What Happens to Joint Mortgages Without Life Insurance?

A joint mortgage is issued in the name of two people rather than one person. When purchasing a property with a partner or friend, people should protect their investments. Life insurance is one way to ensure that the other owner does not suffer financially upon your death.

However, many people neglect to purchase this important cover, leaving the co-owner responsible for payment of the entire mortgage balance.

Life Insurance Designed for Joint Mortgages

It is not typically compulsory to purchase life insurance for mortgage protection. However, it is wise in the case of a joint mortgage or if the individual has a family. Joint mortgage life insurance is designed to repay the mortgage balance if one owner dies. This policy pays out upon the first death and then terminates. If either partner dies, the mortgage loan will be repaid and the surviving partner will not be forced to make loan repayments in the future.

When the holders of a joint mortgage consider this type of cover, they typically wonder if they both need to have life insurance. They do not and in some situations, it may be wiser for one partner to purchase life cover rather than for both to buy a joint plan. For example, individual life cover may make more sense if only one partner is employed and makes mortgage payments.

While a joint policy pays out only once, if each party gets an individual policy, two payouts are possible. The cost of two separate life policies is typically only about ten percent higher than the cost of a joint term life policy. This additional premium may be exceeded by any claim that is paid upon the death of an insured. If the partners opt for a joint policy, adding critical illness cover will create a pay-out if either person suffers one of the listed injuries or critical illnesses.

Joint Mortgages Without Life Insurance

If the joint mortgage holders do not take out life insurance, the surviving partner must continue to make mortgage payments for the duration of the loan. If both incomes were applied toward these payments, this can create a financial burden. Many partners have children, making it even more difficult to spread income across necessary living expenses.

Joint mortgage life insurance may not even be sufficient in this case because it is designed to repay the mortgage. The surviving partner may not earn enough to support children and him or herself.

Joint life insurance policies are available to registered civil partners, married couples, and cohabitating couples with joint financial obligations such as a joint mortgage. A joint or individual life policy can be worth the cost of premiums when both partners are parties to a joint mortgage.

When taking out a mortgage with another individual, consider how his or her death will affect the ability to repay the loan without the financial protection provided by life insurance.