Mortgage Life Insurance – Protecting the roof over your head
Have you considered how your family would survive financially if you were to die?
Could they afford to continue making your mortgage repayments without your income?
Mortgage Life Insurance is an assurance policy designed to pay off your mortgage if the worst happens and you are killed or die. It pays out in a lump sum that allows your family the opportunity to completely pay off the mortgage or to cover other liabilities or debts.
The insurance, which is offered by a wide range of providers including Bupa, Legal and General, Fortis, AXA and Royal Liver, is usually taken when you take a new mortgage but is available at any time whether you have no current cover or whether you are looking for a more competitive deal on your current insurance.
Usually the cover is designed to protect the whole of your mortgage balance but can also be taken to cover only a part of it if you have other arrangements in place.
As well as protecting you and your family from your death, the cover can also be taken in conjunction with critical illness cover to provide a payout if you a struck by a heart attack, cancer or other major critical illness. This mortgage life and critical illness cover provides a more comprehensive protection and can be tailored to suit your needs and budget.
How much will my cover pay out?
Your cover is tailored to fit around your mortgage, so if you have a £100,000 mortgage you may choose to take a £100,000 life insurance policy over the same number of years as you are repaying your mortgage.
Will my policy pay the same amount throughout the policy?
Again your cover is designed to fit around your mortgage and the answer to this question lays in your aims and type of mortgage.
Mortgage life insurance can fall into two brackets, namely level life insurance and decreasing life insurance.
The decreasing option is generally cheaper but is only suitable for capital and repayment mortgages (where you are paying off the balance of the mortgage and not just the interest). As your mortgage balance decreases so to does the amount that your insurance policy will pay out. The policy is designed to always have enough in its pot to pay off the mortgage but may not leave your family with any money left over.
A level life insurance acts in an opposite fashion to its decreasing counterpart. With this option, the amount of cover you choose is the same amount that will be paid out to your family at any point during the policy. This is suitable for interest only mortgages or mortgages which are part interest and part capital repayment.
Does my health affect my policy?
Your health may affect the policy whilst it is been setup but once your policy is in force, any changes to your health will not have any effects on the policy terms or the amount you pay.
A vast majority of conditions do not cause any changes to premiums however more serious conditions can sometimes cause an insurer to ask for an increased premium. The best way to find out if your medical condition is going to affect a policy premium, is to speak to an advisor who will be able to take some details about the condition and advise if your medical history will cause any issues and if so, which insurers are likely to be more lenient and offer the better price and terms.
Should I take my mortgage life insurance from my mortgage provider?
When taking a new mortgage, your provider may also offer you a quotation for your life insurance. Whilst this may appear to be helpful, in most cases the premium offered by a mortgage broker is only taken from a single insurer (or a very small range of insurers) and does not represent the whole of the marketplace and therefore the most competitive premium. On top of this, most providers add their own fee on top causing a further price increase. In some cases, quotes from mortgage providers can be three times higher than the best price!
Overall your home is one of the most important assets you will ever own. The mortgage on your house is something that can make or break your family financially during a crisis and protecting your family from this and also ensuring the roof over their heads is protected, is essential.
Mortgage life assurance can provide a tailored solution to this protection, matching both your aims and needs .
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