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A Guide to Life Insurance for First-Time Buyers

Congratulations on your first home! It’s an exciting milestone. As you step into this new phase of life as a homeowner, amid all the excitement of planning and decorating, it’s easy to forget the importance of life insurance. But don’t worry. Our comprehensive life insurance guide is here to help first-time homebuyers understand its importance, how it works, and why it’s a crucial component in safeguarding you and your loved ones.
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How does life insurance work?

Before we dive into the specifics of first-time buyer life insurance, let’s start with the basics.

Life insurance comes in various forms, but the core principle remains the same. You pay regular premiums, and in return, your loved ones receive a sum of money when you pass away or if you are diagnosed with a terminal illness.

It’s like a safety net for your family, ensuring that they have financial support even when you’re no longer there to provide for them. They can use this payout for things such as paying off debts, covering daily living expenses, or securing your family’s future.

So, what are you waiting for? Pick up the phone, and let’s get started!

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Protecting your home loan with life insurance

Do I need life insurance to buy a house?
Life insurance when buying a house is not a legal requirement, but many mortgage lenders recommend or even require it.

Why? Because homeownership often entails significant financial commitments, particularly when a mortgage is involved. If you or your partner were to pass away, the mortgage payments could become a substantial burden, especially If you’re reliant upon two incomes to pay the bills. Adding to the complications, the loss of a parent could mean a surviving parent incurs higher childcare costs or more living expenses, and suddenly, you can find yourself in financial trouble through no fault of your own.

This is where life insurance buying a house comes into play.

Securing a home loan with life insurance can offer peace of mind to first-time buyers and their families. It ensures that the mortgage is paid off, so your loved ones can remain in the house without financial strain. Mortgage brokers and mortgage lenders will talk a lot about the importance of securing a suitable life insurance policy because they want your loved ones to be able to remain living in their own homes.

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Three reasons why first-time buyers should consider life insurance for mortgages

As a first-time buyer, you might understandably be reluctant to add another cost to your list. Here are three reasons why you should keep it in mind:

  1. Pay off the mortgage balance
    Life insurance for your home loan can provide valuable protection, covering the remaining mortgage balance if you or your partner passes away. This helps to ensure that your loved ones don’t have to worry about keeping the house they call home.
  2. Financial security for funeral expenses
    Funeral expenses can be a significant financial burden. Funerals can cost as much as £9,500 when all professional fees, floral arrangements and catering costs are added into the mix. Life insurance can provide the funds needed to cover these costs, giving your family peace of mind during a difficult time.
  3. Coping with living expenses
    In the event of a loss, daily living expenses and maintaining your family’s standard of living can be challenging. Especially if one income is lost. Life insurance provides a financial cushion for things like bills and childcare costs. This helps your family maintain their quality of life and reduce some of your stress during a difficult time.

What type of life insurance is best for first-time buyers?

Choosing the right type of house and life insurance are critical decisions. Here are three life insurance for mortgage options:

  1. Decreasing cover
    This is often known as mortgage life insurance. Decreasing cover is tailored to match your home loan with life insurance. This is often the best life insurance for mortgages, as the cover amount decreases over time in the same way your mortgage balance does. Mortgage insurance/life insurance means that the potential payout will always be enough to pay off your mortgage.
  2. Term life insurance
    This covers you for a specific time, such as 30 years, which is commonly aligned with your mortgage term. If you pass away during the policy term, your loved ones will receive the death benefit. However, if you outlive the term, life insurance for home loans typically expires without any payout, and you will need to take out a new policy to maintain your financial security.
  3. Whole of life insurance
    Whole of life insurance does exactly what it says. It provides cover for your entire life. It does not have a predefined term, meaning it remains in force as long as you continue to pay the premiums. This type of policy promises a payout to your beneficiaries whenever you pass away.

We don’t expect you to know which option is right for you. In fact, we suspect that until your mortgage lender mentioned it to you, you’ve never even considered life insurance!

We get it!

We speak to people all the time who are only now thinking about it after a chat with their lender or mortgage broker.

We don’t want you to be worried that life insurance is overly complicated or too expensive.

With our help, we can simplify the process and find you an affordable life plan that won’t break your budget.

Find the best life insurance for your mortgage

Should my life insurance be a single or joint policy?

Whether you take out individual or joint policies is up to you. Single policies offer independent cover, while joint policies provide shared cover for couples, typically at a lower cost.

