Should Landlords have Life Insurance?

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Life Insurance is a financial product that some see as essential whilst others believe that it is an unnecessary expense. Both point of views have some merit, but it is the individual’s situation that will dictate how relevant each point of view is. In the past, many landlords may have considered life insurance as a financial product that not would interest them. However, it is becoming more relevant as the economic landscape shifts. Landlords could indeed benefit from the investment of life insurance.

Why Now?

The biggest expense that a buy-to-let landlord has to face is his/her mortgage repayments. Mortgages are, indeed, essential if a property is going to be rented out with the aim of making some profit. In the past, interest rates have been an expensive foe to be faced by potential landlords. Life insurance did not seem an attractive investment when mortgages were costing an awful lot of hard-earned money. Paying the mortgages that landlords had bought specifically for buy-to-let propositions was a challenge in itself. Savers were benefitting, and their money was growing quickly, but those who invested in property were paying the high price of such an economy.

Yet, now it’s a different economic landscape. Interest rates have been slashed, the savers are most upset about the poor returns from their savings, and the mortgage payers are having rather a jolly time of it.

With the economy currently in the favour of landlords, now is a great time to invest in life insurance. Landlords would have a little more money to play with, due to the low interest rates, and that means that the benefits of life insurance could make a difference.

Why Be A Landlord?

Another way to think about the relevance of life insurance is to consider the reason why landlords became landlords. It is always for one simple reason: investment. Buying real estate and renting it out is a historic way of paying a mortgage, leaving a great investment. But the reason for making the investment in the first place may need life insurance to secure the plan.

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The investment is usually so a landlord has something to pass on to loved ones in the event of death. It could also be to have something to sell when the property investment value peaks,  the whole planning financially for the future. Therefore, the investment into life insurance would ensure that their children get to go to college, their spouses would get the benefit of an investment, and there would be control over the family’s financial security, even after death.

Buying with Another

There is a typical investment dilemma for landlords who co-own the mortgage. What would happen if one of the buyers passes away? The responsibility would then be passed onto the surviving co-owner, unless other arrangements were put in place. Life insurance would solve the dilemma and make the transition very smooth. In these situations, having a life-insurance policy makes good business sense and protects both parties from financial ruin in the event of a death.

Life insurance is often overlooked by landlords since, traditionally, the mainstream thought was that it had nothing to offer them, but these days it clearly makes sense to protect your investments. Debts do not die with you as many UK residents believe.  Life insurance would be a very important benefit to those that are left behind after death; they would have financial protection and would not have to go down a path of financial ruin.


Categories: Real Estate

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May 8, 2015 Should Landlords have Life Insurance?