I don’t have children, I’m not married and if I die, my parents would just sell my flat to repay the mortgage.
My mortgage broker tells me I need life insurance, but what for? Is he right or is this about him earning more money?
My mortgage broker tells me I need life insurance, but what for?
Phil Jeynes, sales director at insurance comparison firm UnderwriteMe, replies: Typically, life insurance for single people without dependants shouldn’t be the main priority.
As you say, your parents would sell your flat and nobody else would be financially worse off.
However, given the often low costs of life insurance – particularly for young people in good health – it’s still worth considering.
For one thing, these policies can run for decades and although your need isn’t great right now, that could change and having cover in place already rather than applying when you’re older and possibly in less good health could be handy.
Also, property prices aren’t set in stone, so it’s not a guarantee that your parents selling the flat would clear the outstanding debt.
Having said that, I’d be thinking about insuring myself against loss of earnings rather than death.
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The reason for this is simple: it’s a problem you’re far more likely to face.
According to LV=, a 30-year old male non-smoker planning to retire at 65, has only a four per cent risk of death compared with a 29 per cent chance of being off work for two months or longer.
Therefore an income protection policy which aims to replace your net earnings if you’re off work long-term, would be a good option.
A good income protection plan would mean that after any sick pay you receive has ended, the policy kicks and pays you a wage until you’re back on your feet.
That would mean the bills are paid and hopefully your standard of living needn’t drop more than is necessary.
Another policy to consider would be critical illness cover.
Unlike income protection, this policy pays out a lump sum if you’re diagnosed with one of the conditions listed by the insurer.
Insurer LV= reckons that same 30-year old would have a 14 per cent chance of suffering such an illness (like cancer or a heart attack) during their working life.
Finally in answer to the final part of your question: typically mortgage brokers and other financial professionals will get paid commission by the insurer for arranging your cover.
Hopefully they’ve done a good job for you in facilitating the purchase of your flat and are now trying to make sure you not only move into it but can keep it and your standard of living should the worst happen.
If they succeed in those aims, I’m sure they’ll have earned their money.
Your questions answered
This is Money has teamed up with Phil Jeynes, sales director at insurance comparison service UnderwriteMe, to start a regular series of insurance related articles.
He can answer questions relating to life insurance, income protection and critical illness cover.
If you’ve had a good or bad experience when buying this sort of insurance or when claiming against it, get in touch to let us know.
Phil is here to answer all your questions.
Email [email protected] with the word ‘protection’ in the subject line and we’ll do our best to answer your queries.
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