The choice should be based on your specific circumstances. Our experts at The Insurance Surgery can help you decide what is right for you.

What other types of insurance should I have as a first-time buyer?

Apart from life insurance, several other types of insurance can be handy for first-time buyers. You may wish to consider investing in:

  1. Buildings and contents insurance
    First-time buyer home insurance covers your house and belongings in case of fire, theft, or other unforeseen incidents. While it’s not the same as life insurance, it’s still an important part of protecting your investment. If, for example, your house burned down, you would have to continue making your mortgage repayments to your bank while paying for the costs of a rebuild – and paying for rent elsewhere while it’s being fixed!
    No one wants that! But your buildings insurance would pay out for any refurbishment or rental costs for as long as you need until you are ready to move back in.
  2. Income protection insurance
    Think of this as your financial safety net. It kicks in when you can’t work due to illness or injury and replaces a chunk of your income. That way, you can still cover your daily expenses even if you’re not on the job. It’s particularly important to take out income protection if you know that statutory sick pay isn’t enough to cover your living expenses.
  3.  Critical illness insurance
    This is like your backup plan for health hiccups. If you ever get hit with a serious illness that’s covered by your policy, it pays out a lump sum. You can use that money for medical bills or to keep living life as you like, even when things get tough. With fewer money worries, you can focus solely on your health.
  4. Buyers protection insurance
    This type of insurance offers an additional layer of protection specifically designed for the home-buying process. It comes into play if, for some reason, your house purchase falls through. Buyer insurance acts as a financial safety net, reimbursing some of the costs associated with the failed purchase so that you don’t bear the full financial burden if your dream home deal doesn’t materialise as planned.

Remember, these extra insurances aren’t a must-have, but they give peace of mind.

We can’t help you with buildings and contents or buy protection insurance. But we can help you with income protection and critical illness plans. To find the right cover for you and your loved ones, have a chat with one of our experts.

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Is life insurance the same as home insurance for first-time buyers?

No. First-time buyer house insurance is often referred to as buildings and contents insurance. It protects your home and belongings from specific risks, such as fire or theft. It won’t, however, pay off your mortgage repayments.

In contrast, life insurance does cover this, focusing on ensuring your loved ones are financially secure if you pass away.

So, while both home insurance and life insurance are important, they serve distinct purposes in securing your financial wellbeing and that of your loved ones.

Protecting your investment and loved ones

What could happen to my mortgage if I die?

In the unfortunate event of your passing, your mortgage doesn’t disappear. It becomes part of your estate, and your loved ones may be left with the responsibility of handling it.

If you’re the sole owner
Your executor, the person you trust to manage your affairs after you’ve passed, will step in. They’ll use the funds from your life insurance policy or sell the house to clear outstanding mortgage and debts.

If you own the property with your partner
They’ll usually take over the responsibility of paying the mortgage. They might also tap into your life insurance policy if you have one.

But what if you don’t have life insurance?
Things get a bit trickier. Your executor might need to work with the creditors to figure out a plan to pay off your debts. If that doesn’t work out, the house might have to go on the market to cover the unpaid debts.

No will?
The rules of intestacy kick in. Your estate and property will be sold, and the money will be divided according to the legal rules.
Life insurance is designed to step in and cover the remaining mortgage balance. It relieves your family from the burden of mortgage payments during an already challenging time.

Talk to us about how we support first-time buyers to secure mortgage insurance

Do I have to take out life insurance through my mortgage broker?

While some mortgage brokers may offer life insurance, it’s not always the best option. Mortgage brokers often specialise in mortgages rather than home life insurance, and their policy offerings may not be the right fit.

Partnering with a dedicated broker, like The Insurance Surgery, ensures you get the right cover to protect you and your loved ones.

Benefits include:
Access to the whole market
This means that we work closely with smaller, independent insurance companies as well as high-street names. As a result, you can choose a policy that’s tailored to your personal circumstances. We only ever recommend insurance companies that we trust and those who have a strong history of quick and easy payouts. You deserve to have an insurance partner who will have your best interests at heart.

Expertise in special cases
By speaking with us, we can make sure that you are fully covered, even if you’ve got pre-existing health conditions or have been declined elsewhere. Our personal approach means that we take the time to get to know who you are and what you’re looking for. Armed with far more information than a computer tick box, we can talk directly to the underwriters, which means that we can accurately assess your level of risk.
This attention to detail is why we can secure lower premiums than anyone else.

