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Do I need life insurance for a mortgage as an expat?

Purchasing a property is massive, and it’s important to have some kind of insurance to cover huge expenses and protect your house in case of any unfortunate event. But do you need life insurance to get an expat mortgage and what other insurance should you consider as an expat?

Do I need life insurance for a mortgage?

Getting your mortgage application approved is likely to come with the most amazing feelings. While it’s great to enjoy and celebrate, it’s also very important to consider different types of insurance for your home.

This article discusses whether you need life insurance for a mortgage or not. We will also cover different types of insurance you may consider for a mortgage. Although William Russell offers international life cover, this is not specifically mortgage insurance and banks may require a different type of policy. Whoever you choose as your provider, always make sure you check with the relevant parties to make sure it will meet any minimum requirements which your lender may insist on before you proceed with the policy.

Can I use William Russell international life insurance policy against a mortgage?
Yes, you can nominate a bank as the beneficiary of your plan however we cannot confirm that all banks will accept the suitability of the cover as it is a Personal Life policy and not a Mortgage Life policy, and it is annually renewable and not a fixed term plan.

Is insurance important when you are getting a mortgage?

We all know that purchasing a property is massive. For that reason, it’s important to have insurance that can cover the huge expenses and protect you in case of any unfortunate event.

There are many benefits of having insurance for your home and your family. Different types of insurance can:

  • Cover your loved ones in case of the death of the sole provider
  • Cover the cost of repairs or rebuilding of your home in case it gets damaged
  • Cover replacement of most of your belongings in case they are stolen or damaged

As per the 2020 Insurance Barometer Study by LIMRA, around 54% of the people in the United States were covered by different types of life insurance. This shows how important having life insurance is.

What is the difference between mortgage life insurance and personal life insurance?

Both types of insurance can be used to help your loved ones pay off the mortgage. The main difference between life insurance and mortgage life insurance is that they are designed with different protection purposes in mind.

Mortgage life insurance is a kind of insurance that is designed to pay your mortgage debt in the event of your demise. Having a mortgage life insurance will help you cover the balance of the mortgage, which will ultimately reduce as the mortgage gets paid.

On the other hand, personal life insurance isn’t associated with your mortgage.

When your home is paid off, the mortgage life insurance coverage will end. Whereas, personal life insurance doesn’t depend on the mortgage being paid off.

Is life insurance necessary for a mortgage?

Life insurance isn’t always necessary for a mortgage but regardless of whether you can proceed without it, it’s still preferable that you get one. Having life insurance can make sure your loved ones are covered in case of any unfavourable situation. This becomes more important and preferable when the entire family is financially dependent on you.

We can’t deny the fact that paying a mortgage is essential. But, in case of an unfortunate occurrence, such as your demise, your family will be liable to pay off the mortgage. If your family members don’t earn enough, and cannot pay off the mortgage, they could lose their home.

With life insurance, the amount of life cover that you may need will vary. It will depend on the type and size of your mortgage. Another thing to consider when making your choice is the amount needed to cover the expenses of your dependents and to clear other debts which you may have.

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Types of insurance you may need for a mortgage

There are different types of insurance you can get for a mortgage. You can choose any of these depending on your needs and requirements.

Building insurance

Building insurance is one of the most important insurance you should have. If you have building insurance, mortgage lenders will most likely favour you over other mortgage seekers. It gives lenders some type of confidence in lending to you.

Building insurance will only cover repairs to the structure of your home or to permanent fixtures: it is not designed to cover your possessions or the contents of your house. Here are some examples of what would be covered with this type of policy:

  • The structure of your home if it were damaged due to a natural disaster
  • Fixtures and fittings of the home which are considered permanent
  • Gardens, on-site garages, outbuildings or other permanent structures within the property.

Buildings insurance will not cover damage where this is a result of negligence in the maintenance of the property.

Contents insurance

As we discussed, building insurance is important for your home as it helps in covering the costs related to the repair of the structure of your home. But, it does not cover the content of your house. For this reason, it’s important to have contents insurance.

Contents insurance would cover any loss related to the damage or theft of any item in your home. For example, expensive electronics, gadgets, pieces of jewellery, furniture, and artwork. Some policies will also be able to offer additional cover for personal belongings outside the home and may also offer optional upgrades for portable equipment such as laptops or for sporting equipment such as bicycles while they are outside the property.

