If you already own a property or are in the process of purchasing one, you will be all too familiar with the concept of borrowing money. Unless inherited, acquiring property generally involves taking on the most significant debt you will ever have in your lifetime, and it’s a perfectly standard, everyday occurrence. What many people neglect to think about at the time, whether for the obvious reason that it’s not pleasant to think about or by simply being unaware of its importance and relevance, is life insurance.
How property lenders view life insurance in Australia
Life insurance in Australia comes with myriad benefits and very few downsides. However, it is not a legal requirement when negotiating the terms of any loan to secure a piece of property. That’s not to say it isn’t beneficial, and lenders often view the existence of a life insurance policy favourably when analysing a loan request. After all, if the holder should die unexpectedly, it is much more likely that they will receive full repayment of the loan.
- Some mortgage lenders may insist on life insurance as a condition of any loan approval. This is more likely if the borrower is considered high-risk.
There are other practical and financial reasons why people choose to take out life insurance in Australia when applying for a mortgage, including:
Property protection for loved ones
One potential benefit of life insurance in Australia is that it can be used to pay off your mortgage in the event of your untimely death. This allows family members to remain in the property without being saddled with an enormous debt they may not want or be able to afford.
- The nature of life insurance is such that it is taken out specifically to protect those we love when we are gone, and there is no finer way to do so than by securing ownership of their home.
Peace of mind
Although the point of life insurance in Australia is to do something good for others after we’re gone, there are some benefits we can take from a policy while we’re still able. The biggest is the peace of mind from knowing we have gone above and beyond to protect our families and loved ones.
- Financial stress is no joke, and knowing that burden is taken off their shoulders in their darkest hour is comforting.
Should I take out life insurance in Australia if I have no dependents?
Although single people without dependents may appear to have less need for mortgage-covering life insurance, many still consider it if they prefer to determine to whom their property will be left in the event of their death, such as:
- Non-dependent loved ones
- Charitable causes
Circumstances change in life, and younger people may take out life insurance in Australia when the premiums are lower with the hope of having a family later.
Taking out life insurance in Australia is an excellent idea, whether taking out a property loan or not. Protecting our loved ones when we can no longer do so ourselves by covering such a significant debt and taking it off the list of things they need to worry about is the best we can do for them.