Mortgage Protection Insurance – Everything You Need To Know
How Does Mortgage Protection Insurance Work?
There are many different types of insurance that protect you should you become ill, suffer an injury, or die. This is one such insurance that is often offered in conjunction with a mortgage offer.
Mortgage protection usually falls within three main types:
Critical illness cover
All of these products can be purchased as a standalone, alongside other insurances as a package, and are available from independent providers. We recommend seeking professional, expert advice before committing to a long-term insurance product to make sure you are getting the best deal and choosing the most suitable types of cover.
Income Protection Insurance
Income protection insures you for the value of your income should you become ill or injured and no longer be able to work.
This usually provides a monthly payment roughly equivalent to your usual salary until you can return to work, or until you reach retirement age.
Critical Illness Cover
Critical illness works similarly, although covers you for serious illnesses and long-term conditions. It usually pays out in one lump sum, rather than in smaller monthly payments for a longer period.
It is important to check exactly what conditions are included within your policy, and to fully disclose any pre-existing medical conditions to ensure that your cover is valid should you ever need to make a claim.
Life insurance also protects your beneficiaries should anything happen to you, and usually pays out a lump sum to your named recipients in the event of your death.
Term life insurance lasts for a fixed period, usually until your mortgage is paid off or until your children reach a certain age.
Whole life insurance exists for the entirety of your life and does not have an expiration date.
Term policies carry smaller premiums, since they will expire at a fixed point, and can be purchased on a decreasing basis to continually provide cover for the remaining balance of your mortgage, as it is paid off over time. This also means that your premiums will decrease accordingly.
Whilst life insurance is more expensive since it does not expire, it does provide the reassurance of a guaranteed pay out to your family should you die.
Who Needs Mortgage Protection Insurance?
Whilst mortgage protection insurance is not mandatory, it does mean that you have a contingency plan should anything happen and you find yourself unable to keep up with your mortgage payments.
Whether this is right for you depends on the value of your mortgage, the amount of equity you have in your home, and whether you have any other financial resources you would be able to call upon should you become injured or unwell, and no longer be able to work.
Mortgae Payment Protection Insurance FAQs
Where Is The Best Place To Buy Mortgage Protection Insurance?
We always recommend using an independent broker when choosing an insurance product. This is because a broker has access to the whole of the market, is not confined to the products sold by their company, and can give professional advice about what insurance cover makes the most sense for you.
What Does Mortgage Protection Insurance Cost?
The cost of your cover will depend on many factors, as it is designed to be specific to your required level of income, and the value of your mortgage.
Your advisor will ask for information to help them recommend the best policies, such as:
- What regular income you need to cover
- Whether you would like a fixed-term or whole life policy
- How long you would be able to cope financially if you were unable to work, and so when your insurance cover would need to become activated
- How your income is expected to change over time, and how inflation will affect your wages
Is My Health A Factor In Mortgage Protection Insurance?
Health and lifestyle are relevant factors since your insurance provider will need to assess the likelihood that you will become unwell or injured.
This can include asking questions about your age, existing health, type of employment and lifestyle.
Purchasing mortgage protection becomes more expensive as you become older, and the level of risk associated with your job and place of work will also be taken into consideration.
What Pay Outs Does Mortgage Protection Provide?
The value of your policy will be established when it is taken out, and usually will be calculated against your existing annual salary.
Whereas life insurance can be purchased at multiples of your annual income, mortgage protection cover is usually limited to around 70% of your salary.
Can I Change My Mortgage Protection Provider?
Yes, you can always switch your insurance provider, and sometimes shopping around will provide a significant cost saving.
Should your occupation, health or lifestyle has changed since you first took out your policy, this should also bring down the cost of your premiums since it may reduce the risk exposure assessed by your provider.
If in any doubt as to what you should expect to pay for mortgage protection, which type of insurance is best for you, or whether you need a specialist policy, give Revolution Finance Brokers a call. We are fully independent, offer highly competitive rates, and tailor every quotation to suit your circumstances.