When considering a Contents insurance policy, it is important to look at the maximum cover per item limits and, if you have high-value items, or artwork, these may need a specialist policy which is specific for them.

Critical illness cover

With the uncertainty of life, having life insurance can help us in the most unfortunate situations. But there are also various instances where due to an illness we are unable to pay our mortgage or other expenses. This is where the critical illness cover comes in.

If you have a critical illness cover, you and your family can stay protected financially in the event of any sudden illness. These illnesses include, but are not limited to:

  • Heart attacks
  • Cancer
  • Stroke
  • Diabetes

According to the CDC every year, about 805,000 people in the United States have a heart attack. This shows how common critical illness such as heart attack is. It also makes us realize the importance of having critical illness cover.

When your illness is diagnosed, a specific amount is given to you, which may become very useful to pay off your mortgage or any other costs related to your treatment.

Getting insurance for a mortgage

Having building insurance is a must, as it’s often required by lenders. Getting other types of insurance for your mortgage will depend on your needs.

When choosing the insurance, it’s recommended to check which things are included and which are not. It is important to check it because all insurance policies aren’t the same.

Want to know more about the key benefits of our life insurance plans?
Find out more here

How much does expat life insurance cost?

There are different types of expat life insurance, for example, you may have heard of level term life insurance, decreasing term life insurance, and joint life insurance. With William Russell, you renew your policy each year without the need for medical questions or examinations, and your life benefit stays the same.

It’s essential to understand precisely what is covered and what isn’t covered by your international life insurance. With a William Russell policy these would be some of the points to consider:

Cover Cause of death
Covered Common causes of death (cancer, heart attack, accident, illness)
Death while you’re living & working abroad
Death while you’re in your country of nationality
Covered after one year Suicide
Not typically covered Death from a pre-existing medical condition
Death from negligence, illegal activity, or drug or alcohol abuse
Death due to war or terrorism in a country the British FCDO advises its citizens not to travel to
Death not reported to us within 12 months
Death while you’re in Iran, Libya, North Korea, South Sudan, Syria or Yemen

What affects the cost of expat life insurance?

In addition to the type of policy you choose, there are several factors that can influence the cost of your life insurance premiums. The price an individual pays usually depends on factors including:

  • Age – generally, the older you are, the more expensive a policy will be. This is because with age comes an increased risk of developing a medical condition that may affect your life expectancy.
  • Lifestyle – leading an unhealthy lifestyle can increase premiums. For example, drinking too much alcohol or being overweight can shorten life expectancy. Premiums will be typically higher to reflect this.
  • Health – having a pre-existing medical condition can affect the price you pay. Some more serious, chronic medical conditions mean that premiums will be typically higher.
  • Family medical history – insurers may ask if your parents or siblings have a history of a serious medical condition. For some people this may impact your price, as there can be a greater risk of you suffering from the same condition.
  • Occupation – if you have a dangerous job, it’s possible that you will have to pay more than someone who works in a lower risk profession – for example, someone who is an office administrator.
  • Smoker status – a smoker can expect to pay more for life insurance cover than a non-smoker, because of the health risks associated with smoking. This includes all nicotine replacement products, including vaping.
  • Length of cover – life insurance policies with longer terms can be more expensive than policies with a shorter term.
  • Amount of cover – you decide how much you would like to be covered for – generally, the higher this is, the higher the premiums will be.

It just might cost you a little more in premiums. Whether you get cover, and what you’ll pay, is down to your personal circumstances – so it will be different for everyone.

It’s important to answer any questions your insurer asks you accurately and honestly when applying. If you don’t, it could have a devastating impact on your loved ones, as it can affect whether your insurer is able to pay out a claim on the policy in full.

Don’t leave anything to chance. Choose total peace of mind instead.

How do you choose a partner to help you settle into your new life overseas? We recommend choosing one with 30 years’ experience providing insurance exclusively to expatriates like you.

When you choose William Russell as your provider of international life insurance, you’ll know you’re in the safest possible hands. Trust William Russell to protect what’s precious. We’ve worked in over 200 countries, so we have the global expertise you can depend on.

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