Do you need life insurance for a mortgage?

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Do I need life insurance to get a mortgage?

So you’ve had your offer accepted on the property you want to buy. And you’ve just received confirmation of your housing loan (yay! ). So now all you have to do is arrange for the insurance you’ll need to ensure that nothing stands in the way of getting access to your brand new home!

With so many different insurance policies to choose from, it’s not easy to know which ones are compulsory to get a mortgage and which are optional.

Can I get a mortgage without life insurance?

Short answer: Yes, it’s not a legal requirement that you need life insurance to buy a house, but life insurance is a good idea for a homeowner. If you’re hunting for your first home, some key things to know.

With so many different insurance policies available, it’s not always clear which ones you need as a legal requirement to get a mortgage and which ones are optional.

However, banks might prefer your having a life insurance policy to cover the debt in your premature death.

What insurance do I need to get a mortgage?

Because the bank has security in the house, insurance is required.
Lenders want proof of house insurance because the value of your home is their primary concern.

For example, if a fire broke out in your house and you didn’t have house insurance to pay for the cost of the repairs, the value of the home would drop like a stone. The house would no longer be worth the money you borrowed. This means that the lender won’t be able to recover the money they loaned you for the purchase.
Finally, this is why, while getting a mortgage, house insurance is a requirement, but life insurance is not.

Do you need life insurance when buying a house?

Purchasing your first home is an exciting milestone.
It is a place of comfort, security, and happy memories. Yes, probably also some tears. It is the frame around your life and family. 

Many New Zealanders achieve their dream of home ownership through a mortgage, which is a way to get on the property ladder faster with a long-term financial commitment. 

How would your death affect the family finances?
Will they be able to meet their mortgage payments and their daily expenses?
Life insurance can protect your family’s investment of money, time, and love by allowing them to keep a roof over their heads.

How does life insurance work?

It’s pretty simple. Life insurance provides a tax-free lump-sum amount that you and your dependents can use to cover various costs, including loan repayments, in your untimely death or terminal illness.

How much life insurance do you need?

The answer is determined by your family’s circumstances, financial needs, and plans. You can estimate the insurance premiums cost by using our calculator here.

As a homebuyer, a place to start is to make sure that the amount of coverage is adequate to pay off the mortgage. Then, you can consider any other expenses your family may incur, such as your lifestyle, your children’s education and your partner’s retirement. And, of course, think about your budget.

Insurance alternatives

Life insurance isn’t the only protection to think about if you’re buying a home. Depending on your situation, it would help if you also considered income protection, mortgage protection, and health insurance. Each of them does have its own set of advantages. 

How do you get insurance?

You can use our calculator here to get an indicative life insurance quote.
Give your LifeCovered Adviser a call if you need a helping hand in the right direction.

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