4 ms·

>If you've just bought a house and a car and had a kid you're probably in a lot of recent debt, with the assumption that you'll have a lifetime to pay it down

>If you've just bought a house and a car and had a kid you're probably in a lot of recent debt, with the assumption that you'll have a lifetime to pay it down Out of self discipline I bought a life insurance at the same time my home loan was approved; the insurance amount being same as loan amount. I have always wondered why don't Government have regulations in place that forces a borrower to purchase a life insurance. Or at least make the borrower opt into insurance by default with the option of opting out. Left to themselves borrowers are not likely to think about insurance at the time of taking loans. I think by nature we underplay risks to our life because of which our loved ones end up suffering financially over and above emotionally.

caiusdurling 13y ago
From what I've heard from friends/family that have mortgages, here in the UK the mortgage company stipulates that you have to get life insurance in place to cover the remaining loan amount before they approve your mortgage.
- ealexhudson 13y ago
  That's not at all true. Banks will be very happy to sell you life insurance, for sure, and may make it sound important - but the only insurance requirement is on the building itself, and even then the cost of rebuilding it, not the value of it.
maxerickson 13y ago
What good would it do a single person? Life insurance is to protect the people that rely on your income, not pay off your debts (I don't think this is a deep insight, I just think it is the sensible way to talk about it). If you have children and only insured the value of your house, you probably need to buy more (but of course you might have discussed a simplified version of your situation or whatever).
- DigitalJack 13y ago
  My rule of thumb is insure for 10x your income. That makes it feasible for interest on the payout to replace your income.
yodsanklai 13y ago
> I have always wondered why don't Government have regulations in place that forces a borrower to purchase a life insurance It's the old "nanny state" debate... In France, life insurances are mandatory when you get a mortgage. However, one still has to be particularly careful with insurance policies. My mother died to a cancer, a few years after she contracted a loan. However, the insurance company refused to pay off the loan. The contract was nullified as she didn't mention a disease she had 15 years before (unrelated the the cancer that killed her).
antirez 13y ago
It is mandatory in Italy. If you die the debt is automatically payed.
morgante 13y ago
> I have always wondered why don't Government have regulations in place that forces a borrower to purchase a life insurance. Or at least make the borrower opt into insurance by default with the option of opting out. Because that's literally an unfair subsidy for insurance companies off the backs of homeowners. Insurance isn't a scam, but it is trading some reward to decrease risks. Probabilistically, you're better off saving the insurance money. I'm not saying that's the best choice for everyone, but it should be a choice. Personally, as a single adult I'd never consider life insurance——nobody would be financially ruined if I died, so I'm much better off rolling all excess money into the stock market.
lafar6502 13y ago
It certainly makes you confident that insurance company will take care of everything when you die. But are you really sure? Did you check the fine print? What if your death is 'because of age' or 'because riding a bicycle is a dangerous activity'?
- vishnugupta 13y ago
  Life insurance business in India is very tightly regulated. In fact till very recently there was just one player, LIC (Life Insurance Corporation of India), which is essentially backed by the state. And LIC, being the oldest player in India, is profitable and has the highest claim settlement ratio, about 98%. Even though I haven't really checked the complete fine print I'm more or less certain, looking at the settlement ratio, that they wouldn't include such clauses. That's the reason I'm fairly confident the insurance company will take care of everything.
  - lafar6502 13y ago
    Well, i'm relying on maths, not on government regulations. All the data is there, you can calculate the expected payout value for current mortality data and compare it with your yearly insurance cost. I don't know how much you pay but my calculations showed that insurance companies must seriously reduce the payout amount and/or exclude a majority of 'payable' illnesses or death causes, or they would lose money on every life insurance sold. That's why i don't believe in life insurances and prefer other solutions.
gnoway 13y ago
I'm single with no dependents. I have enough money to cover my mortgage. Why should I be required to purchase life insurance?
- vishnugupta 13y ago
  That's a fair point as others have also pointed out. It's that I couldn't even imagine such a scenario. The society I live in, India, you will very rarely come across such a person, i.e., a single person with no dependents owning a house on mortgage. Once you start earning here there's almost someone financially dependent on you :). Could be your parents, spouse, children at various points in time.

caiusdurling 13y ago

From what I've heard from friends/family that have mortgages, here in the UK the mortgage company stipulates that you have to get life insurance in place to cover the remaining loan amount before they approve your mortgage.

ealexhudson 13y ago
That's not at all true. Banks will be very happy to sell you life insurance, for sure, and may make it sound important - but the only insurance requirement is on the building itself, and even then the cost of rebuilding it, not the value of it.

maxerickson 13y ago

What good would it do a single person? Life insurance is to protect the people that rely on your income, not pay off your debts (I don't think this is a deep insight, I just think it is the sensible way to talk about it). If you have children and only insured the value of your house, you probably need to buy more (but of course you might have discussed a simplified version of your situation or whatever).

DigitalJack 13y ago
My rule of thumb is insure for 10x your income. That makes it feasible for interest on the payout to replace your income.

yodsanklai 13y ago

> I have always wondered why don't Government have regulations in place that forces a borrower to purchase a life insurance It's the old "nanny state" debate... In France, life insurances are mandatory when you get a mortgage. However, one still has to be particularly careful with insurance policies. My mother died to a cancer, a few years after she contracted a loan. However, the insurance company refused to pay off the loan. The contract was nullified as she didn't mention a disease she had 15 years before (unrelated the the cancer that killed her).

antirez 13y ago

It is mandatory in Italy. If you die the debt is automatically payed.

morgante 13y ago

> I have always wondered why don't Government have regulations in place that forces a borrower to purchase a life insurance. Or at least make the borrower opt into insurance by default with the option of opting out. Because that's literally an unfair subsidy for insurance companies off the backs of homeowners. Insurance isn't a scam, but it is trading some reward to decrease risks. Probabilistically, you're better off saving the insurance money. I'm not saying that's the best choice for everyone, but it should be a choice. Personally, as a single adult I'd never consider life insurance——nobody would be financially ruined if I died, so I'm much better off rolling all excess money into the stock market.

lafar6502 13y ago

It certainly makes you confident that insurance company will take care of everything when you die. But are you really sure? Did you check the fine print? What if your death is 'because of age' or 'because riding a bicycle is a dangerous activity'?

vishnugupta 13y ago
Life insurance business in India is very tightly regulated. In fact till very recently there was just one player, LIC (Life Insurance Corporation of India), which is essentially backed by the state. And LIC, being the oldest player in India, is profitable and has the highest claim settlement ratio, about 98%. Even though I haven't really checked the complete fine print I'm more or less certain, looking at the settlement ratio, that they wouldn't include such clauses. That's the reason I'm fairly confident the insurance company will take care of everything.
- lafar6502 13y ago
  Well, i'm relying on maths, not on government regulations. All the data is there, you can calculate the expected payout value for current mortality data and compare it with your yearly insurance cost. I don't know how much you pay but my calculations showed that insurance companies must seriously reduce the payout amount and/or exclude a majority of 'payable' illnesses or death causes, or they would lose money on every life insurance sold. That's why i don't believe in life insurances and prefer other solutions.

gnoway 13y ago

I'm single with no dependents. I have enough money to cover my mortgage. Why should I be required to purchase life insurance?

vishnugupta 13y ago
That's a fair point as others have also pointed out. It's that I couldn't even imagine such a scenario. The society I live in, India, you will very rarely come across such a person, i.e., a single person with no dependents owning a house on mortgage. Once you start earning here there's almost someone financially dependent on you :). Could be your parents, spouse, children at various points in time.