You will need Mortgage Protection if you are buying a home and taking out a mortgage. Like many people your mortgage will be your biggest financial liability. Your lender will stipulate that you have at least a basic Mortgage Protection plan in place before you draw down your loan.
Mortgage Protection is a very affordable type of cover and the cost will be dependent on your loan amount, term, age and health and in particular smoker status!
There are many variations of Mortgage Protection in the market and we have put this useful summary together to help guide you through your options.
What is Mortgage Protection?
Mortgage Protection is a type of insurance that pays off your mortgage if you die.
- If you are single the cover will be taken out on your life only – Single Life.
- If you are a couple it can be set up on a Joint Life/ First Death basis which means a lump sum is paid on the first death only. Life Cover is also offered on a Dual Life basis where the policy can pay out twice.
Traditionally, Life Cover only was offered under a Mortgage Protection plan, however Specified Serious Illness and other benefits can now be added to your plan giving you more comprehensive cover.
- Life Cover
A cash lump sum is paid if you die during the term of the plan. This will be used to pay off the outstanding balance of your loan, any surplus will be paid to your estate,
- Life and Specified Serious Illness Cover
You can add ‘accelerated’ serious illness to your plan. This means if you are diagnosed with one of the illnesses listed in your policy document a lump sum will be paid to your loan. Accelerated means if you make a claim, your Life Cover will be reduced by the amount paid out and any remaining balance will be paid out on death.
Your Mortgage Protection can also be set up in a number of different ways – either on a decreasing basis or a level basis.
- Decreasing Mortgage Protection is the most basic type of cover and is the most affordable. This is where your cover will reduce each year in line with your Mortgage. If you die during the term of the plan a cash lump sum is used to clear your mortgage. At the end of the term you will have no life cover.
- Level Term Mortgage Protection is a step up in terms of the protection it offers. This is where your Life Cover does not reduce in line with your mortgage but remains at the same level throughout the term of the plan. If you die during the term of your plan the policy pays out a cash lump sum which is used to clear the balance on your mortgage. Any remaining Life Cover is then paid to your estate.
Additional benefits can be added to the above plan types providing more comprehensive cover for you and your family.
- ‘Specified Serious Illness’ on an accelerated basis. Specified Serious Illness pays out a lump sum on diagnoses of an illness specified under the policy. It can be taken out on a percentage basis up to 100% of your overall Life Cover i.e. 25%, 50%, 75% or 100% of your Life Cover. If you make a claim, your Life Cover will be reduced by the amount paid out and any remaining balance will be paid out on death.
- ‘Continuation Option’ allows you to extend the term of your Life Cover at any stage during the term, without providing evidence of health.
Are you currently in the process of buying your own home??? Why not get in touch for a quotation and advice on the most suitable type of Mortgage Protection for you.
Do you have an existing Mortgage Protection plan??? It can be beneficial to review this from time to time to see if you can make any savings. The cost of Mortgage Protection has become very competitive in recent years with many companies running ‘Special Offers’.
Interested in finding out more?? Contact us now and we will research the market on your behalf. We have access to all the main companies ensuring you get a policy offering you the best value for your money.
