What is Life Insurance?

70% of people in the UK don’t have life insurance. That means that when you die there won’t be any payout to help your family cover Inheritance Tax, funeral fees or any other costs.

As well as the emotional turmoil of grief and loss, there are practical matters you may not have ever considered. And those practical matters could be weighty enough that  your family could have to sell up everything just to make ends meet.

So it’s important to know what life insurance is and make sure you’re getting the right policy to protect your family. Mashroom Mortgages’ Kirsty Primmer breaks down everything you need to know about life insurance.

What does life insurance cover?

Life insurance is an insurance policy, just like your car insurance, that would pay out on the death of the person that was insured.

So, for instance, if you have a mortgage, the life insurance payout would completely clear the mortgage for the people you’re leaving behind.

Historically, you had to have life insurance if you had a mortgage, which isn’t the case now (unlike Buildings Insurance!). But life insurance can cover so many things: 

  • Clear outstanding loans. The payout out cover credit card debts, for example
  • Cover funeral costs. Some insurers fast track payments for funeral costs, up to £11,000
  • Emotional support. If you have young children, you might want to organise something nice for them to look forward to, like a holiday

That’s what life insurance can do, it gives you reassurance and peace of mind.

Why is life insurance particularly important for landlords? 

You’re a landlord for a reason and a lot of time that reason is to ensure a legacy for your family.

It may be that in the case of a couple, one spouse is a higher earner than the other, which so leaving a property to them means they can take the full income from that property, so the family don’t have to struggle.

People sometimes think that a partner could take over the mortgage if they were to pass away, but unfortunately, it isn’t that simple. Lenders have a lot of criteria which means that  the mortgage can’t always be taken over, so the properties would need to be sold. So your hard earned legacy is gone. There is also Inheritance Tax to consider.

What kinds of life insurance are there?

There are a few different types of life insurance that we deal with:

  • Level term life insurance. This pays a lump sum upon death and that sum is always the same, reassuring you that your mortgage would be cleared
  • Decreasing term life insurance. This decreases in line with your mortgage each year
  • Whole of life insurance. Generally called a life assurance policy and pays out a lump sum upon death, but is not necessarily tied to a mortgage

These are just some of the types of policy available – there are SO many more! So it’s definitely best to speak to an advisor about the options available, including add ons like critical illness cover and income protection.

Should a landlord get single or joint life insurance? 

The answer to this question really depends on your personal situation – the answer will vary from person to person. To know what’s best for your life insurance policy, you are best off speaking to an expert about it. A protection advisor will be able to advise the best thing for you.

In general, a joint life policy will pay out on the first death of someone. It can be a cheaper option because two people are insured, rather than two separate policies. You might also find that this is the most cost effective option for people who are cohabiting or married.

If you are single, then a single life policy would be the best thing. Alternatively, you might want a single life policy if you’re part of a couple, so that the first policy pays out on the first person’s death, which includes the mortgage, but the other person’s policy leaves a benefit to the family that are left behind.

It’s all dependent on your particular situation and what you want to ensure happens after your death. 

What’s the best way to get life insurance?

The best way to get life insurance is to speak to a protection advisor. There are currently hundreds of life insurance providers in the UK, but they will all have different criteria, they will all look at different things and it’s really important to make sure that you have the right cover for you. So working with a protection advisor means they’ll be able to advise on the right type of policy for your situation. They can also advise about things that you could add, for example, some insurers provide Global Treatment, which pays for you to go and have the best treatment in the world should you be diagnosed with things like cancer, require neurosurgery or live organ transplant.

There are many other benefits you can get with your policy, you just need to get the best advice.

How is life insurance calculated?

Life insurance is calculated depending on a lot of different factors. You’ll be asked lots of questions and some can seem quite intrusive. They’ll ask:

  • Your height 
  • Your weight 
  • Your smoking status 
  • Your medical history 
  • Your family medical history 

These questions are designed to calculate your premium and they may then request more information, so they might want to ask your doctor for more information, or give you a phone call, or you may not fit their criteria at all.

Different insurers will have different ways of doing things. Mashroom has access to a lot of different insurers, which means that if we can’t make it work with one insurer then we can generally find another option for you.

If you want to talk to Kirsty about the options available to you for your life insurance, you can book a call today.

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Mashroom is an appointed representative of Adelphi Insurance Brokers Ltd. Adelphi Insurance Brokers Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Their Financial Services Register number is 594620, with permitted business activities being introducing, advising, arranging, dealing as agent, assisting in the administration and performance of general insurance contracts and credit broking in relation to insurance instalment facilities. You may check this on the Financial Services Register by visiting the FCA’s website, register.fca.org.uk or by contacting the FCA on 0800 111 6768