What is Life Assurance?
Life insurance is an insurance policy that will pay out if the policy holder dies. A life insurance agreement will contain details of the nominated beneficiaries who are to receive the insurance payout.
While the idea of life insurance is straight forward, there are a great deal of differences between the thousands of products available. People often refer to payment protection insurances and critical illness covers as life insurance as it pays out upon an important ‘life event’ for example:
- Serious Illness
- Disability
- Redundancy
Though the policies may insure your life, they are not life insurance policies by definition.
Why Is Life Insurance Relevant to Mortgages?
To protect your family members and beneficiaries to your estate. When you have a mortgage, you are guaranteeing to the lender you will make payments. If you should die, the lender will still want to recover its monies and shall seek to do so through your beneficiaries. If the beneficiaries cannot meet the mortgage commitment, the bank will take possession and liquidate the asset.
Life insurance therefore is essential for anyone who has dependants, as in the event of your death the insurance payout will ensure they can cover the mortgage commitments.
What Does Life Assurance Do?
Depending on the terms of the assurance, life assurance will pay out either a lump sum or a monthly payment to the nominated beneficiaries, the purpose of these monies is to cover any outstanding financial obligations that may exist and to provide for the policy holders dependants (usually the nominated beneficiaries)