How to choose life insurance for your home loan

Home owner

There are many requirements and components that accompany purchasing your first home. One of these is a life insurance policy of some kind to qualify for a home loan. Knowing which policy you will require will depend on the bank who has granted your home finance.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa says life cover is the assurance most financial institutions require to grant a home loan.

As unpleasant as it might sound, the institutions need to be sure that the loan amount will be repaid even in the unfortunate event of your death during your lending term” he says.

If you are the primary income provider in your household, life insurance will ensure that your loved ones will be provided for in the eventuality that you are no longer around to support them.

Goslett says that each bank has their own lending requirements when it comes to life insurance policies, so buyers need to do their homework with each financial institution carefully before deciding which policy to sign up for. He suggests working through a reputable bond originator who can advise you about the various prerequisites involved when applying for a home loan.

That way, they can provide you with preapproval on your home loan so that you know exactly what you qualify for before you begin your house hunting process,” he says.

According to Betterbond, Nedbank is the only bank of the four major banks where a life policy is not always mandatory. ABSA usually requires both a death and disability policy and FNB usually requires these in addition to retrenchment cover whereas Standard Bank normally requires not only death, disability, and retrenchment cover but dread disease cover as well.

Life cover is one of the many requirements when purchasing a home. My advice to first-time home buyers is to partner with a trusted real estate advisor to guide them through the process. Having a professional by their side can save first-time buyers a lot of stress and prevent them from making mistakes along the process” Goslett concludes.