Should Landlords Have Life Insurance?
How do you feel about the thought of your family struggling with not only the emotional turmoil to death but the financial burden of the property portfolio you’ve left behind?
Currently, around 1 in every 25 estates pay Inheritance Tax, but that’s not all your family will have to worry about.
Could they pass the affordability test to take on your mortgages? All of your hard work to build a legacy could potentially leave your family financially worse off after your death, so Mashroom Mortgages’ Kirsty Primmer breaks down:
- Why do you need life insurance?
- When should you get it?
- How often should you update it?
Why do landlords need life insurance?
It’s absolutely essential as a landlord to have life insurance!
As a landlord you generally have a portfolio of properties or even just one property as a legacy. Your ideal plan might be to leave it to your family or children, or to even to friends. If there is a mortgage on that property, that mortgage is not always able to be transferred to the person that you leave the property to, so that could mean that that person is then selling the property and your legacy has gone.
Life insurance is a really great way to ensure that the properties and the rental income you receive will go to the people you want it to.
What about when you increase your portfolio?
When it comes to increasing your portfolio, you should have a protection review. As the insurance you have covers the properties you have, of course when you buy another property it makes sense to expand your insurance to cover that property.
You can have a blanket policy that will cover all of the properties or you could have individual property cover, so Kirsty’s advice is to always review your policy when you purchase a new property.
With regards to checking in with a life insurance policy, it’s generally something your mortgage and protection advisor would do for you, so when you come to review your mortgage your advisor can review your insurance at that time. They will make sure you have the best product for your situation.
Life can massively change. You can get married; you can have children. Things change all the time, so make sure it’s reviewed when these events happen, or when you buy a new property, or you’re reviewing your mortgage.
What are the best add ons for landlords?
People think of their life insurance as a policy that just pays out when they die, but actually it’s not just a protection package!
There are certain things you can add to a policy to upgrade it to support you should you fall ill. One of our insurers has Global Treatment, which is an amazing policy as it will pay for you to go and have the best treatment in the world, should you be diagnosed with something like cancer or need neurosurgery.
We’ve all seen people raising money on social media to go abroad for life saving treatment, but this is something you can add to your policy that gives you massive peace of mind. It’s an add on that for less than a pint of beer in the pub will pay up to two million pounds for you, your children, your partner (if they’re on your insurance) to go and have the best treatment in the world, as well as medicines when you come back to the UK.
It’s no longer just about having an insurance policy, it’s a protection package and that’s really important for anybody.
What if you own a property in partnership?
If you own a property in partnership, the type of insurance policy you need will depend on the type of partnership, so this is something to discuss with your advisor.
A joint life insurance policy can work out a lot cheaper and it would pay on the first death, so if somebody were to pass away, you could then leave that property to the other owner and it could be an income for family, providing that extra support without the burden of the mortgage.
If you own property as a business partnership, you may want single life policies because you may want to leave your 50% share of the property to family.
It’s always best to speak to somebody, you can always give Kirsty a call and talk through the right situations to decide what’s best for you.