Why Landlords Should Consider Mortgage Life Insurance
Last updated: 02/02/2023 | Estimated Reading Time: 8 minutes
For the majority of landlords, handling 100 different tasks and dealing with property maintenance issues is nothing new. In fact, for many landlords, juggling the needs and demands of their various properties is simply considered part of the job.
However, dealing with tenants and having to worry about so many variables on a constant basis can be exhausting. And when you’re spending so much time taking care of multiple tenant and property issues, it’s easy to lose sight of the future and how important it is to prepare accordingly.
If you’re a landlord who is responsible for looking after loved ones, it’s worth considering what the best possible form of protection is for them. A look into some mortgage life insurance cover can help you be more prepared should the unexpected occur. But what exactly is mortgage life insurance? And what kind of coverage can it offer you as a landlord?
A mortgage life insurance policy helps your loved ones reduce the financial burdens that can come with the death of a family member, such as mortgage debt payments. And while coverage like landlord home insurance may provide you with some protection for the property you’re responsible for, mortgage life insurance cover provides your beneficiaries with a lump sum to help them clear your mortgage payments in the event of your death.
While this list isn’t exhaustive, the following may be taken into consideration for this kind of mortgage protection insurance:
This kind of life insurance policy tends to be a decreasing term option, meaning the payout reduces over time, much like a standard mortgage payment. Therefore, if you decide to take out a mortgage life insurance policy, and you have a regular mortgage repayment, the coverage would usually be designed to pay your outstanding mortgage balance. It would reduce over time in line with the amount due.
However, just like any standard life insurance coverage, you also have the option to choose a level term policy, which means that your beneficiaries will receive a lump sum payment, regardless of when you pass away.
When you think about the reasons for choosing a mortgage protection life insurance policy, it’s crucial to begin by reminding yourself why you wanted to be a property owner and landlord in the first place.
Generally speaking, the majority of landlords invest their time and money into property for one of the following reasons:
Unfortunately, it’s possible for all of that hard work and planning to go to waste if you haven’t taken the time to find the right kind of mortgage protection insurance for your specific needs.
For example, level term policies also provide you with the option of having a larger fixed payout to help your loved ones cover bills beyond your mortgage payments, such as
And if you have an interest-only mortgage plan with a fixed balance, then you may want to consider choosing a level term policy instead, as opposed to choosing a decreasing term plan that reduces payments over time.
As interest-only mortgage payments only cover the interest, and not the acutal amount borrowed, your overall balance won’t decrease over time. This means that a decreasing term policy wouldn’t suit your needs, as it would be more beneficial for you to have same fixed amount paid throughout the mortgage.
While each policy is unique due to each person’s specific circumstances, it’s always a good idea to get a policy that can cover the amount owed on your mortgage. Checking recent mortgage statements or discussing your mortgage balance with your lender can give you a clearer idea of what you’ll need.
Finding the right kind of life coverage or mortgage protection is all about knowing what will be covered. But sometimes getting a better idea of the insurance you need also means understanding what you won’t be covered for in any given policy. And that’s where it’s vital to ensure that you know that a mortgage life insurance policy isn’t a direct replacement for a standard mortgage protection or landlord home insurance policy. In fact, generally speaking, a mortgage life insurance cover won’t cover you for things like property damage or theft of contents within a property.
For coverage that pertains to things like legal protection as a landlord or getting more buildings and contents coverage to protect from storms, crime, and appliances within the properties, then it’s best to explore landlord home insurance options.
To get extra peace of mind, many policyholders decide to get both landlord home insurance and a mortgage life insurance policy in order to prevent confusion and take advantage of the added protection both policies can offer.
When choosing your coverage, the majority of policies will include the following steps:
Other factors in calculating your premium may include any extra additions that you’d like to have on your policy, like critical illness insurance cover. Having this extra level of cover means you’re not only protecting your loved ones in the event of your death, but also ensuring you’re covered in the event of a critical diagnosis or terminal sickness.
Please Note: Not all insurance providers we work with offer all types of policies. Please do your research and compare quotes before proceeding.
Landlords with several properties needing coverage may also experience an increased premium. And while additional real estate means more income, it also means increased pressure for your loved ones from lenders in the event of your death. Estimating the total value of your property portfolio alongside the amounts still owed on those properties should give you a general idea of how much mortgage life insurance you’ll require.
At this point, if you’re sure that mortgage life insurance is the best way for you to get a little more mortgage protection for your loved ones, consider the following before making any final decisions.
If you don’t want to disclose your health issues and you’re over the age of 50, the majority of over 50s life insurance policies offer a guaranteed acceptance without the need for a medical.
Taking out some form of mortgage life insurance cover or mortgage protection may come from a desire to help provide a better future for your loved ones, or even at the insistence of your mortgage provider. Either way, taking out landlord home insurance or mortgage life insurance usually has no effect on the interest rates you pay for your mortgage.
Considering mortgage life insurance means that you’re considering what happens beyond today, and preparing your family for a less stressful future should the unexpected occur. And while a policy won’t pay out should your death be due to drugs and alcohol, suicide, or an act that’s deemed reckless, you can gain that extra peace of mind in life knowing you’ve done your part to provide a little extra security for the people you leave behind.