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:
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 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 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.
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.
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.
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:
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.
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.
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 mortgage brokers a call. We are fully independent, offer highly competitive rates, and tailor every quotation to suit your circumstances.
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.
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