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How to choose a life insurance policy for your home loan

13 Nov 2020

There are many things first-time buyers will learn when purchasing their first home, one of which is that they will need a life insurance policy of some kind to qualify for a home loan. Knowing which policy they need will depend on the bank through whom they have acquired their home finance.

"Life cover is the assurance most financial institutions require in order to grant you 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. For those who are the primary income providers in their household, it also ensures that your loved ones will be provided for in the eventuality whereby you are no longer around to support them," explains Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

According to Goslett, each bank has their own lending requirements when it comes to life insurance policies, so buyers will need to do their homework with each financial institution carefully before deciding which policy to sign up for. "To save yourself some trouble, work through SA's leading bond originator, BetterBond, 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 suggests.

In general though, BetterBond advises that Nedbank is the only one 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 many requirements when purchasing a home. My advice to first time 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.

Article published courtesy of My Property

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