This is a common question when it comes to mortgage related insurance.

However, before answering this, the question itself needs closer inspection.

Is it mandatory to have life insurance to get a mortgage?

This is usually what people mean. In other words, is the lender going to insist on you taking out life insurance before they offer you a mortgage?

The simple answer is No – in virtually all cases, taking out life insurance is not a condition of a mortgage offer.

The lender may advise you to consider taking it, but it’s not usually a mandatory requirement.

Many years ago, this may have been the case, but not so much now. So, if you think it’s mandatory or you’ve been advised that this is the case, double check this and the conditions of your offer before making a decision on whether to take out life insurance if this is your only motivation.

Do I need life insurance?

This is the part of the question that should be carefully considered in its own right.

Just because it isn’t mandatory, it certainly doesn’t mean that you don’t need it.

If the main reason you took out a mortgage was to provide security for your family and keep a roof over their head, then life insurance could help facilitate this should the worst happen.

Making sure that you and your family are financially resilient and able to cope with whatever life throws at you should be a priority.

Hold your current risk management and contingency plans to account. How would they perform in terms of your monthly outgoings and your long term financial security if something were to happen to you?

Then you should be able to answer the question ‘do I need life insurance?’ yourself.

Not all risk is created equal

Mandatory or not, people tend to look at life cover as the priority.

This is understandable because death is inevitable (boo!)

The good news is, it’s generally the least likely during a typical mortgage term (yay!)

It’s actually more likely for an average person to be off work ill for 2 months or more or suffer a critical illness during a mortgage term so this needs to be considered.

It’s not to say that life insurance isn’t important, it’s just also important to fully understand the key risks to make informed choices about how best to use your insurance premiums based on your circumstances.

Fail to plan, plan to fail

It’s also important to consider whether each type of insurance is appropriate based on your circumstances.

For example, if you are single with no dependents, why would life insurance be a priority? (or even a consideration).

If you have (or can get)  income protection through your employer, why would you consider a personal plan?

It’s important to consider all of the risks, take into account your current plan and circumstances and make sure that your plan is tailored to your needs and affordable budget.

It’s also important to take responsibility for your own contingency plans and risk management. Seek the right advice where appropriate, make good informed decisions and have a robust plan in place to make sure you are financially resilient should the worst happen.

Just ask yourself ‘what would happen if…’ based on different scenarios. Then you should be in a good position to answer the question of ‘do I need insurance?’ yourself.