only thing that matters or should matter to you is how much you’re paying for that policy & how much cover do you have in return. With that in mind, if a company offers you a better deal, you must, by all means, grab that opportunity, without thinking twice. Be advised though that, it’s purely for life insurance & is not meant for critical illness cover which is more comprehensive & differs from company to company. With critical illness cover, your biggest concern should be the quality of cover rather the price you’re paying on it.
Finally, a life insurance is best taken out when you’re young and healthy & not when you’ve retired. A lot of people would normally start thinking about it in their 50s unless they take out a mortgage at a young age. Trouble is as you grow older, life insurance gets more expensive. Besides, the prices go up considerably the moment you turn 50. So it’s definitely something that should be set up before you’ve turned 50.