Cost savings
We can often find more cost-effective insurance solutions compared to mortgage brokers. That’s because we know what tricks we can use to minimise your premiums yet maximise your protection.
For example, we may ask you for details about your employer. We’ll talk to you about your remuneration package and what benefits you’re entitled to. Often, people neglect to realise that benefits such as death-in-service benefits or enhanced sick pay policies offer financial protection. We want to know what you’re entitled to so we can make sure that you’re not duplicating existing protection or under-insuring yourself.

A personal approach
We take the time to really get to know you. This helps us to find the right policy guaranteed to pay out when you need it to.

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What information do I need to take out a life insurance policy?

How much does life insurance cost?

As we’ve discussed above, there is no set price for life insurance, as your premium depends on lots of factors.

We get worried when we hear people choosing the cheapest policy, they can find on price comparison sites. It’s great to get an idea of how much life insurance costs, but those comparisons might be inaccurate. Although pricing may be similar, the level of cover and number of exclusions can vary greatly.

We understand. Money is tight when buying your first home. No one wants to pay more for insurance than they have to.

With our price protection promise for life insurance, we can guarantee you won’t find a better price anywhere else.
So, how much does life insurance for first-time buyers cost?

Here’s a hypothetical example.

Example #1
David is 31 years old. David has been living with his partner for the past five years, and they’re buying their first home together. He’s looking for a whole life policy with a maximum payout of £250,000.

For the last two years, David has been dealing with mild anxiety. He takes daily medication and regular counselling sessions to help manage it.

David’s monthly premiums are £128.38.

Over 35 years, David would pay out £1540.56 per year

Example #2
23-year-old Alice is moving out of the family home. She works as a nurse for the NHS. Alice has smoked ten cigarettes a day since she was 18 and has been recently diagnosed with high blood pressure. She has also had asthma since childhood.

As a single woman and first-time homebuyer, she is looking for 30 years of life insurance when buying a house valued at £150,000 to pay off her remaining mortgage balance if something happens. That way, she can leave her home to her parents in her will.

Alice’s monthly premiums are £5.86.

Over 30 years, Alice would pay out £70.32 per year or a total of £2109.60 for a potential £150,000 payout for her parents.

£5.86 per month | 30 years | £150k payout

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Need Advice Regarding Critical Illness Insurance?

We answer your most frequently asked questions.

We know you’ll have hundreds of questions about life insurance for first-time buyers. Please feel free to submit any questions via our live chat. We’re happy to answer any questions – and we want you to take the time to understand what your policy could cover.

If you’re looking for first-time buyer life insurance, you’ll probably have read pages of articles. The information overload can be confusing.

People have been coming to The Insurance Surgery for years because they know we will be honest and open about their insurance needs. We never assume you know what different policies offer or what you’re looking for.

Instead, we take the time to talk you through the terms and conditions and check that you fully understand what you’re agreeing to.

To help you in your search, here are a few commonly asked questions about life insurance for first-time buyers.

Aside from life insurance, buying a house brings other areas you might want to cover:

• Buildings and contents insurance protects your home and belongings.
• Income protection insurance safeguards your finances in case of illness or injury.
• Critical illness insurance provides a financial buffer if you’re diagnosed with a serious illness.
• Buyer protection insurance offers additional coverage if your house purchase falls through.

Yes. Getting a life insurance plan for your mortgage is an excellent idea, as it ensures that your mortgage is paid off if you or your partner passes away.

Yes. You can get life insurance at any time, even after buying a house.

While life insurance is not a legal requirement when buying your new home, it is often recommended to protect your investment and your loved ones.

Yes. However, it is often advised to have a life insurance plan in place to cover the mortgage in the event of a death.

We hope this comprehensive life insurance guide has provided you with a clear understanding of why life insurance is important for first-time homebuyers.

Remember, The Insurance Surgery is here to help.

We offer a personalised service, access to the entire insurance market, and a commitment to providing you with the best coverage at the right price. While life insurance may initially seem tricky, our experts are dedicated to simplifying the process so you can get the protection you need.

When you’re ready, don’t hesitate to pick up the phone and give us a call. No question is too big or too small – we’re here to provide you with the life insurance guidance and support you need. Your first home is a significant achievement, and we want to ensure it’s safeguarded for you and your loved ones.

Congratulations on this exciting new chapter in your life!

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If you have any further questions about anything to do with Life Insurance and protection for your family, please feel free to contact our team of expert Life Insurance advisors.
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