Have a mortgage and a family, but no life insurance? Time to reconsider. Here's why

Over 40% of mortgage holders don't have life insurance, putting their families at risk of becoming homeless

(Image credit: Getty)

When you take out a mortgage on your first home, the last thing you want to be thinking about is your death, right? This, surely, must least partly explain why a substantial proportion of home owners don't take out life insurance at all; plus, with all the other expenses that come with purchasing a home, another monthly direct debit can seem like just too much. And, what with recent revelations about loyal customers being made to pay more by insurance companies than new customers, some of us might be downright put off taking out any form of insurance at all.  

So it really is little wonder that only 58 per cent of home owners* have life insurance. More worryingly, though, the rate of insurance uptake is much lower in unmarried couples, with only 30 per cent saying they have life insurance, despite the fact that unmarried partners are much more vulnerable where it comes to property rights. 

'But do I really need life insurance?', you may ask. The answer very much depends on your circumstances, and, perhaps even more importantly, on those of your other family members. If your family consists of only two people, and you both earn well, then a life insurance may not be necessary. On the other hand, a family with children where one partner is the main or sole provider could find itself in substantial financial hardship, or even lose the family home if the worst was to happen. 

What not many people know is that you can take out what's known as 'decreasing cover insurance', which is also sometimes referred to as mortgage protection insurance. The way it works is that the amount it covers decreases every year, at the same rate as the amount of the loan on the mortgage. In the event of the policy holder's death, their family would be covered for the outstanding amount on the mortgage loan at that point. 

What's good about this type of life insurance is that it is cheaper than level life insurance, where the amount covered does not increase. The monthly payments are fixed and never increase, as with many other types of insurance. And, contrary to what some people think, the money doesn't have to be spent on the mortgage and can go towards living expenses instead.

Have you thought about taking out life insurance, or do you already have it? Let us know on Twitter or Facebook.

*According to a YouGov poll of 2057 adults, of which 608 were adults who have a mortgage/part own their home, for Aviva.