Mortgage ProtectionMortgage Life Cover is one of the most frequently bought types of insurance. It is a type of life insurance designed to secure the family home and ensures your mortgage will be paid off if you die. It will prevent your home from being repossessed and secure it for your family.
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Secures your home for your loved ones when you pass away
Reduces worry of missing mortgage repayments
Stops your family home from being repossessed
Different types of cover to suit your mortgage
Not tied by your cover if your mortgage changes
Mortgage Protection term life insurance (also commonly know as Decreasing term life insurance) is a type of life insurance policy that’s paid over a fixed period of time. The level of pay-out decreases over the length of the policy. It’s often used to cover the balance of a repayment mortgage, because this is a type of loan that also decreases over time. Often, a mortgage lender will insist that life insurance must be in place before you start your agreement.
One benefit of a decreasing term life insurance policy is that monthly premiums are often lower than with other types of life cover. That’s because the amount of money an insurance provider needs to cover you for reduces over the course of a policy. As well as being popular with those who have a repayment mortgage, decreasing term life insurance could be a good option if you’ve recently started a family. If you have children, the amount of pay-out you’d need them to receive – if you or your partner were to die unexpectedly – might reduce as they grow up and become more self-sufficient.
On the other hand, decreasing term cover won’t work for you if you have an interest-only mortgage, because the money you originally borrowed (the capital debt) is only repaid at the end of the mortgage term.
Generally speaking, as time passes any claim on a decreasing life insurance policy will be worth less. So make sure you check the interest rate of any quote to make sure that cover would not fall at a significantly quicker rate than your outstanding mortgage debt.
If you’re working then it’s worth checking whether or not you have a death-in-service benefit in your employee’s contract. If you do, this benefit will pay out to your dependants if you pass away so try to find out how much you are covered for. Often, a death-in-service benefit is around four times the cost of your salary. This may not be enough to support your family. If that’s the case, you should probably still think about life insurance. Learn more about death-in-service.
You should also think about whether level term life insurance is more suited to your circumstances. A level term policy remains fixed throughout the course of a plan, guaranteeing a lump sum payment if you were to die during the length of your policy. Your dependants then have a pay-out that can be used for debts but also any other expenses, such as funeral costs, in the event of your death. However, you often pay more for this type of cover. Finally, another option to explore if you have a young family could be joint life insurance which insures two people.
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0330 058 1105Mortgage life cover is designed for those with new mortgages and dependant families who would struggle to afford the repayments if you passed away. If you are single and childless you may not need mortgage life cover, however don’t forget that cover is cheaper the younger you take it out.
There are two main types of mortgage life cover; level term policies and decreasing term policies. The type you need is dependent on your mortgage – whether it’s an interest only or repayment mortgage. An interest only mortgage will need to be paid off with a level term policy whereas a repayment mortgage is paid off with a decreasing term policy.
Level term policies offer the same amount of cover for the duration of your plan whereas decreasing term policies will gradually decrease the amount of cover in line with the reducing debt of some mortgage types.
If your mortgage changes, you can change your cover accordingly – you are not restricted to the cover for the length of your mortgage. However, if you do change your mortgage, your mortgage life cover should be reviewed as you may be under-protected or a cheaper policy may be available.
Yes, they will still be covered even if they are not named on the mortgage.
While MPPI covers your mortgage if you miss payments due to being unable to work, mortgage life cover protects your mortgage in the event that you pass away unexpectedly.
You might not need cover while you’re single and childless, but remember: Mortgage Life Cover is at its cheapest when you’re young and in good health – it might be harder to get if your circumstances change.
There are two main types of Mortgage Life Cover: Level Term Cover and Decreasing Term Cover. The type you might need will depend on your mortgage.
Interest Only Mortgage
If you have an interest only mortgage your debt stays the same throughout the term of the mortgage. You’ll need a level term policy to pay it off.
Repayment Mortgage
If you have a repayment mortgage, your mortgage debt will decrease as you pay it off. A decreasing term policy covers what’s left to pay on your mortgage.
Level Term policies offer the same amount of cover throughout the term of the plan. Decreasing Term policies reduce cover to match the reducing debt of some types of mortgage. This makes Decreasing Term policies cheaper.
You are not tied into the cover for the life of the mortgage, you can change your cover whenever you want. If you change the amount of your mortgage you should review your Mortgage Life Cover too as you might be under-protected – or save a small fortune with a cheaper policy.
No. Mortgage Life Cover doesn’t get paid directly to your mortgage lender – you choose who should benefit.
Yes, partners do not have to be named on the mortgage in order to have cover – just as long as there’s a legitimate reason for the mortgage to be repaid upon their death.
