Safeguarding the family home when you’re gone

It’s what life insurance is for – among other things

Nothing can make up for losing a partner. It’s one of the hardest things we might face.

But having life insurance can help reduce the financial impact on those left behind – including helping make sure they won’t have the upheaval of moving home, when they already have to process so much.

Losing a partner can mean leaving a home

The death of a partner, who might also be a parent, can put a big financial strain on families. Losing that income, especially if they were the main earner, can have far‐reaching effects. So it stands to reason that sometimes families can no longer afford to stay in the same home.

Research by Aviva  among 500 people whose partner died in the last five years, shows a third were no longer living in the same home. The main reasons they gave for moving were:

  • They couldn’t afford to stay, so they moved to a smaller or cheaper property, with a lower mortgage or rent
  • There were too many memories, which made the grieving process harder
  • They wanted to be nearer friends or family, to get the support they needed during a difficult time

Though getting a fresh start was a big reason for moving, almost half (45%) moved because, financially, they had no real choice.

Only 16% of people asked said that, when their partner died, they owned the home they lived in outright, with no mortgage left to pay. Almost twice that amount (30%) owned a home and had an outstanding mortgage with their partner, with others renting from a private landlord or their local authority.

What happens if you have life insurance?

There’s no two ways about it: grieving is hard, and the fewer things to worry about, especially when it comes to a roof over your head, the better.

So having a plan in place, which includes taking out life insurance and making a will that you keep up to date, can give you the peace of mind that your loved ones will be in a position to worry less about the finances when you’re gone.

That’s because the lump sum that’s paid out on a valid claim if you pass away within the policy term helps provide that financial cushion – whether that means paying off a mortgage, or helping to take care of other outgoings, too. Our cover also pays the cover amount if you’re diagnosed with a terminal illness that meets our definition, where you’re not expected to live longer than 12 months.

Making sure loved ones are in a position to pay off a mortgage is a common motivator for taking out life insurance. And for some mortgage providers, it’s compulsory. After all, it’s the largest amount of money most people will borrow in their lifetime.

In the same survey, people whose late partner had a life insurance policy were far less likely to move out of the family home (25%), with emotional reasons being the main reason for moving (68%), not stretched finances.

The different types of life cover

When you buy a life insurance policy with us, you choose one of two types of term life cover. Either could help pay off a mortgage, but which you choose might depend on the type of mortgage you have, and if you want to help cover other costs.

If you’re looking to help make sure a repayment mortgage could be paid off if you die during the term of the policy, you could choose decreasing cover. Your premiums are fixed, but as the amount left to pay on a mortgage gradually decreases over time, so does the cover amount.

Or you could choose level cover, where the amount of cover stays the same throughout your policy, and your premiums are fixed, too. The lump sum payout could be used by your family to pay off an interest‐only mortgage or keep up mortgage repayments, and go towards general living costs and monthly outgoings.

You can choose to help protect this cover amount from the effects of inflation. This means that the cover amount will increase and your monthly payments may also rise, and at a higher rate. But the lump sum won't be worth less in the future because of the rise in the cost of living.

What happens if you don’t have life insurance?

Unfortunately, the majority of people in our survey (65%) who recently lost a spouse or partner they lived with said their partner didn’t have life insurance when they died.

Some had to move

These were the partners left behind who were more likely to move (36%), with more than a half (52%) saying they moved for financial reasons. That could be due to not being able to cover mortgage or rent payments. But it could be because the house had to be sold, if it was in the sole name of the partner, or if it was joint ownership, if the surviving partner didn’t have the money to clear that debt, or afford repayments.

If you’ve lost your partner and had a joint mortgage with them, it’s important to get in touch with your mortgage lender as soon as you can. They may be able to help if you’re worried about repayments, and will have lots of experience of dealing with this situation.

Some found compromises

For families whose partner or parent had no life cover in place when they died, moving to a smaller home with lower mortgage or rent payments was necessary to cut back on costs. But in our survey, some families used other ways to help make up for the loss of their partner’s income, which included:

  • Cutting back spending on food and drink
  • Taking in a lodger
  • Selling personal possessions
  • Cashing in savings
  • Using credit cards or taking out loans
  • Taking on extra work

As much as this shows that people can be resourceful, they’re less‐than‐ideal solutions, at an already difficult time.

Not forgetting that nearly a quarter of respondents (23%) who were a parent or guardian when they lost their partner had a child aged four years or under to take care of, too.

What to do if you need financial help when you lose your partner

You may be able to get financial help from the government if you’ve had a bereavement. It depends on your circumstances, but if your husband, wife or civil partner died and you’re under state pension age, you may be eligible for a Bereavement Support Payment.

If you’re an unmarried partner and not a tenant, and you need to stay in the home, you can find more information about your options at Citizens Advice.

Over a fifth of respondents (22%) to our survey said they claimed state bereavement benefits after losing their partner to help them cope financially.

Do insurers pay out when someone dies?

We really want to help bust this life insurance myth. We publish our claims figures every year and in 2019, paid 98.6% of life insurance claims made by our customers – a total of £582 million of payouts to recently bereaved families .

While nothing can make losing a partner or loved ones easy, a solid reason for getting life insurance can be to make sure your family can have the financial resources to help them stay in the home. So if they move, it’s because they choose to, not because they can’t afford to stay.

Interested in life insurance?

Have a look at how we could be here for you and your loved ones.

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