Should Landlords Buy Life Insurance?

Here's my thoughts on this. When I drop dead I'd like to think that Svetlana (my wife) would keep my buy to let portfolio. However, as my portfolio was built before I ever knew Svetlana the properties and the mortgages are in my name. I'm not going to change that because that would involve refinancing away from some incredible deals I arranged pre-credit crunch. Therefore, Svetlana will need to refinance if I out live her. That will be a big cost. Also, the mortgages will cost more as lenders margins have increased. Therefore, to maintain the same cashflow will mean that she will need to reduce the mortgage balances. Where will this money come from? Life insurance insurance of course! I've also made sure that my life insurance is written into trust, just in case we both die at the same time. Any money left to Svetlana will obviously be tax free as we are married, however, anything we leave to anybody else, such as our children, will be subject to 40% inheritance tax on everything over £325,000. By writing the policies into trust I've effectively given them away whilst they are worthless. Therefore, when I die the payout doesn't form part of my estate.

I'm not a financial adviser but I would suggest the minimum amount of life insurance that a landlord needs is whatever would be required to reduce the LTV on his portfolio to at least 50%, plus of course all the costs of refinancing.

Of course, if you've got no friends or loved ones that you who financial security you would like to protect or leave your properties to there's absolutely no need to buy any life insurance at all.

For most people with families though I suspect it's very important.

If the properties and mortgages are in join names with a nice positive cash flow, I don’t see need for live cover to pay off the mortgages. It also depends on how much your partner earns etc.

I also have enough money in pensions that will be paid to my wife to sort out problems with the properties.

Hi Ian, what makes you think that the mortgage lenders will not call in the mortgages if you or your wife pass away during the mortgage term? I have every reason to believe they would call them in, especially if the mortgages are with one of those lenders which are no longer in the business of lending, e.g. NRAM, MX, CHL etc. In that case you would have no choice other than to refinance or to sell up if that wasn’t possible. Given the costs of refinancing and the likelihood of having to put money into the properties and suffer higher rates too it may well be in your interests to buy some insurance for you and your wife now. As I see it, you either pay the premiums or risk paying the price. I’d much rather pay an insurance company to carry those risks personally.

I have found when accessing commercial loans the banks can insist on adequate life cover for the properties concerned regardless of age or marital status to ensure their financial input is covered.

Christine Nicholson

I do much like Mark does - Life Insurance written into trust so if me and the wife went together in a car crash my 3 kids have a big wedge from Day 1 to sort out their lives for the next 5 years or so irrespective of IHT and CGT issues. It gives them breathing space to decide what to do with the portfolio which may change according to their respective lifestyles over the months and years ahead. I probably need to enhance and upgrade that level of cover now but life insurance for me is the most quick and easy and most cost effective way of protecting for the immediate future what I have built up

I believe it to be good idea to try and mitigate against such eventualities, however, it's a personal thing and the requirement will differ from individual individual - there is no harm in having an initial discussion with an adviser.

hello interesting article. just been to chat with Nationwide re inheritance, life assurance,as have nram mortgagaes so your comments about them being called in on my death very relevant,
say 50%equity, 2 properties,1 res 1 btl,so likely have to think about £1m liability for iht.nw said say £200000 LI which at my age 70 next is £660 month.Its a lot, can I do better, any options? hope to hear from you, kind regards T

Hi Tessa, did you complete the form in the article?

Hi Mark, sorry lost the comment,needle in haystack, followed up form and very helpful lady etc still a lot to take on , another monthly dd like another mortgage, even lowest term ass. for 20 years etc £200 monthly for £100k. anything would help of course but think I have to look for options. thinking as I go, if I sell off one unencumbered flat to my son that would kill two birds with one stone, ie he would have the flat I wish to leave him, so that would reduce my estate as he can only pay say half value anyway and the money would go on refurbn bills , debts etc dont think there would be too much left after spend etc. the mortgage on the property then would leave 50% equity so covered by exemption IHT etc, so hope thats correct and so I other property to cover,again 50 % equity ,probably do same again if IHT for dec. husband not used ,have to check as not sure ,unless I demise into a garden flat and pass on to family asap hopefully survive the 7 years.had rotten contentious so no illusions,really do want to leave sorted.I thought to just sell up etc but family devastated if I did that, its lovely you are able to leave your family secure so nice you think of them not everyone does.Thats all I can think of for me I'd welcome your comments, such a great forum, even if I do have to make sure I'm sitting down before reading, never know whats going to jump out, like the BOI bomb.all the best T PS lost a comment,so can I ask would like to remortgage from NRAM residential but no salary now as expect rely on BTL income, any possibility for me at 70 to get a remort. only small pension so not high enough , can I change BTL income to salary somehow to enable me to remortgage, or other options?cheers T

A financial advisor has been recommended through property 118, a company called H D Consultants based in Essex. I have made contact with one of the consultants and all seem above board. I would like to know if anyone has used this company in any capacity and would they be able to give a testimonial of reassurance?